Disegno di legge “Capitali”: interventi a sostegno della competitività dei mercati di capitali

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‚- Written by Francesco Dagnino, Andrea M. Maroni and Giovanni Piscopo.

On April 11, 2023, the Council of Ministers approved a draft bill introducing measures to support the competitiveness of capital markets.
The approved text aims to constitute a reform intended to incentivizing and facilitating companies‘ access to the capital market and reviving the competitiveness of the Italian stock market.

The draft bill, among other things, extends the dematerialization regime to the shares of „SME-LLCs,“ reforms the regulations for „widespread“ issuers and those listed on an MTF, and provides simplifications for bond issuance as well as temporary facilitations for approving capital increases.

Furthermore, there are expected innovations regarding internal dealing, the conduct of meetings of listed companies, multiple voting rights, as well as simplifications and reductions in obligations concerning admission to trading and prospectus requirements.

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On the past April 11th, the Council of Ministers adopted a draft bill regarding access to and regulation of capital markets (the „Capital Markets Bill„).

The Capital Markets Bill aims to enhance the competitiveness of the Italian capital market, which has recently been considerably overshadowed, especially in the stock market area. In the explanatory report accompanying the Capital Markets Bill, it is considered a „fundamental aspect to accompany and support the recovery that has been consolidating in recent years and to address the challenges of the transition that our country is facing“.
The Capital Markets Bill draws inspiration, among other things, from the Green Paper on „The Competitiveness of Italian Financial Markets in Support of Growth,“ which prompted a widely participated public consultation by market operators, associations, as well as academic representatives.

According to the accompanying report, the Capital Markets Bill aims, on one hand, to remove regulatory and operational constraints on market access for businesses. On the other hand, it seeks to introduce measures that encourage the meeting of private savings and enterprises, both from the demand and supply side, while ensuring investor protection.

In the following paragraphs, we intend to provide a summary of some of the main measures that would be introduced by the Capital Markets Bill, bearing in mind that these provisions are subject to potential modifications during the parliamentary process it undergoes.

Extension of the definition of „quoted SMEs“

Article 2 of the Capital Markets Bill would expand the scope of „quoted SMEs“ as defined in Article 1, paragraph 1, letter w-quater.1) of Legislative Decree 58/1998 (the „TUF“), by raising the capitalization threshold from €500 million to €1 billion. These quoted SMEs are required to include, within the report on corporate governance and ownership structures according to Article 123-bis of the TUF, information concerning the acquisition and maintenance of the SME status, indicating the market capitalization value. They must also disclose any changes in their SME status to the market within five trading days from the date of December 31st.

Dematerialization of shares of SME-LLCs

Article 3, paragraph 1 of the Capital Markets Bill, by amending Article 26 of Decree-Law No. 179 of October 18, 2012, would allow SME-LLCs to issue their shares in book-entry form, voluntarily accessing the dematerialization regime provided for in Article 83-bis of the TUF. This aims to reduce costs and administrative burdens associated with the issuance and transfer of shares.

Access to this regime, particularly beneficial for companies with widespread shareholder ownership, including many of the „S.r.l.“ type, would naturally entail the application of the centralized management regime concerning the circulation and exercise of corporate rights, as well as the establishment of encumbrances and the protection of acquisitions.

For SME-LLCs opting for dematerialization of shares, the obligation to maintain a shareholder register (a requirement no longer generally applicable to S.r.l.s.) would be reinstated.

Furthermore, paragraph 2 of the aforementioned Article 3 of the Capital Markets Bill would amend Article 100-ter, paragraph 2, of the TUF, which relates to the subscription and transfer of shares in S.r.l.s within crowdfunding offerings. It clarifies that the circulation regime established in crowdfunding offerings serves as an alternative not only to the circulation regimes currently mentioned in that provision (specifically, the general regime under Article 2470 of the Civil Code) but also to the newly introduced centralized management circulation regime.

Reform of the regulations for „widespread“ issuers and provisions concerning issuers with shares traded on multilateral trading facilities (MTFs)

Article 4 of the Capital Markets Bill aims to reduce the assimilation of „widespread“ issuers to issuers listed on regulated markets by eliminating several obligations that currently apply to both groups. Specifically, among others, it eliminates the requirement for the approval of management incentive plans by the assembly and the applicability of regulations concerning related-party transactions for „widespread“ issuers.

In parallel, following a commendable trend already initiated (particularly regarding capital increases), the Civil Code provisions concerning „public“ companies (i.e., issuers listed on regulated markets and „widespread“ issuers) regarding the publicity of shareholders‘ agreements and the counting of treasury shares for the purpose of meeting quorum requirements are extended to issuers listed on multilateral trading facilities (MTFs), with particular emphasis on the Euronext Growth Milan market (formerly AIM).

However, although mentioned in the accompanying report, the draft Capital Markets Bill currently does not include the extension of the quantitative limit on share repurchases set forth in Article 2357 of the Civil Code, which applies to „public“ companies and amounts to 20% of the share capital, to MTF issuers.

Regarding takeover bids (OPAs), MTF issuers replace „widespread“ issuers in relation to which a „long“ term of thirty days is provided for the approval of the offer document by CONSOB.

Furthermore, Article 5 of the Capital Markets Bill also extends to MTF issuers the option to prepare financial statements according to international accounting principles, clearly aiming to enhance their appeal beyond national borders.

Facilitation of bond/debt securities issuance by S.p.A. and S.r.l. companies

Article 7 of the Capital Markets Bill aims to facilitate the issuance of bonds (by S.p.A.) or debt securities (by S.r.l.) by excluding certain limitations, including quantitative restrictions for S.p.A., currently provided in Articles 2412 and 2483 of the Civil Code, provided that the subscription and circulation of these securities are exclusively intended for professional investors.

Temporary measures in support of capital increases

Article 8 of the Capital Markets Bill reintroduces, for a period of two years until April 30, 2025, the measures previously implemented until June 30, 2021, through Article 44 of the Decree-Law July 16, 2020, No. 76 (known as the Simplification Decree) to support recapitalization transactions. Specifically, it introduces facilitated quorum requirements for the approval of capital increase resolutions.

In particular, until April 30th, 2025, provided that at least half of the share capital is represented, the reinforced majority of at least two-thirds of the represented capital in the assembly as required by Article 2368, second paragraph, second period, of the Civil Code (for „public“ companies, in the first call) and Article 2369, third paragraph (for „closed“ companies, in the second call), and seventh paragraph (for „public“ companies, in subsequent calls), of the Civil Code would not apply to resolutions concerning:
a) increases in share capital through new contributions, in accordance with Articles 2440 and 2441 of the Civil Code.;
b) the granting to the administrators the power to increase the share capital, pursuant to Article 2443 of the Civil Code.
In such cases, the resolution would be validly adopted with the favorable vote of the majority of the capital represented at the assembly, even contrary to the bylaws (i.e., by a „simple“ majority).

Furthermore, until April 30, 2025, companies with shares listed on regulated markets or MTFs could resolve to increase the share capital through new contributions, excluding the pre-emptive right, in accordance with Article 2441, fourth paragraph, second sentence, of the Civil Code, even in the absence of explicit statutory provisions and within the limits of 20 percent of the pre-existing share capital (deviating from the ordinary regime that provides for a limit of 10 percent of the pre-existing share capital and explicit statutory provisions).

Abolition of the obligation to report transactions carried out by reference shareholders (internal dealing regime)

Article 11 of the Capital Bill would repeal paragraph 7 of Article 114 of the Consolidated Financial Act, resulting in the elimination of the obligation imposed on shareholders who hold shares representing at least ten percent of the share capital, as well as on any other entity that controls the listed company (in a regulated market), to report to CONSOB the transactions carried out by them, even through an intermediary (internal dealing).

As known, this obligation has been maintained in the Italian legal system despite Regulation (EU) No. 596/2014 on market abuse (MAR) providing that such reporting obligations apply (although also in relation to MTF issuers, in addition to those in regulated markets) only to persons who hold managerial, supervisory, or directional functions within the issuer (as well as to closely related persons) – therefore constituting, at least according to the explanatory memorandum to the Capital Bill, a case of so-called gold plating.

If the repeal of this obligation is confirmed, listed issuers (in a regulated market, and potentially MTF issuers who have voluntarily introduced such obligation in their internal procedures) will need to assess the opportunity to modify their internal procedures regarding internal dealing

Conducting meetings of listed companies exclusively through the intervention of the „appointed representative.“

Article 12 of the Capital Bill would allow, if provided for in the company’s bylaws, the possibility for listed companies to conduct their meetings exclusively through the intervention of the „designated representative“ as referred to in Article 135-undecies of the Consolidated Law on Finance (TUF).
The Capital Bill would essentially make permanent the emergency regime introduced by Article 106 of Decree-Law No. 18 of March 17, 2020, which provided specific provisions regarding the conduct of meetings of listed companies in order to balance shareholders‘ right to participate and vote in meetings with the safety measures imposed to contain the spread of the COVID-19 pandemic.

In particular, it should be noted that the aforementioned Article 106, titled „Provisions on the conduct of company meetings“ (whose effectiveness was most recently extended until July 31, 2023, by Article 3, paragraph 1, of Decree-Law No. 228 of December 30, 2021), allows listed companies (including MTF issuers) as well as „diffuse“ companies to designate a designated representative for ordinary or extraordinary meetings in accordance with Article 135-undecies of the TUF, even if the bylaws provide otherwise. Furthermore, the same provision allows companies to stipulate in the notice of convocation that participation in the meeting takes place exclusively through the designated representative, to whom delegation or sub-delegation can be granted in accordance with Article 135-novies of the TUF, in derogation of Article 135-undecies, paragraph 4, of the TUF.

The maintenance, subject to a statutory option, of the possibility to hold meetings exclusively through the intervention of the designated representative even after the expiration of the emergency regime is justified in the explanatory report in light of the changed model of shareholders‘ decision-making within the context of meetings of listed companies. Essentially, the role of the meeting has shifted away from being informative, deliberative, and essential for the formation of voting decisions. Participation in the meeting is reduced, particularly for institutional investors, as the voting direction is often predetermined well before the meeting based on procedures implemented in accordance with stewardship functions and taking into account direct engagements with the company’s management. This shift is also facilitated by the advance publication of explanatory reports by the board of directors on each agenda item and the related proposed resolutions.

On the other hand, while closed meetings may raise concerns among transparency and engagement advocates, it is true that under regular conditions, there have been instances where „in-person“ meetings of listed companies became a stage for so-called „disruptors“ or shareholders engaged in internal conflicts, both cases being driven by interests that have little to do with transparency and engagement issues.

Furthermore, the Capital Bill aims to formalize the practice, prompted by CONSOB recommendations during the emergency period and inherently linked to the mode of holding meetings, of limiting the possibility of individually submitting proposal resolutions on agenda items. It sets a deadline of fifteen days before the meeting for the submission of such proposals and two additional days for their publication by the issuer (while under regular conditions, individual proposal resolutions can be presented directly during the meeting). This framework ensures that proposals can be considered by shareholders in a timely manner before providing voting instructions to the designated representative

Furthermore, it would also be clarified that the right to ask questions under Article 127-ter of the Consolidated Financial Act (TUF) can only be exercised before the assembly, with the obligation for the issuer to respond within three days prior to the assembly. It may be necessary to consider better coordination with Article 127-ter of the TUF and the deadlines set therein for the submission of questions and responses. Currently, if the notice of convocation states that the company will provide responses before the assembly, the deadline for submitting questions is seven trading days, and the deadline for providing responses is two calendar days before the assembly. It is worth noting that, in response to the recommendations of CONSOB, during the emergency regime, several issuers had already reduced the deadline for providing responses, even if often by only one day, as envisaged by the new provision.

It should also be noted that, considering the strong trend towards the enhancement of the MTF issuer market, the retention of the possibility to hold assemblies exclusively through the intervention of the designated representative, even after the expiration of the emergency regime, should reasonably be extended at least to such issuers, if not also to „diffused“ issuers (although this is not currently provided for in the Capital Act, unlike the „COVID“ regulations; the regular provisions of the Consolidated Financial Act in this regard are applicable only to issuers of shares listed on a regulated market).

If confirmed, this development would likely lead to a general adaptation of the bylaws of listed companies, aiming for operational flexibility and considering the „success“ experienced by market participants with this method of holding assemblies.

„Enhancement“ of multiple voting

Article 13 of the Capital Bill would modify the fourth paragraph, last sentence of Article 2351 of the Civil Code, increasing the number of votes assignable to each multiple voting share from three to ten.

It is worth noting that, according to Article 127-sexies, paragraph 1 of the Consolidated Law on Finance (TUF), the bylaws of listed companies (on a regulated market) cannot provide for the issuance of multiple voting shares. However, paragraph 2 of the same provision states that multiple voting shares issued prior to listing (also on a regulated market) retain their characteristics and rights.

This amendment aims not only to increase the flexibility of the corporate framework – in line with other countries – but also to further enhance the appeal of listing, which in the Italian context is often discouraged by the fear of founder-entrepreneurs losing control of the company following the listing.

Simplifications and reductions of burdens related to off-market offerings, listing, and prospectus

The Capital Bill would also provide, among other things:

  •  the Capital Bill would also introduce measures aimed at expanding the cases of exemption from the regulation on off-premises offers (Article 30, paragraph 2, of the Consolidated Financial Act) in cases of so-called „self-placement.“ In particular, the following would be excluded from such regulation: (i) the offer of financial instruments of its own issuance for subscription or purchase amounts equal to or exceeding EUR 250,000, with the exception of placements aimed at admission to trading on a regulated market or a multilateral trading facility, and (ii) offers for sale or subscription of own shares with voting rights or other financial instruments of its own issuance that allow the acquisition or subscription of such shares, provided that they are issued by issuers with shares or financial instruments traded on regulated markets or multilateral trading facilities in Italy or European Union countries.
  • the Capital Bill also includes measures aimed at simplifying the procedures for admission to trading. In particular, on the one hand, it proposes the repeal of provisions that establish specific requirements for the listing of companies that control entities established and regulated by the laws of non-European Union countries, as well as for holding companies (Article 66-bis of the Consolidated Financial Act). On the other hand, it proposes, in particular, the removal of the power of CONSOB (Italian Securities and Exchange Commission) to prohibit the execution of decisions regarding admission to listing and exclusion from trading by the market management company (Article 66-ter of the Consolidated Financial Act).
  • the clarification that the approval deadline for the prospectus starts from the date of submission of the draft prospectus, and not from the moment when CONSOB deems the application complete (Article 94, paragraph 3 of the Consolidated Financial Act), as well as the repeal of the provision regarding the liability of the placement agent for false information in the prospectus or for omissions capable of influencing the decisions of a reasonable investor (Article 94, paragraph 7 of the Consolidated Financial Act).


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