A major SPA approached my firm for defense in the context of a corporate dispute arising out of a major acquisition.

The matter can be briefly summarized as follows.

A shareholder challenges the resolution to reset to zero and reconstitute the share capital pursuant to Art. 2446-2447 of the Civil Code, by which the new shareholders of the SPA, having noticed a major loss in the financial statements, such as to completely erode the share capital, had decided to cover the losses and reconstitute the share capital by means of shareholders' contributions. The shareholder in question had not participated in the replenishment of losses and had not exercised his option right (which had been conditional on the replenishment of losses) and thus had been excluded from the shareholding structure. The grounds for the appeal were essentially based on formal and substantive exceptions.

On the one hand, the shareholder complained that the option right could not be conditioned on the replenishment of losses as it had been. He also claimed that Article 2446 of the Civil Code had been violated in that, prior to the shareholders' meeting that was to decide regarding the reconstitution of the share capital, a proper balance sheet complete with income statement, balance sheet and notes had to be filed at the registered office, whereas the directors had filed only a balance sheet and income statement. On the first point, the Court of Vicenza confirmed the orientation that a shareholder's obligations do not end with the initial subscription of shares, especially when further performance is required of him in order to ensure the very survival of the company in which he participates (Court of Cassation no. 23262/2005), so it considered it entirely legitimate to subordinate the option right to the coverage of losses. Regarding the violation of Article 2446 of the Italian Civil Code, the ruling was particularly interesting in that it upheld a minority interpretation of the rule by enhancing its literal datum where, in the case of capital losses, Article 2446 states that the reconstitution must be resolved “without delay even if only on the basis of a balance sheet situation” (Trib. Vicenza, dep. 18.5.16). The court thus decided to give precedence to the need to ensure the protection of third parties and the survival of the company over the protection of shareholders.

Regarding the merits of the dispute, the shareholder argued that the losses included in the financial statements were untrue and depended on an incorrect valuation of the company's inventory. He also claimed that the resolution to lower capital, replenish losses, and reconstitute had been used to get rid of the minority shareholder, and therefore requested that the other shareholders be ordered to pay damages quantified at several hundred thousand euros. In the course of the trial, however, it turned out that the losses actually existed.

Not only that, the other partners, whom I represented, proved that the minority partner, at the time he was a director of the company, had himself committed numerous wrongful acts, to the extent of causing damage to the company to the tune of several tens of thousands of euros. All claims were therefore dismissed and the partner ordered to pay damages to the company and the other partners.