The Court of Venice held that the prohibition of financing the purchase of own shares and the subscription of own shares pursuant to Article 2358 of the Italian civil code applies also to cooperative companies, pursuant to the reference made in Article 2519 of the Italian civil code.
The Court of Venice upheld the action filed by two account holders, seeking an injunction aimed at preventing the bank from demanding the payment of debit balances on their accounts. In particular, in relation to the requirement of periculum in mora, the Court accepted the existence of irreparable damage, set forth in Article 700 of the Italian code of civil procedure, since, although being a financial damage, it could significantly affect the organization of the debtor’s private life.
With two different appeals filed before the Court of Venice, two account holders argued the invalidity of loan agreements entered into with a well-known financial institution ,aimed at purchasing the bank shares, in breach of the prohibition contained in Article 2358 of the Italian civil code. Therefore, the account holders filed an injunction , aimed at inhibiting the bank from demanding the payment of debit balances on their accounts.
The bank joined both proceedings, disputing the existence of the requirements of periculum and fumus boni iuris.
In particular, with reference to the requirement of periculum, the bank noted that a request of payment did not fulfill the condition of “irreparable and imminent damage” required by Article 700 of the Italian code of civil procedure, provided that: (i) it is a financial damage and, as such, recoverable; (ii) the system attributes multiple remedies to the person wishing to object a request of payment ; as a consequence, the damage cannot be considered imminent.
With regards to the requirement of fumus boni iuris, the bank objected the following: (i) the application of the rules set forth under Article 2358 of the Italian civil code, typically applicable to public companies, also to cooperative companies; (ii) the lack of a link between the financing transaction and the purchase of the bank’s own shares; (ii) the fact that the plaintiffs had not proved the lack of conditions according to which the financing of the purchase of own shares is permitted.
With reference to the requirement periculum, the Court of Venice considered that the request of payment may integrate the condition of periculum pursuant to Article 700 as, “even though it was a financial damage, high indebtedness – when the creditor requires payment – may significantly affect the debtor’s organization of private life”.
In terms of fumus boni iuris, with reference to both the proceedings, the Court granted the plaintiffs’ request. Specifically, the Court stated that:
- despite few controversy around the issue, Article 2358 of the Italian civil code also applies to cooperative companies;
- evidence was shown of the link between the financing transaction and the purchase, provided that temporal proximity between the two represented a “serious, precise and consistent presumption”, able to prove the unity of such operations;
- by virtue of the principle of proximity of evidence, the burden of proof rests on the bank, which has to prove the conditions under which the financing of the purchase of own shares is lawful. Such evidence was not provided in this case.
In light of the above, granting the remedies sought by the plaintiffs, the Court inhibited the bank from requesting the payment of debt balances on their accounts.