Leaving aside partnerships (società semplice, società in nome collettivo and società in accomandita semplice) and partnerships limited by shares (società in accomandita per azioni), Italian companies are in most cases incorporated and operating as corporations, i.e. limited liability company (società a responsabilità limitata) or joint stock company (società per azioni).

Shareholders of both limited liability companies and joint stock companies are granted with limited liability (i.e. the risk is limited to the investment).

Private companies are usually incorporated as limited liability companies – especially if closely-held small and medium-sized enterprises (SMEs) – or joint stock companies. Public companies, i.e. companies with shares admitted to trading on a regulated market, are typically incorporated as joint stock companies (as limited liability companies cannot be listed).

It is worth noting that, while joint stock companies issue shares, limited liability companies issue “quotas”, which are not securities from a legal standpoint.

The key corporate structure of both limited liability companies and joint stock companies is as follows:

• shareholders general meeting (assemblea dei soci);
• board of directors (consiglio di amministrazione) or sole director (amministratore unico);
• board of statutory auditors (collegio sindacale) (see point 13 below).

Joint stock companies may also opt-in – by means of an explicit by-laws provision – for implementing one-tier (monistico) or two-tier (dualistico) corporate governance systems. The one-tier system is characterized by the presence of a shareholders meeting, a board of directors and a committee on management control, operating within the latter and composed of independent directors. The two-tier system is characterized by the presence of a shareholders meeting, a supervisory board and a management board, whose members are appointed by the supervisory board.

Joint stock companies shall also appoint an accounting auditor, acting in compliance with Legislative Decree 39/2010, provided that the board of statutory auditors may act as accounting auditor, conditional to: (i) the company not being required to consolidate the accounts of other entities, (ii) the company not being a listed or supervised entity, (iii) all statutory auditors being enrolled with the Register of Accountants.

We expect long-term sustainable development matters and ESG issues to become increasingly important for companies and the whole market. The institutional debate, especially at EU-level, is growing stronger. Stricter harmonized rules are expected to be deployed, which will require a serious compliance effort by companies, especially large ones having a greater impact (in terms of employment equality, environmental footprint, social matters, adherence to human rights conventions and regulations, etc.). We are experiencing a number of companies – namely listed and supervised ones – approving amendments to their by-laws and/or internal protocols/rules aimed at formally setting long-term sustainable development values, as well as ESG targets (see points 24 and 26 below).

Gender balance rules applicable to listed companies and supervised entities’ corporate bodies have been recently enhanced (see point 8 below), likewise to measures addressing gender-pay-gap.

On a different note, shareholder activism and engagement have kept growing and gaining strength in the past years. Following the national implementation of Directive (EU) 2017/828 as regards the encouragement of long-term shareholder engagement (Shareholder Rights Directive 2 or SRD 2), we expect such trend to increase even more in the Italian financial markets, also in light of the coming into effect of the new Corporate Governance Code for listed companies (the CG Code, adopted in January 2020 and effective from 1 January 2021) issued by Borsa Italiana S.p.A. (the Italian stock exchange management company).

Finally, we expect companies and regulators to focus on the interactions between innovation, finance and corporate governance (e.g. crypto-assets, FinTech, AI and technology within the corporation, management of tech and cyber risks, etc.). We also expect a further spreading of remote corporate meetings, non-at-meeting voting methods (see point 4 below), with the support of innovative tech-tools, capitalizing on the experience gained during the Covid-crisis, as well as of work-from-home policies.

The key persons involved in the management of joint stock companies and limited liability companies are usually as follows:

• the governing body, which may be either a board of directors or a sole director (or a management board in case a two-tier system is in place) (see point 1 above);
• managing director (amministratore delegato), who usually serves on the board (see point 6 below);
• the committees established within the board of directors (see point 6 below);
• key managers, such as the general manager (direttore generale) and officers (CFO, COO, CRO, CIO, CTO, etc.), if appointed (see point 6 below).

Management matters are reserved to the exclusive competence of the board of directors (Art. 2380-bis, par. 1, ICC) and shareholders are prevented from resolving upon any management matter, even though certain exclusions apply to limited liability companies under Art. 2479 ICC.

Shareholders general meetings are “ordinary” or “extraordinary”, depending on the items to be addressed, and meet at first and second calling (prima and seconda convocazione).

The shareholders meeting is entitled to resolve upon the matters granted to its competence by the applicable laws and regulations, which most significantly include: (i) appointment of directors and statutory auditors, (ii) filing of corporate suits against directors and statutory auditors, (iii) approval of financial statements and distribution of profits, (iv) share buyback programs, (v) amendments to the by-laws, (vi) mergers and demergers, conversions, (vii) etc.

Meetings operate based on the majority principle, provided that the by-laws may provide for the existence and issuance of special classes of shares, granted with certain rights or obligations (see points 7 and 15 below). The applicable quorums and majorities are to be determined based on: (a) type of company (listed or non-listed), (b) type of meeting (“ordinary” or “extraordinary”), (c) calling (first or second), (d) super-quorums and/or majorities set forth under the by-laws, if any.

With reference to both shareholders and board meetings, the by-laws may opt-in for: (i) remote meetings, i.e. audio/video attendance to meetings, and/or (ii) non-at-meeting voting methods, i.e. by mail or electronic means, provided in any case that a formal meeting shall be called.

Only limited liability companies’ by-laws may also provide for written consent or circular resolution instruments.

Corporate governance requirements are regulated, inter alia, under the Italian Civil Code and, as regard listed companies, the Consolidated Financial Act (Testo Unico della Finanza or CFA), as well as other relevant laws, regulations and best practice guidelines, such as the CG Code.

Adherence to the CG Code is not mandatory. However, the company shall inform the public of the compliance to the latter on a yearly basis, under a comply-or-explain regime (Art. 123-bis, par. 2, CFA).

Corporate governance requirements of banks and financial institutions are regulated under the relevant supranational rules (e.g. EU ones), the CFA, the Consolidated Banking Act (Testo Unico Bancario or CBA), the Private Insurance Companies Act (Codice delle Assicurazioni Private or PICA) and the relevant implementing regulations.

Specific provisions apply to state-owned entities, non-profit and social entities and companies, etc.

The above is without prejudice to supranational rules (e.g. EU regulations and directives), soft-law and guidelines (e.g. the G20/OECD Principles of Corporate Governance, revised in 2023, and the Basel Committee on Banking Supervision Corporate governance principles for banks).

The default corporate governance system is the so-called “traditional” one, which is the most commonly used. As mentioned above, joint stock companies may also opt-in – by means of an explicit by-laws provision – for implementing one-tier (monistico) or two-tier (dualistico) corporate governance systems (see point 1 above).

In the event that the shareholders meeting appoints a board of directors (i.e. not in the case of a sole director), pursuant to Art. 2381, par. 2-3, ICC, all or part of its powers may be attributed to: (a) one or more individual members, acting as managing director(s), and/or (ii) an executive committee. The delegation of powers shall be resolved by the board. In such case, the managing director(s) or the executive committee shall report to the board – at least on a semi-annual basis – on the general management of the company, the most significant transactions/events of the relevant period (with respect to the company and the subsidiaries) and the foreseeable evolution of the business.

It is worth noting that the board shall have the right to recall the attributed powers at its sole discretion, provided that in the event that there is no just cause for recalling said powers, the relevant managing director(s) or executive committee shall have the right to sue a claim for damages.

Typically, the leadership is entrusted with a sole managing director (amministratore delegato).

It should be stressed that the chairperson – even if non-executive – is granted with significant rights and powers under Art. 2381 ICC, such as calling board meetings, defining the items on the agenda, ensuring that the directors receive all necessary information for the purposes of resolving on the matters to be addressed by the board.

Also, committees serving specific functions or tasks may be established within the board, either discretionally (non-listed and non-supervised entities) or mandatorily (listed companies, banks, financial institutions, etc.). Such committees may be executive (i.e. be granted by the board with autonomous management powers) or non-executive (i.e. serve preliminary or advisory functions).

Non-listed and non-supervised entities are not required to implement any committee structure, therefore it is to the by-laws or the board discretion to do so. Listed companies – pursuant to, respectively, Regulation no. 17221/2010 issued by the CONSOB (the Italian securities and markets authority) and the above mentioned CG Code – and banks – pursuant to Circular no. 285/2013 issued by the Bank of Italy – shall appoint the following board committees: related party transactions, appointments, remunerations and risks (the latter in listed companies is called “control and risks”).

Day-to-day activities and coordination with the management structures of the company, the governing body usually appoints a general manager (direttore generale) and officers (CFO, COO, CRO, CIO, CTO, etc.), who are generally employees of the company and do not serve on the board. They usually report directly to the managing director and/or the board.

Pursuant to Art. 2383 ICC, the members of the board of directors shall be appointed by the ordinary shareholders meeting, which is also exclusively competent in removing them. The removal may be discretionarily resolved upon by the meeting, provided that in the event that there is no just cause for removal, the removed directors shall have the right to sue a claim for damages. Ordinary quorums and majorities apply to the appointment and removal of directors (see point 4 above).

The term in office shall be of maximum 3 financial years.

It is worth noting that, inter alia: (i) special classes of shares may be granted with certain rights in relation to the appointment of directors, such as veto rights or the right to appoint (autonomously) a certain number of directors, (ii) each holder of a participating financial instrument (strumento finanziario partecipativo or SFP) may be granted with the right to appoint an independent director under Art. 2346, par. 6, ICC, provided that the majority of the board shall be appointed by the shareholders meeting.

Moreover, listed companies shall mandatorily apply list-voting mechanisms aimed at granting the appointment of at least 1 minority director.

SMEs and closely-held companies are typically managed by the majority shareholder or a trusted representative of the latter, who usually acts as managing director (amministratore delegato) and/or chairperson. Public and large companies are typically managed by non-investor professionals, while majority and qualified-minority investors hold offices as non-executive chairperson or directors.

In any case, pursuant to Art. 2382 ICC, one cannot be appointed as director – and, if appointed, terminates from office automatically – if he/she is: (i) interdicted, (ii) incapable, (ii) declared bankrupt, (iv) prevented from carrying out public offices or executive directorates. Also, before accepting their appointment, each candidate director is required to file with the company a declaration stating that he/she: (a) doesn’t fall under any of the above cases, and (b) has not been issued with any measure preventing him/her from holding directorships in any EU Member State.

Further suitability requirements apply to those holding offices as directors of listed companies, banks and financial institution (honesty, integrity, reputation, adequate knowledge and experience, sufficient time commitment, maximum number of directorships, interlocking directorates, independence of mind, etc.), provided that the by-laws may voluntarily set forth specific requirements (Art. 2387 ICC).

With reference to independence: (i) listed companies’ board of directors shall include at least 1 or 2 independent directors, depending on whether the board is composed of up to or more than 7 members (“independence” is defined under Art. 147-ter and 148 CFA and the CG Code), (ii) banks’ board of directors shall include 25% of independent members (“independence” has been defined by Ministerial Decree no. 169/2020).

Statutory diversity requirements are provided for: (a) listed companies, which shall reserve at least 2/5 (40%) of the board seats to the least represented gender, and (b) banks, which shall reserve at least 1/3 (33.3%) of the board seats to the least represented gender and ensure the appointment of directors with an adequate degree of diversity of competences, background, age, gender, internationalization, in compliance with their diversity policies (the CG Code provides for similar soft-law rules for listed companies). If the bank is listed, the former rules shall prevail.

On 27 December 2022 a new EU Directive has entered into force (i.e. Directive (EU) 2022/2381 on improving the gender balance among directors of listed companies and related measures), mandating that at least 40% of non-executive directorships shall be reserved to the least represented gender. Member States may choose to extend gender balance rules to both executive and non-executive directorships and, in this case, the target shall be 33%. The Directive applies to large listed companies incorporated under the laws of a Member State (listed entities with less than 250 employees or not meeting certain turnover/financial thresholds are excluded from the scope of the Directive). The above targets shall be met by 30 June 2026. Large listed companies will have to provide the competent authorities with information on minimum gender representation on a yearly basis and, if the relevant targets are not met, how they plan to remedy. As noted above, Italian legislation on listed companies is already substantially in line with the minimum requirements under the Directive. We expect the implementation of limited adjustments, with reference to appointment procedures and disclosures.

No mandatory provisions are set out as regard succession plans. With regard to listed companies, the CG Code provides that succession plans should be implemented for the managing director, executive directors and top managers.

As mentioned, management matters are reserved to the exclusive competence of the board of directors (see point 4 above), including the activities related to strategy setting and changing. The strategy is usually defined by the managing director or the executive committee; the board is in any case competent in examining the strategic plan, if any (Art. 2381 ICC).

The corporate strategy shall in any case be compliant with the applicable laws and be aimed at pursuing the purpose of the company, as set forth under the by-laws (Art. 2380-bis ICC).

It should be noted that recent district-court case law (Commercial Court of Rome) stated that the directors cannot approve resolutions “substantially impacting on the structure or the organization of the company”, which can only be decided by the shareholders (even though, under the Italian legal system, case law is not binding, this precedent might be the first and leading-case of further judicial decisions; this view is nonetheless highly debated among scholars).

According to the Proposal for a Directive on Corporate Sustainability Due Diligence (see point 24 below for a broader overview), directors would also be called to take steps to adapt the corporate strategy to take into account the actual and potential human rights and environmental adverse impacts, with respect to their own operations, the operations of their subsidiaries, and the value chain operations carried out by established business relationships.

Board members may be compensated in a variety of ways, ranging from a fixed annual remuneration, to stock option plans, from stock grants, to direct profit-sharing mechanisms.

It is worth noting that the compensation shall be resolved upon by the shareholders meeting, even though the board itself may grant further compensation to the benefit of the directors holding particular offices (e.g. managing director, chairperson, committee members, etc.), provided that the shareholders meeting shall in any case have the right to set out an aggregate maximum amount (Art. 2389 ICC).

Specific rules are provided for: (a) listed companies, as the CFA and the CG Code sets forth a number of principles and recommendations on the remuneration of board members and top management, and (b) banks, which shall comply with the mandatory rules under the EU Credit Requirements package, the CBA and their relevant implementing guidelines and regulations (inter alia, Circular no. 285/2013 issued by the Bank of Italy).

Specific provisions apply also to insurance companies and other financial institutions.

Directors’ duties and responsibilities are governed – as a general rule – under the ICC.

On the one hand, directors shall act in a loyal manner, as Art. 2390-2391 ICC sets forth that they shall not: (i) carry out any activity in competition with the company (unless so authorized by the shareholders meeting), (ii) use for their own advantage or the advantage of third parties any information (including information on business opportunities), of which they become aware as a consequence of their office and that might be exploited by the company. Moreover, Art. 2391-bis ICC and its relevant implementing measures set forth specific rules applicable to listed companies’ related party transactions (scope of application, thresholds, procedures, whitewash, etc.). Substantially-updated implementing rules have been issued by the CONSOB.

On the other hand, pursuant to Art. 2392 ICC, directors are under a general duty to: (i) carry out the management of the company in accordance with the applicable laws and regulations, as well as the by-laws, (ii) act with the degree of care (diligenza) required in relation to their office, their professional skills and the particular features of the company.

Also, as a general rule, the directors shall define, approve and implement an organizational, management and accounting structure suitable in light of the company’s purpose and dimension. Said structure shall also be fit for timely discovering distress/insolvency situations and monitoring the going concern of the business (Art. 2086 ICC).

In case of breach of the mentioned duties of loyalty and/or care, directors shall be jointly liable towards the company for any damages caused by or deriving from their negligence, with the exclusion of the powers attributed, as the case may be, to the managing director or the executive committee, if any.

However, non-executive directors are not totally exempt from liability. In case the relevant member: (a) negligently fails to obtain data or information from the managing director or the executive committee, or (b) knew that a detrimental action was being carried out, but did not do his/her best to prevent or limit the consequences thereof, he/she shall be jointly liable with the managing director or the members of the executive committee.

It should be noted that the so-called business judgement rule applies. Namely, directors shall not be held liable for any damages suffered by the company, provided that the latter are part of the range of choices that could be considered ex ante as potentially advantageous (or in any case harmless) for the company by a person having the standard of care and knowledge which could be expected from the director of a company operating in the same business sector. It is worthwhile noting that, even though the business judgment rule prevents the courts from plunging into the merits of managerial evaluations, courts are not prevented from evaluating whether the decisions of the directors have been taken with gross negligence or reckless disregard and/or with the actual awareness that said decisions would cause a prejudice to the company.

Specific provisions apply to banks and financial institutions.

Finally, it should be noted that according to the Proposal for a Directive on Corporate Sustainability Due Diligence (see point 24 below for a broader overview), when fulfilling their duty to act in the best interest of the company, large entities’ directors would be mandated to (i) take into account the consequences of their decisions on sustainability matters, including, where applicable, human rights, climate change and environmental consequences, in the short, medium and long term, (ii) be responsible for putting in place and overseeing the due diligence actions referred to in the Directive and in particular the due diligence policy, with due consideration for relevant input from stakeholders and civil society organizations, (iii) report to the board of directors in that respect.

Ex ante indemnities and limitations of liability are generally not permitted to cover board members’ potential personal liability (see point 11 above), as limitations or waivers to directors may be granted only by means of an ex post shareholders meeting resolution (Art. 2393 ICC).

The company may enter into D&O insurance policies for protecting board members against such potential liability. Insurance protections are commonly used only by listed companies, banks and financial institutions, especially if part of international groups. Otherwise they are still quite rare.

Management activities are primarily overseen by: (i) the board of directors as a whole (especially in relation to strategic decisions and high-level management), the managing director(s) and/or the executive committee, and (ii) the board of statutory auditors (compliance with the law and the by-laws).

The board of statutory auditors is a corporate body composed of professionals independent from the company and its management, which is entrusted with internal control functions; limited liability companies shall appoint a board of statutory auditors or a sole statutory auditor only if certain dimensional thresholds are triggered, the company controls an entity subject to mandatory accounting audit and/or it consolidates the accounts of other entities (Art. 2477 ICC).

Managers evaluation shall be discretionally defined and carried out by the board of directors, internal evaluation functions and senior management (e.g. CEO, COO, HR).

It is worth noting that listed companies, insurance companies and banks’ board of directors shall conduct self-evaluations on a periodic basis, respectively, under the CG Code and Circular no. 285/2013 issued by the Bank of Italy.

On the one hand – with the aim of preserving corporate secrets and the exclusive governance competence vested into the directors – shareholders of joint stock companies are not granted with the right to demand engagement with the board of directors for the purposes of being informed of the business activity of the company.

On the other hand, holders of quotas of limited liability companies are granted with the individual right to ask the board of directors for any information on the business activity of the company (Art. 2476, par. 2, ICC).

As for listed companies, the latest version of the CG Code explicitly states that the board of directors shall assess the opportunity of engaging with the shareholders and the other relevant stakeholders. As regard large banks, similar rules on engagement with shareholders apply (under such rules, large banks are required to approve engagement policies, with the aim, inter alia, of protecting sensitive information).

Even though there is no right for shareholders of joint stock companies – including listed ones – to demand engagement with the board of directors, this does not mean that engagement per se cannot occur. In other terms: while the directors cannot be forced to engage in exchanges with the shareholders, they may nonetheless decide to do so discretionally and autonomously. It is of paramount importance for the directors to engage shareholders fairly and treat them equally. In case the company is listed, market abuse rules shall be taken in due account (especially, though not limited to, those on the disclosure of price sensitive information and on market soundings).

The by-laws may provide for the existence and issuance of special classes of shares, granted with certain rights or obligations, e.g. (i) multiple-voting rights (up to no more than 3 votes per share) or limitations/conditions to the exercise of voting rights, (ii) specific rights regarding the distribution of profits or the apportionment of losses, (iii) rights or obligations relating to the transferability of the shares (lock-up, pre-emption, right of first offer, drag and tag-along, etc.), (iv) prior approval or veto rights on specific matters to be resolved upon by the general shareholders meeting.

Multi-class capital structures are commonly used by start-up companies, as well as in private equity and other tailor-made investment schemes, with the aim of protecting the position and the investment of specific shareholders. They are not common in listed companies.

As regard financial information, joint stock companies and limited liability companies shall file with the Register of Companies their yearly financial statements, within 30 days from the approval by the shareholders meeting (see point 20 below). Financial statements approved by the shareholders meeting, once filed, are available to the public.

Listed companies shall also disclose semi-annual financial statements and may opt-in for extending such disclosure regime also to quarterly financial information.

As regard non-financial information, non-listed entities are not required to disclose business information to the public (they may however decide to do so on a discretionary basis), other than the required corporate disclosures to the Register of Companies, such as: (a) corporate seat and purpose, (b) number and characteristics of the issued shares or quotas, (c) names and data of (i) shareholders, (ii) members of the corporate bodies (directors and statutory auditors, with indication of those holding managing director or chair functions, as well as their date of appointment and term in office), (iii) accounting auditor, (iv) entity carrying out management and coordination activity (direzione e coordinamento) over the company.

On a yearly basis, listed companies shall disclose their compliance to the CG Code provisions, pursuant to Art. 123-bis, par. 2, CFA (comply-or-explain).

Moreover, while listed companies shall comply with the disclosure duties under Regulation (EU) no. 596/2014 on market abuse (Market Abuse Regulation or MAR, setting forth detailed rules inter alia on the disclosure of price sensitive information), certain large undertakings and groups (listed and non-listed) shall also comply with those under Directive 2014/95/EU as regards disclosure of non-financial and diversity information, as well as the relevant national implementing laws and regulations (see point 24 below).

The entities subject to the transparency regime under Directive 2014/95/EU shall also disclose, on a yearly basis, information on how and to what extent their activities are associated with economic activities that qualify as “environmentally sustainable” under Regulation (EU) 2020/852 (so-called Taxonomy Regulation), in terms of both: (a) the proportion of their turnover derived from products or services associated with sustainable economic activities, and (b) the proportion of their capital expenditure and the proportion of their operating expenditure related to assets or processes associated with sustainable economic activities.

Such rules will undergo substantial changes in the near future when the recently-approved Directive (EU) 2022/2464 on corporate sustainability reporting (so-called Corporate Sustainability Reporting Directive or CSRD) will be implemented into national law, expanding the scope of the current non-financial and diversity information disclosure, which will evolve into a broader “corporate sustainability reporting”, in terms of both: (i) the number of entities required to abide by the proposed sustainability reporting, and (ii) the scope of information to be disclosed, introducing more detailed sustainability reporting requirements on companies’ impacts on the environment, human rights and social standards, based on common criteria in line with the EU climate goals. Simplifications and exemptions are provided for SMEs. The new rules – which will be supplemented by the sustainability standards that will be adopted by the Commission in the coming months – shall be implemented into national law to become fully effective and will come into force on a staggered basis: from 1 January 2024 for large public-interest companies, with over 500 employees, already subject to non-financial reporting; from 1 January 2025 for large companies that are not currently subject to non-financial reporting, with more than 250 employees and/or 40 million Euro in turnover and/or 20 million Euro in total assets; from 1 January 2026 for listed SMEs and other undertakings.

Specific provisions apply to banks, insurance companies and financial institutions.

With regard to joint stock companies, pursuant to and subject to the limitations under Art. 2367 ICC, shareholders holding at least 10% of the corporate capital (or 5% in case the company is listed) shall have the right to request the directors to call a shareholder meeting, for the purposes of resolving on specific items. The meeting can only resolve on the matters reserved to its competence (i.e. the shareholders are prevented from resolving upon any management matter, which is reserved to the directors’ exclusive competence).

A similar rule applies also to limited liability companies, with reference to investors holding quotas amounting to at least 1/3 of the corporate capital, according to Art. 2479 ICC.

As regard listed companies, Art. 126-bis CFA grants the shareholders representing at least 2.5% of the corporate capital with the right to request the directors to supplement the agenda of an already-called meeting. In such case, the requesting shareholders shall provide the company with a report on the supplemented item, to be made public prior to the meeting.

In case the directors breach their duties, they shall be liable towards the company (see point 11 above).

Should the shareholders meeting not reach the required majority, qualified minority shareholders (20% of the corporate capital or 5% in case the company is listed) may file a derivative suit. Any recovered amount shall be paid to the company, net of the legal costs.

In case an investor suffers a direct damage following a negligent or wilful misconduct of a director (i.e. not an indirect damage, such as a reduction of the value or the revenues of the company), said investor may claim damages from the relevant director.

Italian financial markets experienced a significant growth in shareholder activism and engagement in the past years.

According to the latest publicly-available data (2022 Report on corporate governance of Italian listed companies, issued by the CONSOB in April 2023): ‘Looking at AGMs of the 100 largest Italian listed companies held during the first half of the year, the 2022 proxy season recorded a larger participation by all shareholders with respect to previous year: an average of 75.4% of the share capital intervened compared with 74.6% in 2021 (ranging between a minimum value of 44.5% and a maximum share capital of 95.4%). Institutional investors represented on average 21.9% of share capital (22.8% in 2021)’.

In implementing the provisions under the SRD 2, the Italian lawmaker has adopted a number of provisions on engagement and activism.

Namely, the newly-implemented Art. 124-quarter seq. CFA set forth that asset managers and institutional investors holding stakes in listed companies shall, inter alia: (i) make available to the market a commitment policy which describes how their investment intertwines with their general investment strategy (e.g. investment monitoring and engagement, risks, financial and non-financial results, exercise of voting rights, social and environmental impact, etc.), (ii) disclose, at least on a yearly basis, their actual implementation of such commitment policy and how their voting rights have been exercised.

Specific rules tackle the issue of transparency of asset managers and institutional investors, as well as long-term shareholder engagement.

As a general rule, non-controlling investors cannot exert influence on a corporate entity’s management, as the latter is exclusively competent and responsible on business matters. However, in engaging with the management, investors may express their views and make suggestions and/or recommendations. Nonetheless, they cannot deprive the directors of their exclusive governing competence. The board is not required – from a strictly legal standpoint – to factor into its decisions investors’ interests, unless on a voluntary basis.

Pursuant to Art. 2364, par. 2, ICC, the board of directors shall call the shareholders meeting at least on a yearly basis, no later than 120 days from the date of expiration of the financial year (usually set by the by-laws at 31 December) – or 180 days from such date if the company is required to consolidate the accounts of other entities or such term extension is grounded on reasons relating to the corporate purpose or structure – for the purposes of resolving upon the financial statements, which shall be made freely accessible to the shareholders (at the corporate seat) at least 15 days prior to the meeting.

With sole reference to listed companies, Art. 125-ter CFA sets forth that, together with the calling notice, the shareholders shall be provided with written reports on each of the items on the agenda, prepared by the board of directors, as well as other transparency documents.

It is worth noting that, pursuant to Art. 2374 ICC, shareholders holding at least 1/3 of the corporate capital shall have the right to request a postponement of the meeting, should they assert not to have enough information on the item to be addressed. The new meeting shall convene no later than 5 days from the original date.

Proxy advisors often play a fundamental role in determining the voting outcome in listed companies’ shareholders meetings, especially with reference to compensation resolutions (so-called say-on-pay).

Art. 123-octies CFA (adopted as part of the SRD 2 implementing measures) sets forth specific rules applicable to proxy advisors. The latter shall disclose to the market, inter alia: (i) the essential characteristics of the methods and models applied, (ii) their main sources of information, (iii) the extent and nature of their engagement with the listed companies object of their research, (iv) the procedures implemented to guarantee the quality of their research, advice and voting recommendations, (v) the procedures implemented to prevent and manage conflicts of interest.

Unless so provided for on a voluntary basis, stakeholders do not typically play a role in the company’s corporate governance.

It should be noted that, among others: (a) employees may be granted with corporate rights by means of granting them with financial instruments or stock options, (b) pursuant to Art. 2394 ICC, creditors shall have the right to sue the directors for breach of their duties (see point 12 above), in case such breach is detrimental to the creditors’ rights to effectively collect their receivables, (c) pursuant to Art. 2418 ICC, the noteholders’ representative shall have the right to attend the shareholders meeting.

As mentioned, management matters are reserved to the exclusive competence of the board of directors (see point 4 above).

The board is not required – from a strictly legal standpoint – to factor non-shareholder stakeholders’ interests into its decisions, unless on a voluntary basis (see point 19 above).

As regard listed companies, the latest version of the CG Code strongly stresses the importance of considering them as well.

The mentioned issues are experiencing a significant growth in awareness by companies and stakeholders.

From a legal standpoint, general legal disclosure obligations are currently set forth under Directive 2014/95/EU as regards disclosure of non-financial and diversity information, to be supplemented, broadened and strengthened in the near future under the newly-adopted Corporate Sustainability Reporting Directive (see point 16 above), as well as the relevant national implementing laws and regulations. Also, the European Commission issued a set of guidelines to help companies disclose environmental and social information and a further set of guidelines on reporting climate-related information (which in practice supplement the mentioned non-financial disclosure). Official sustainability reporting standards are being developed with the aim of setting a commonly-shared level playing field, with the first set of standards published in December 2023 (Delegated Regulation (EU) 2023/2772).

Also, Regulation (EU) 2019/2088, on sustainability‐related disclosures in the financial services sector, laid down harmonised rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability‐related information with respect to financial products. The latter has been later amended by the Taxonomy Regulation, which establishes a framework to facilitate sustainable investment, establishing the criteria for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable.

The remuneration policy under Art. 123-ter CFA (amended by the SRD 2 implementing measures) shall serve the long-term interests and sustainability of the company as a whole and shall be approved by the shareholders meeting at least every 3 financial years.

As regard listed companies, the latest version of the CG Code strongly stresses the importance of ESG issues.

As regard banks, Circular no. 285/2013 issued by the Bank of Italy requires boards of directors to factor sustainability and ESG matters into the strategy of the bank.

Finally, it should be noted that, in early 2022, the Commission put forth a Proposal for a Directive on Corporate Sustainability Due Diligence (so-called CSDD), which lays down rules on: (i) due diligence obligations by companies regarding actual and potential human rights and environmental adverse impacts, with respect to their own operations, the operations of their subsidiaries, and the value chain operations carried out by established business relationships, (ii) liability for violations of due diligence obligations. The Directive is expected to apply only to large enterprises (the definition set forth in the Commission’s initial proposal is undergoing substantial changes). These rules are expected to apply also to a number of foreign enterprises having material operations in the EU. Under the proposed Directive, such companies will be called to integrate due diligence into all corporate policies, have in place a due diligence policy that is updated annually (including a code of conduct) and comply with specific reporting requirements. Without prejudice to the duties, responsibilities and potential liability of the directors (see point 11 above), large EU companies are expected to be liable for damages, inter alia, if: (x) they fail to comply with the obligations to identify, prevent, mitigate, bring to an end, as the case may be, actual or potential adverse human rights and environmental impacts, and (y) as a result of this failure an adverse impact that should have been identified, prevented, mitigated, brought to an end or its extent minimized through the appropriate measures occurred and led to damage. The proposal is still under substantial discussions and negotiations by the competent EU legislative bodies, which are expected to take final stances and decisions in the coming months (the above outline is based on the legislative drafts published in late 2022).

With regard to listed companies: (a) pursuant to Art. 120 CFA, investors holding more than 3% of the corporate capital/voting rights of the company (5% if the company is a SME under the CFA) shall notify such holding to the company, the CONSOB and the market, (b) pursuant to Art. 122 CFA, where investors holding more than the mentioned thresholds enter into a shareholders agreement (patto parasociale), such investors shall inform of the agreement the company, the CONSOB and the market.

Also with regard to listed companies, any investor triggering certain holding-thresholds (namely: 10%, 20% and 25% of the corporate capital/voting rights of the company) shall state the objectives it intends to pursue in the following six months, setting out inter alia: (a) the means of financing used for acquiring the relevant holding, (b) whether it acted alone or in concert with other persons, (c) whether it intends to make further stock purchases and/or acquire control over the company and, in such case, the strategy it intends to adopt, (d) its intentions as to any agreements and shareholders’ agreements to which it is a party to, (e) whether it intends to appoint and/or remove directors or statutory auditors.

As regard stewardship, no statutory rules are provided for. It should be noted that Assogestioni (the Italian Investment Management Association) issued the Italian Stewardship Principles, which are best practice and non-mandatory principles, aimed at inter alia: (i) providing a set of high-level best practices designed to promote discussion and cooperation between investment management companies and listed companies in which assets are invested, (ii) encouraging interaction between investment management companies and investee companies, in order to ensure that governance and investment process are closely linked, (iii) improving the quality of communication with investee companies, as well as encouraging investment management companies to create added value for their clients/investors by effectively addressing the issues related to corporate performance.

As mentioned, SRD 2 introduced a varied set of rules aimed, among others, at: (a) encouraging long-term shareholder engagement (e.g. institutional investors shall publicly disclose how the main elements of their equity investment strategy are consistent with the profile and duration of their liabilities, in particular long-term liabilities, and how they contribute to the medium to long-term performance of their assets), (b) enhancing transparency between companies and investors (e.g. asset managers shall disclose how their investment strategy contributes to the medium to long-term performance, reporting on the key material medium to long-term risks associated with the investments), (c) ensuring a more long-term approach by listed companies, (d) enhancing long-term financial and non-financial performance of both the companies and the investors, (e) incentivizing directors to contribute to the long-term success of the company (e.g. the remuneration policy shall contribute to the company’s business strategy and long-term interests and sustainability).

The relevant national implementing laws and regulations (especially the CFA and the second level rules issued by the CONSOB) provide further detail on such principles.

As regard listed companies, the latest version of the CG Code strongly stresses the importance of long-term sustainable development. A similar principle is set forth under Circular no. 285/2013 issued by the Bank of Italy.

Harmonized rules have recently been passed and other ones are expected to be adopted in the near future at EU-level (several legislative proposals are currently being discussed and negotiated, on a variety of matters), aimed at deploying stricter provisions, defining a level-playing-field across the EU and making the latter a global leader on long-term sustainable investment and development.