ITALY Law and Practice Contributed by: Roberto Bonsignore, Paolo Rainelli, Gerolamo da Passano and Nicole B. Puppieni, Cleary Gottlieb Steen & Hamilton LLP
9. Defensive Measures 9.1 Hostile Tender Offers
9.4 Directors’ Duties As mentioned in 9.2 Directors’ Use of Defensive Measures , according to the “passivity rule” , the authority to approve defensive measures lies with the shareholders of the target company rather than with the board of directors. This means that the board of directors cannot imple - ment such measures without obtaining prior approval from the target company’s sharehold - ers’ meeting. 9.5 Directors’ Ability to “Just Say No” When a tender offer is launched, the board of directors of the target company is required to provide its opinion on the fairness of the offer consideration and other terms of the offer. How - ever, the decision as to whether or not to tender shares is ultimately left to the discretion of the company’s shareholders. It is important to note that directors are not per - mitted to enact defensive measures against an announced takeover offer without first obtaining approval from the target company’s sharehold - ers. Conversely, when the board is approached directly (eg, with proposals of business combi - nations through mergers or asset deals), direc - tors may “just say no” if they deem that the pro - posed transaction is not in the interest of the company.
As most Italian listed companies are controlled by a single shareholder or group of shareholders, a bidder intending to acquire control of a listed company usually begins negotiations with the target’s controlling shareholder(s) before engag - ing the target’s board of directors, to potentially gain access to selected due diligence materials. Should the negotiations (and the due diligence exercise, if any) yield favourable outcomes, the bidder can proceed to launch a friendly tender offer. 9.2 Directors’ Use of Defensive Measures Under the “passivity rule” , any defensive meas- ure adopted by the target company necessitates shareholder approval. While the target compa - ny’s by-laws may grant the board of directors the authority to implement defensive measures without shareholder approval, this practice is highly uncommon for Italian listed companies. Exceptions to this rule include actions carried out in accordance with pre-existing decisions that were already partially or entirely imple - mented prior to the bid announcement, as well as activities conducted in the ordinary course of business. Efforts to explore alternative bids are not classified as defensive measures requiring shareholder approval. 9.3 Common Defensive Measures Because of the “passivity rule” outlined in 9.2 Directors’ Use of Defensive Measures , defen- sive strategies such as poison pills, dilutive share issuances or the selling of valuable assets (often referred to as “crown jewels” ) are not prevalent in Italian takeover bids.
10. Litigation 10.1 Frequency of Litigation
M&A-related disputes in Italy have traditionally been frequent. However, over the past three years, there seems to have been a decrease in the number of new disputes. Most cases involve small and medium-sized M&A deals, possibly
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