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Country snapshot

Trends and climate

What is the current state of the M&A market in your jurisdiction?

In the first half of 2016, the M&A market in Europe registered 3,110 deals, for an overall value of about $342.8 billion (which represents a 19.3% decrease in value compared to the first half of 2015, which amounted to an overall value of about $424.5 billion).

According to Mergermarket, even though this was the worst bi-yearly result since 2013, Italian and other local markets have been experiencing significant growth. In particular, based on the relevant KPMG report, the first nine months of 2016 saw 551 acquisitions in Italy, amounting to €39.2 billion (which represents a 56% increase in value compared to 2015).

This extraordinary growth was mainly driven by an increase in foreign investor confidence, particularly from US and Asian investors (the most active investors were private equity bidders such as CVC Capital Partners, BC Partners and Macquarie, which respectively purchased Sisal, Cigierre and Hydro Dolomiti). According to data provided by the Italian Private Equity and Venture Capital Association, 105 new investment were completed in 2016, amounting to €6.7 billion.

Positive results have also been registered in respect of international transactions from Italian investors (in the first nine months of 2016, 110 cross-border acquisitions amounting to €11.8 billion were finalised).

Domestic activity also experienced a resurgence in deal making, with 262 deals finalised, amounting to €14.4 billion. In particular, the most involved markets have been:

  • the energy and utilities industry (about €4.8 billion in investment);
  • the consumer market sector (155 deals worth about €7.8 billion);
  • the financial services industry (deals amounting to about €11.9 billion and representing 31.2% of the overall registered value in 2016); and
  • the support services and infrastructure industry (73 deals amounting to about €6 billion).

Have any significant economic or political developments affected the M&A market in your jurisdiction over the past 12 months?

Italian M&A activity has not been significantly affected by Brexit, and public opinion is that until Brexit negotiations are concluded, M&A transactions will remain the same. However, the long-term outlook will depend on getting greater clarity on the ultimate terms of Brexit. In this context, there may be changes to the details of M&A transactions which are directly affected by EU regulation. For example, proposed acquisitions which meet the EU Merger Regulation thresholds benefit from the European Union’s one-stop shop clearance process, avoiding the need for clearances in multiple EU member states; however, post-Brexit, M&A transactions involving both Italian and UK players may require both UK and EU notifications.

In addition, the Italian market will likely be affected by the policies adopted by the new US president. Further, the Italian constitutional referendum vote was held on December 4 2016.

Are any sectors experiencing significant M&A activity?

The automotive, chemical, transportation, telecommunications, energy, mining and utilities sectors have experienced the most M&A activity.

A significant number of initial public offerings (28) were seen in 2015, with a total fundraising of €6.6 billion, including the successful initial public offering of Poste Italiane.

The infrastructure sector is expected to see some mega-deals due to privatisations in the Italian government (eg, Italy’s air traffic control operator, state railways and Grandi Stazioni) and some other expected transactions, such as the sale of a minority stake in Autostrade per l’Italia, the Italian motorway concessions operator.

M&A activity in the banking sector is expected to be driven by the need for a recapitalisation of some Italian banks in order to comply with European Central Bank decisions. For example, Atlante Private Equity was recently created with the primary goal of recapitalising some Italian small and medium-sized banks.

Are there any proposals for legal reform in your jurisdiction?

There is no significant proposal for legal reform in Italy directly regarding M&A deals.

Legal framework

Legislation

What legislation governs M&A in your jurisdiction?

No statutory framework specifically applies to M&A. However, M&A deals are subject to the Civil Code. For example, the provisions concerning contracts in general apply to contracts regulating M&A deals (Articles 1321 and following of the Civil Code). As far as quota deals for limited liability companies, Article 2470 of the Civil Code – which regulates the validity, publicity and enforceability of public deeds for quota transfers – applies. Share deals for companies limited by shares are subject to Articles 2022 and 2355 of the Civil Code, which regulate registered share transfers or endorsement. Asset deals for companies engaged in commercial activities are subject to Article 2555 and following of the Civil Code. Where real estate assets are involved in the deal, their transfer is regulated by Article 2643 and following of the Civil Code. Mergers and de-mergers are governed by Article 2501 and following of the Civil Code.

In a July 24 2014 decision, the Supreme Court clarified that business representations and warranties in stock sale and purchase agreements are not subject to the restricted one-year statute of limitations applied to warranties in sale transactions, but instead to the general contractual 10-year statute of limitations.

Other specific rules concerning particular aspects of M&A deals may apply – for instance:

  • pursuant to Article 47 of Law 428/1990, the sale of a going concern by a company employing more than 15 employees requires that the buyer and seller inform employees’ representatives and national unions in writing about the deal at least 25 days before consummation of the transaction;
  • rules applicable to listed companies are provided by the Financial Act (58/1998) and regulations issued by the Italian Stock Exchange Commission (CONSOB), the national public authority responsible for regulating the Italian financial markets;
  • for Italian M&A transactions, the merger control rules set out in Act 287/1990 apply;
  • for cross-border mergers among EU companies, Act 108/2008 (implementing EU Directive 2005/56) applies; and
  • applicable tax rules.

Regulation

How is the M&A market regulated?

The primary regulator overseeing M&A activity is the Antitrust Authority.

CONSOB is the regulatory authority empowered to supervise takeovers involving Italian listed companies which have shares listed on regulated markets. Borsa Italiana, a private company in charge of managing Italian capital markets, regulates certain aspects of public tender offers (eg, the duration of offering periods and de-listing).

Depending on the nature of the firms involved in the transaction, other authorities may have a supervisory or regulatory role – for example:

  • the Italian Telecommunication Authority, if a media company is involved;
  • the Bank of Italy, which supervises banks and financial intermediaries;
  • the Insurance Supervisory Authority, which has the power to authorise mergers among insurers; and
  • the Pension Funds Supervisory Commission.

Are there specific rules for particular sectors?

Pursuant to Law Decree 21/2012 (converted into Act 56/2012), foreign investment in certain strategic sectors is subject to a national security review by the government (eg, defence and national security, energy, transportation and communication).

Investments in the banking, finance and insurance industries (among others) are also subject to regulation.

Types of acquisition

What are the different ways to acquire a company in your jurisdiction?

Companies are typically acquired in one of three ways:

  • the purchase and sale of assets;
  • share and quota deals; and
  • mergers and de-mergers.

In respect of M&A public deals, the Italian market is characterised by ownership concentration and limited contestability of corporate control. Therefore, unsolicited or hostile takeovers rarely take place and the primary way to acquire a listed company is through a friendly bid, usually negotiated with the controlling shareholder.

Preparation

Due diligence requirements

What due diligence is necessary for buyers?

In a typical M&A transaction, the buyer performs due diligence in relation to the following:

  • financial matters;
  • technology and intellectual property;
  • customers and sales;
  • material contracts;
  • employment and management;
  • litigation;
  • environment;
  • tax;
  • antitrust and regulatory requirements; and
  • insurance.

Information

What information is available to buyers?

In a private M&A deal, the buyer may gather information on the target during its preliminary contact or may otherwise be allowed to carry out due diligence on the target following the execution of a non-disclosure agreement.

In a public M&A deal, should a hostile bid occur, the bidder is not usually allowed to conduct any due diligence and can provide its offer only based on the information publicly available, as set out in the Financial Act and its implementing regulations.

Conversely, in a non-hostile takeover, bidders can conduct due diligence before the acquisition of a controlling stake or the launch of a public tender. 

What information can and cannot be disclosed when dealing with a public company?

The Financial Act and its implementing regulations provide for a complete set of information to be communicated to the public by Italian listed companies – for example:

  • the target’s annual, semi-annual and quarterly financial statements;
  • reports on the shareholders’ structure and corporate governance;
  • information documents relating to shares plans for managers and employees;
  • information documents relating to main corporate transactions; and
  • shareholders’ agreements.

Stakebuilding

How is stakebuilding regulated?

Under the Financial Act and Italian Stock Exchange Commission Regulation 11,971/1999, ownership disclosure duties apply when an investor, either directly or indirectly, reaches 3% of the voting shares and a set of additional higher thresholds. If the issuer is a medium-sized enterprise, the threshold is set at 5%.

If the bidder decides to build up a stake before launching a tender offer, it must comply with the specific disclosure obligations provided by Italian law.

Documentation

Preliminary agreements

What preliminary agreements are commonly drafted?

Parties usually enter into the following preliminary agreements:

  • Letters of intent – the parties set out the main terms and conditions of the transaction by providing both binding (eg, exclusivity and confidentiality) and non-binding provisions (eg, scope, consideration, process, timing and other material terms).
  • Exclusivity or standstill provisions (which can also be contained in the letter of intent) – the parties may agree to be the sole negotiating parties for a certain period during a perspective transaction.
  • Non-disclosure agreements – both parties agree to keep certain information provided by the other party confidential.

Principal documentation

What documents are required?

In addition to the above, the main document is the share or asset sale and purchase agreement or the board and shareholder resolutions approving the merger or de-merger.

Which side normally prepares the first drafts?

Buyers usually prepare the first drafts, unless (in public or private share or asset deals) the seller chooses a buyer through a bidding procedure, in which case the first drafts are normally prepared by the seller.

What are the substantive clauses that comprise an acquisition agreement?

An acquisition agreement often includes the following:

  • the parties to the agreement;
  • the recitals, definitions, subject and scope of the agreement;
  • the purchase price;
  • conditions precedent;
  • the execution terms;
  • the pre-closing and post-closing covenants;
  • closing;
  • representations and warranties;
  • indemnification; and
  • general provisions (eg, notices, applicable law, dispute resolution, confidentiality, termination, assignment and costs).

What provisions are made for deal protection?

Generally, any attempt by a bidder to seek deal protection would be limited under Italian law in light of the rules set out to promote the contestability of corporate control. Clauses regarding break-up fees, if set out by the parties, will likely be unenforceable under Article 44 of Italian Stock Exchange Commission Regulation 11,971/1999, which allows shareholders to revoke their acceptance of the public offer where a competing public offer is promoted.

M&A deals involving public companies are subject to the specific provisions of the Financial Act concerning hostile takeovers (eg, the so-called ‘passivity rule’).

Closing documentation

What documents are normally executed at signing and closing?

At signing, the parties usually execute the main share, quota or asset purchase agreement (along with its schedules).

In a share or quota purchase agreement, the parties usually execute the following at closing:

  • a deed of transfer before a public notary, pursuant to Article 2470 of the Civil Code, for the sale and transfer of quotas of an Italian limited liability company;
  • an endorsement of share certificates before a public notary in case of a transfer of shares of an Italian company limited by shares and annotation of the transfer in the shareholders’ ledger;
  • waivers of any pre-emption, option, drag-along, tag-along or similar rights that in any way may become effective due to the transfer of shares or quotas;
  • letters of resignation of the target’s directors and auditors;
  • shareholders’ meeting of the target to resolve the appointment of new directors and auditors;
  • documents to confirm in writing that the sellers have complied with all covenants to be performed before closing and that all representations and warranties of the sellers are true and correct in all material respects as of the closing date;
  • new employment agreements among target’s key managers and the acquiring company;
  • documents to confirm in writing that sellers have paid their outstanding debts with regard to the target before closing;
  • third party consent to the transaction;
  • an escrow agreement (applicable to all or part of the consideration or shares); and
  • bank guarantees as collateral for the possible payments of indemnification by the sellers.

In an asset purchase agreement, the parties may further execute or provide for the following at closing:

  • public deeds to transfer real estate assets;
  • documents or forms required to transfer certain assets (eg, permits, licenses and registered trademarks); and
  • tax certificates to confirm the target’s outstanding tax exposure, if any.

Are there formalities for the execution of documents by foreign companies?

No specific formalities exist for the execution of documents by foreign companies. However, the parties may agree that the foreign company provides documentation to confirm its legal status, capacity and the authority of its signatories (eg, excerpts from the relevant commercial or trade registries).

Should the foreign company grant special powers of attorney for the execution of the required agreements, this should be duly notarised and, as the case may be, legalised or apostilled pursuant to the Hague Convention of October 5 1961, as applicable.

Are digital signatures binding and enforceable?

If complying with certain legal requirements, digital signatures are recognised as original signatures for the execution of deeds and agreement.

Foreign law and ownership

Foreign law

Can agreements provide for a foreign governing law?

Foreign law may apply to agreements, provided that its application relates to the existence of material cross-border features of the transaction. Even if the agreement is governed by foreign law, the parties must comply with Italian public order provisions, such as mandatory rules on the closing of the deal (eg, share, quota or asset transfer formalities).

Foreign ownership

What provisions and/or restrictions are there for foreign ownership?

Foreign investments are not subject to specific restrictions under Italian law. However, legislation was recently enacted to guarantee that foreign investments in certain industries will not cause any prejudice to the integrity of public interests. For example, pursuant to Decree 21/2012 (as amended and ratified by Act 56/2012), foreign investments in certain strategic sectors (eg, defence and national security, energy, transportation and communication sectors) are subject to a national security review by the government.

In order to allow the government to exercise its powers, investments by non-EU investors in the sectors mentioned above must be notified to the government within 10 days of the purchase of the interest, along with a description of the transaction, its purpose and specific information about the purchaser and its business.

In regards to relationships with non-EU investors, where restrictions apply to Italian investments, the Italian authorities may apply, under foreign affairs reciprocity rules, the same restrictions exercised over the Italian investments in those jurisdictions.

Valuation and consideration

Valuation

How are companies valued?

Valuation methods comply with best international practice. The two most common techniques are:

  • comparable company analysis – estimates the target’s implied value through an analysis of similar companies’ trading and operating metrics. This method applies earnings before interest, taxes, depreciation and amortisation multiples derived from similar or comparable businesses in the same industry as the target; or
  • discounted cash flow analysis.

In certain industries, other methodologies that are consistent with international best practices apply.

The net financial position of the target is considered to establish enterprise or equity value.

Consideration

What types of consideration can be offered?

In private acquisitions, consideration typically consists of cash. In the context of public deals, a distinction must be made with respect to mandatory or voluntary tender offers.

In a voluntary tender offer, consideration may consist of both cash (public purchase offers) and securities (public exchange offers).

In a mandatory tender offer, the consideration may be represented in whole or in part by securities. However, the bidder shall offer cash consideration if the shares offered are not listed on an EU-regulated market. In particular, in a mandatory tender offer, the purchase price should be equal to the highest price paid by the bidder for any acquisition of securities of the target during the 12 months preceding the offer. Where no shares have been purchased in the past 12 months, the purchase price should not be lower than the weighted market average value over the preceding 12 months.

Strategy

General tips

What issues must be considered when preparing a company for sale?

From a legal standpoint, early preparation for sale may include a sell-side due diligence exercise, followed by corrective actions (as required) – for example:

  • settling pending disputes or tax assessments;
  • checking for the absence of environmental issues;
  • improving the quality of financial reporting;
  • analysing relationships with customers, suppliers and employees; or
  • securing and protecting IP rights.

Generally, prospective sellers should start thinking about ways to maximise profitability before deciding to sell the business. For this reason, sellers should focus, for instance, on achieving operational efficiencies, cost reductions and better cash flow.

Sellers should further aim to achieve support from a strong management team. Presenting the business with a strong management team will help to position the deal as attractive. In addition, sellers should provide buyers with realistic and sustainable business plans.

What tips would you give when negotiating a deal?

From a legal standpoint, no special tips apply to an Italian deal compared to other advanced western jurisdictions.

In general, buyers should verify the existence of audited accounts and focus their attention on employment relationships, litigation, tax and administrative issues.

Hostile takeovers

Are hostile takeovers permitted and what are the possible strategies for the target?

As far as public M&A is concerned, the Italian market is largely characterised by ownership concentration and limited contestability of corporate control. Therefore, generally speaking, unsolicited or hostile takeovers rarely take place, and the primary route for acquiring a listed company is through a friendly or negotiated bid.

Article 104 of the Financial Act provides for the so-called ‘passivity rule’, which requires Italian public companies which have securities involved in a tender offer to abstain – from the date of notice of the offer until the end of the offer period – from any actions or transactions that could interfere with the success of the offer, unless such actions or transactions are approved by the target’s shareholder meeting. Shareholder meeting approval may also be required for the implementation of any decisions taken before the date of notice of the offer that do not fall within the ordinary business operations of the company and may impair achievement of the aims of the offering. However, these rules are not mandatory and Article 104(1ter) of the Financial Act provides that the bylaws of public companies may differ, wholly or in part, from the abovementioned rules. In such cases, the company must notify any approved difference to Italian Stock Exchange Commission and the relevant supervisory authorities in the EU member states in which its securities are admitted to listing on a regulated market or in which admission to listing has been requested.

In addition, Article 104bis of the Financial Act establishes a number of ‘neutralisation’ rules requiring that certain target’s bylaws not apply to bidders during public offers.

In respect of foreign bidders, Article 104ter of the Financial Act provides that the passivity rule will not apply to takeover bids or exchange tender offerings by entities not subject to equivalent provisions in the country where the bidder’s securities are listed.

Warranties and indemnities

Scope of warranties

What do warranties and indemnities typically cover and how should they be negotiated?

Representations and warranties normally cover legal and business issues of the transaction.

In particular, the parties may agree on a set of representations and warranties – for example, on:

  • the existence and title to the target’s shares, quotas or assets;
  • financial information;
  • absence of certain material events;
  • compliance with applicable laws;
  • material contracts;
  • real estate and other assets;
  • environmental matters;
  • claims and litigation;
  • employment matters;
  • IP rights
  • litigation;
  • permits and authorisations;
  • tax; and
  • insurance.

Limitations and remedies

Are there limitations on warranties?

Caps on indemnification should be provided in order to avoid their possible invalidity on the assumption of having established an unlimited liability of the warranting party.

What are the remedies for a breach of warranty?

The parties may agree in the stock purchase agreement for indemnification and termination provisions. Termination may apply by operation of law in case of major breaches.

Are there time limits or restrictions for bringing claims under warranties?

The Supreme Court recently clarified that business representations and warranties in stock sale and purchase agreements are not subject to the one-year statute of limitations that applies to warranties in sale transactions, but rather to the general contractual 10-year statute of limitations.

That said, the parties generally agree on specific time limits in respect of warranties. Usually, except for tax, environmental, social security and labour warranties (typically subject to their applicable legal statutes of limitation), other warranties are subject to negotiated time limits (typically one to two years after closing). 

Tax and fees

Considerations and rates

What are the tax considerations (including any applicable rates)?

Preliminarily, Italian companies are subject to corporate income tax (IRES) at a rate of 27.5% (24% as from the 2017 fiscal year) and regional tax on production activities (IRAP) at a rate of 3.9% (the IRAP rate may vary depending on the region in which the company operates and the business activities that it carries out).

An M&A transaction will qualify as a tax relevant or a tax neutral event depending on the type of transaction realised.

Share deal The disposal of shares or quotas is a tax relevant transaction for IRES purposes. However, if the requirements for the participation exemption regime (PEX) are met, only 5% of the realised capital gains are taxable, thus leading to an effective IRES tax rate of 1.375% (1.2% as from 2017 fiscal year). Capital losses are fully deductible for IRES purposes (or fully not-deductible where PEX applies).

Capital gains and losses are generally excluded from the IRAP taxable basis.

From an indirect taxation perspective, the transfer of shares and quotas is a value added tax (VAT) exempt transaction and registration tax applies at the fixed rate of €200.  

Asset deal The direct sale of a line of business is a tax relevant transaction for IRES purposes. Where the business has been owned for at least three years, the seller may opt for the taxation of the capital gain for IRES purposes in equal instalments over a five-year period. Capital losses are fully deductible.

Capital gains and losses are generally excluded from the IRAP taxable basis.

The disposal of a line of business is out of the scope of VAT.

The following indirect taxes apply to an asset deal:

  • Registration tax applies on a proportional basis on the net value of the going concern. The applicable rates depend on the assets transferred:
    • 9% for real estate assets;
    • 0.5% for receivables; and
    • 3% for other assets, including goodwill.
  • Mortgage and cadastral taxes apply on real estate assets transferred at the fixed rate of €50 each.

Merger, de-merger or contribution in kind  These transactions are tax neutral events. No taxable capital gain arises from such transactions and, consequently, the transferred assets maintain the same value recognised for tax purposes. However, the taxpayer may opt – even partially – for the tax recognition of the eventual higher accounting value by paying a substitute tax ranging from 12% to 16%.

For mergers and de-mergers, specific provisions limiting the use of the tax attributes (ie, carried forward tax losses and passive interests excess) of the companies involved in the transaction should be carefully considered.

Mergers, de-mergers and contribution in kind of a business line are out of the scope of VAT.

Registration tax, mortgage tax and cadastral tax (should real estate assets be concerned), apply at the fixed rate of €200 each.

Share deal (individuals) Where an individual disposes of shares that constitute a ‘qualifying interest’ (ie, if they attribute to the holder a percentage of voting rights higher than 20% (2% in the case of listed companies) or represent a percentage of share capital higher than 25% (5% in the case of listed companies)), 49.72% of capital gains are subject to individual income tax at the applicable progressive tax rate (up to 43%). In case of capital loss, 49.72% of its amount may be offset against taxable capital gains (deriving from the disposal of qualifying interest) or carried forward until the fourth fiscal year following their realisation.

In case of the disposal of shares that do not constitute a qualifying interest, a substitute tax of 26% applies on the capital gain. In case a capital loss is realised, it may be offset against financial capital gains or carried forward until the fourth fiscal year following their realisation.

Exemptions and mitigation

Are any tax exemptions or reliefs available?

As far as share deals are concerned, the seller may benefit from a partial exemption (95%) of the realised capital gain for IRES purposes, if the PEX regime applies. The PEX regime applies provided that the following conditions are met:

  • The shares must have been held uninterruptedly since the first day of the twelfth month preceding the month of sale.
  • The shares must have been entered as fixed financial assets in the first balance sheet after the acquisition (for international accounting standards (IAS) adopters, the shares are considered as fixed financial assets if not classified as “held for trading”, in accordance with IAS 39).
  • The company issuing the shares must carry out a business activity.
  • The company issuing the shares must not be resident in a black-listed jurisdiction.

The conditions in the last two points must have been met for at least three fiscal years before the disposal or, in case of newly incorporated companies, from the incorporation. 

What are the common methods used to mitigate tax liability?

Carried forward tax losses In general terms, an Italian company may offset carried forward tax losses against the taxable profit for IRES purposes. Tax losses incurred during the first three fiscal years after the incorporation can offset the entire taxable profit; meanwhile, tax losses incurred after the first three fiscal years of activity may offset no more than 80% of the taxable profit realised in the following fiscal years.

Notional interest deduction  Italian companies can deduct from their IRES net taxable income (after using any carried forward tax losses) an amount corresponding to the notional interest on the increase of the equity (considering the specific adjustments provided by law) with respect to the 2010 equity base. For the 2016 fiscal year, the percentage for the computation of the notional interest has been set at 4.75%. On the basis of the 2017 draft budget law, the notional interest percentage will be 2.3% for the 2017 fiscal year and 2.7% onwards.

Any excess notional interest deduction may be carried forward with no time limits.

Fees

What fees are likely to be involved?

Fees for legal, financial and tax consultants are usually involved, as are notary public fees for asset deals involving real estate, quota deals, mergers and de-mergers.

Management and directors

Management buy-outs

What are the rules on management buy-outs?

No specific rule directly relate to management buy-outs. However, Article 2501-bis of the Civil Code provides a set of rules for broader leverage buy-out transactions, which applies to mergers between companies in which one of the companies has contracted debts in order to acquire control of the other company and where, as a result of the merger, the equity of the latter is used as general collateral or as a source of repayment for these debts.

Directors’ duties

What duties do directors have in relation to M&A?

Directors must act in the best interest of the managed company and in compliance with the obligations set out by applicable law and the company’s bylaws.

The Civil Code provides for certain specific obligations (eg, drafting of the annual financial statements and keeping of the corporate books) and other general duties, such as:

  • the duty of care;
  • the duty to inform the other directors;
  • the duty to act advisedly; and
  • the duty to monitor the other directors.

With regard to listed companies, pursuant to a 2010 Italian Stock Exchange Commission (CONSOB) regulation, related party transactions must be resolved by the board of directors with the prior opinion (binding or non-binding) of a special committee, comprised of independent directors, on the company’s interest in entering into the transaction and its substantial fairness.

In addition, the regulation provides that should the independent directors give a negative opinion on a material related party transaction – meaning those deals exceeding certain thresholds as determined by CONSOB – the transaction can be implemented only subject to the approval of the majority of unrelated shareholders (the so-called ‘whitewash mechanism’).

Further, in the case of a tender offer launched by a controlling shareholder, a member of a shareholders’ agreement, a director or any person acting in concert with them (so-called ‘insider bid’), under the Financial Act, the target’s directors must to rely on independent directors’ evaluation; moreover, they usually appoint, on a voluntary basis, a financial adviser in order to assess whether the consideration complies with the relevant legal criteria.

With respect to conflicts of interest between directors and controlling shareholders, the judicial review on business decisions does not scrutinise the merits of the case, nor does it question the terms of the transaction; instead, it focuses on the formal and procedural requirements as a proxy of the performance of the directors’ duties. 

Employees

Consultation and transfer

How are employees involved in the process?

Pursuant to Article 47 of Law 428/1990, the sale of a going concern by a company employing more than 15 employees requires that the buyer and seller inform any employee representatives and national unions in writing about the deal at least 25 days before the consummation of the transaction.

What rules govern the transfer of employees to a buyer?

In the case of an asset deal, the transfer of employment agreements is governed by Article 2112 of the Civil Code, according to which employment relationships continue with the transferee and employees retain all personal rights that they accrued before the transfer. The transferor and transferee are jointly and severally liable for all of the credits accrued by employees before the transfer, but employees can release the transferor from this liability by executing a settlement agreement.

In the event of a share or quota deal, the employer’s identity remains unchanged with the consequence that, subject to existing change of control clauses integrated in the employment contracts, the deal will not affect existing contracts.

Pensions

What are the rules in relation to company pension rights in the event of an acquisition?

Share and quota deals do not affect employees’ pension rights.

In the case of an asset deal, employees’ pension rights are transferred to the transferee. With regards to complementary private scheme pursuant to collective bargaining agreements, after the transfer, the transferee must apply the complementary private scheme set out by the national, territorial and company collective bargaining agreements applicable to the transferred employees in force at the time of the transfer until they expire, unless they are substituted by collective bargaining agreements applied by the transferee. If the transferor and transferee apply different collective bargaining agreements, the abovementioned provisions permit a change from the collective bargaining agreement (of the same level) applied by the transferor to the one applied by the transferee. According to case law, this substitution takes automatic effect at the time of the transfer. 

Other relevant considerations

Competition

What legislation governs competition issues relating to M&A?

Under the merger control rules (Act 287/1990), when certain turnover thresholds are met – namely, if the deal involves undertakings that have an aggregate turnover in Italy exceeding €495 million and the aggregate turnover of the target exceeds €50 million – merger transactions must be notified to the Antitrust Authority, which has the power to prohibit or authorise the transaction, subject to certain conditions aimed at avoiding possible distortive effects on competition.

The European Commission is also involved in assessing deals with European dimensions.

Anti-bribery

Are any anti-bribery provisions in force?

Yes, they are provided by the Civil Code and the Criminal Code, as amended by Act 69/2015.

Receivership/bankruptcy

What happens if the company being bought is in receivership or bankrupt?

Under the Bankruptcy Law (Royal Decree 267/1942, as amended), the trustee appointed by the court is entrusted with the administration of the bankrupt company’s estate under the supervision of the judge and the creditors' committee. The trustee can be authorised by the court (with consent from the creditors' committee) to carry on the business or single business branches temporarily or to lease them to a third party selected through a competitive procedure, with a view to preserving the bankruptcy estate and facilitating the sale of all or part of the business as a going concern.