2. Protected by the Law? Improving the Protection of Minority Shareholders in Italian Public Companies Enrico Giordano Chadi A. Salloum C hiomenti S tudio L egale

3. Our approach to presenting MSPs Going “back to basics” Presenting key Minority Shareholders’ Protections and Suggesting guidelines for constructive shareholder involvement Roadmap C hiomenti S tudio L egale

4. Italian Civil Code As amended by Law No. 6/2003 (on Corporate Law Reform) Consolidated Financial Act Legislative Decree No. 58 of February 24, 1998 Investor Protection Act Law No. 262 of December 28, 2005 (on the protection of savings; this law amended the Civil Code and the Consolidated Financial Act) Consolidated law on Financial Intermediation As amended by law n. 262/05 (on protection of savings) : CG & MSPs: Legal Sources C hiomenti S tudio L egale

5. Traditional  B of D in charge of ordinary and extraordinary management  B of SA supervises proper management and compliance with law and by-laws CG Systems: Overview C hiomenti S tudio L egale B of SA Shareholders B of D

6. Two-tier  Superv. Board supervises proper management and compliance with law and by-laws  Mgmt. Board in charge of ordinary and extraordinary management CG Systems: Overview C hiomenti S tudio L egale ShareholdersSuperv. BoardMgmt. Board

7. One-tier CG Systems: Overview C hiomenti S tudio L egale Shareholders B of D Mgmt. Ctrl. Com.  B of D in charge of ordinary and extraordinary management  Mgmt. Ctrl. Com. supervises proper management and performs other functions delegated by B of D

8. CG Systems: Overview C hiomenti S tudio L egale Fiduciary duties of directors Duty of care Duty of loyalty Duty of candor Conflict of interest Duty to disclose

9. C hiomenti S tudio L egale Listed Company: “Special S.p.A.” Oversight by Consob Stringent legislative framework Higher level of scrutiny Resulting in additional protections

10. C hiomenti S tudio L egale Key rights and protections  Participating in the election of corporate bodies  Reporting irregularities to the board of statutory auditors  Requesting Court intervention  Requesting the call of a shareholders’ meeting and additions to its agenda  Instituting legal action against the company’s corporate bodies  Challenging the board of directors and shareholders’ meeting resolutions Listed Company: “Special S.p.A.”

11. C hiomenti S tudio L egale 1. Election of corporate bodies B of D  2.5% holders of share capital to present own slate  Right to elect at least one director  Election of independent directors For the first time mandated by law One if B of D has more than seven members What does it mean to be independent?  Borsa Italiana: a leader in corporate governance Listed Company: Key MSPs

12. C hiomenti S tudio L egale B of SA  Exclusive right to elect Chairman of B of SA  Election of independent statutory auditor Broadened criteria in line with changes to B of D Listed Company: Key MSPs

13. C hiomenti S tudio L egale Listed Company: Key MSPs 2. Adoption of the Code of Conduct For the first time, the law recognised the existence and importance of the Code  Comply or explain Annual disclosure Monitoring by Consob Role of statutory auditors

14. C hiomenti S tudio L egale Listed Company: Key MSPs 3. Reporting irregularities to B of SA  Any holder suspecting mismanagement has the right to report  if 2 % holder of share capital complains, B of SA has to: investigate report to shareholders’ meeting

15. C hiomenti S tudio L egale Listed Company: Key MSPs 4. Requesting Court intervention  5% holder of share capital suspecting serious mismanagement that could damage the company may request the Court to intervene and investigate  B of SA may on its own initiative or on basis of shareholders’ reporting irregularities to it request the Court to intervene and investigate

16. C hiomenti S tudio L egale Listed Company: Key MSPs 5. Requesting the call of a shareholders’ meeting or additions to its agenda  10% holder of share capital may call the meeting  2.5 % holder of share capital may request additions to agenda New MSP under IPA  Important tools for minority shareholders to be heard and trigger discussions

17. C hiomenti S tudio L egale Listed Company: Key MSPs 6. Bringing legal action against directors Direct action by the Company  Approved by shareholders’ meeting or resolved upon by 2/3 of the B of SA, for breach of fiduciary duties  5 years time limit from the day directors cease office  Unless opposed by 5% of share capital, company may abandon or settle action

18. C hiomenti S tudio L egale Listed Company: Key MSPs 6. Bringing legal action against directors (cont.) Derivative action by shareholders  2.5 % holder of share capital may bring a derivative action for breach of fiduciary duties  5 years time limit from the day directors cease office  Unless opposed by 5% of share capital, company may abandon or settle action  Recovery is only for the benefit of the company

19. C hiomenti S tudio L egale Listed Company: Key MSPs 6. Bringing legal action against directors (cont.) Direct action by shareholders  Any shareholder may bring a direct action for damages on the basis of: malice, fraud or negligence  5 years time limit from the day directors cease office  Damages are awarded to shareholders

20. C hiomenti S tudio L egale Listed Company: Key MSPs 7. Challenging resolutions Shareholders’ meeting  0.1% holder of share capital may challenge if: resolutions are not in conformity with law or by-laws  Any shareholder is entitled to be awarded damages as a result of resolutions’ non compliance with law or by-laws

21. C hiomenti S tudio L egale Listed Company: Key MSPs 7. Challenging resolutions (cont.) B of D  Most important new MSP Direct mean to scrutinise management  0.1% holder of share capital may challenge if: resolutions cause damage to shareholder’s interests

22. C hiomenti S tudio L egale

23. C hiomenti S tudio L egale The Code of Conduct and legislation have provided minority shareholders the necessary tools to protect their interests Minority shareholders are protected by law, but need to be proactive in a responsible and constructive way Conclusions & Guidelines

24. C hiomenti S tudio L egale Minority shareholders should:  Know their rights and remedies  Communicate to management areas of their concern  Attend shareholders meetings  Not be deterred by the complexity of legal issues by reaching out to local counsel for guidance and assistance Conclusions & Guidelines

25. Chiomenti Studio Legale Enrico Giordano Partner & Head of Capital Markets enrico.giordano@chiomenti.net Chadi A. Salloum Associate chadi.salloum@chiomenti.net Via XXIV Maggio 43 - 0187 Roma tel. +39 06 466221 fax. +39 06 46622600 roma@chiomenti.net www.chiomenti.net Rome  Milan  Turin  London  New York  Brussels