No passivity or breakthrough

Author: | Published: 1 Jul 2009

The financial (and business) crisis has triggered a deep revision of many principles of law. That has recently happened in Italy where Law Decree 185/2008 (the so-called anti-crisis decree), converted into Law 2/2009, has deeply reformed two pillars of Italian legislation on hostile takeovers of listed companies: the passivity rule and the break-through principle.

Under the passivity rule, following the launch of a takeover offer, the target listed company could not take actions or pass resolutions to block the offer (defensive measures), except with the prior approval of the general meeting of shareholders. That meeting could only grant approval with the backing of at least 30% of the voting capital. Capital increases, conversion of bonds or other securities into equity, sale of going concerns, mergers or de-mergers, increase of the target's debt, granting of special rights to the directors in case of their removal: all fell within the...