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Italy

Italian banking foundations have undergone a number of legislative interventions, the latest of which was by Legislative Decree 217, August 2 2002 (Decree 217). The banking foundations have also lately been the subject of two rulings by the Italian Constitutional Court, Rulings 300 and 301 of September 24 and 29 2003. These rulings affect the juridical status and, as a result, the activity and composition of banking foundations' bodies.

With Ruling 300, the Constitutional Court has recognized that the juridical status applicable to banking foundations is exclusively that of private entities belonging to the private sector. This status is the result of legislative change since 1990, when banking foundations originally operating as public entities were transformed into non-profit private entities. They were therefore prevented from running any credit business and investing or holding controlling stakes in any profit enterprises or companies other than those that are strictly instrumental to the banking foundations' statutory object. Consistent with such a statement, the Constitutional Court has confirmed the exclusive legislative power of the Italian Central Government for the regulation of banking foundations, thus rejecting the concerns about constitutional illegitimacy raised by certain Italian regions. Still on the issue of banking foundations' juridical status, the Constitutional Court has confirmed the lawfulness of the regulation introduced with Decree 217 in connection with the main sectors to be chosen by the banking foundations when organizing their activities.

On the other hand, the Constitutional Court has also ruled on the composition of the banking foundations' administrative bodies. Pursuant to Decree 217, enacting article 11 of Law 448 of December 23 2001 (the 2002 Budget Law), banking foundations shall give the majority of the seats in their board (organo di indirizzo) to representatives of local authorities. These representatives will be appointed by the regions, provinces, municipalities and metropolitan cities (if any) within the relevant territory. The remaining seats shall be taken by individuals of great renown with specific experience in the sectors of the banking foundations' activities, to be designated by reputably independent entities operating in such sectors. Further, article 11 of the 2002 Budget Law and Decree 217 set out special incompatibilities for those who have addressing, administrative, managerial or controlling functions in the banking foundations' bodies. They may not take any similar function, neither in the controlling companies of such banking foundation nor in other companies operating in the banking sector. Lastly, the same article 11 of the 2002 Budget Law introduces the concept of control for the purposes of preventing banking foundations holding controlling stakes.

In Ruling 301, the Constitutional Court has now, among other things, declared the constitutional illegitimacy of the above-mentioned article 11 (and therefore of the relevant enactment provisions). It does so in the part where it provides for a prevalent and qualified representation of regions, provinces and municipalities in the banking foundations' boards and in the part where it provides for the incompatibilities for members of the banking foundations' bodies. It has further clarified that a relevant control for the purposes of article 11 of the 2002 Budget Law is a control that is effective. It therefore may not be identified in the ownership by two or more banking foundations of stakes in a bank or company in such an amount as to potentially control that company or bank, unless a specific shareholders' agreement is in place among those banking foundations. As a result of Ruling 301 the composition of the boards of banking foundations shall no longer be changed as provided in Decree 217. Some banking foundations were supposed to dismiss certain stakes in companies or banks that, added to those of other banking foundations, would result in a controlling stake following the interpretation of article 11 of the 2002 Budget Law by the central government. Now they will no longer be bound to arrange such dismissals to the extent that no shareholders' agreement is in place.

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