Mandatory rule on shareholder put and call options
According to Article 2265 of the Civil Code, a members' agreement which provides that one or more shareholders are exempted from a company's profit or loss is null and void.
This rule was established to comply with Italian public order regarding company law, which is based on the principle that company shareholders must share profit or loss in proportion to their equity participation.
On 10 October 1994 the Supreme Court of Cassation (Decision 8927) stated that a clause inserted in a joint stock company's articles of association by which a shareholder is permanently and completely excluded from any company's loss or profit is null and void.
Recent Supreme Court of Cassation decision
On 4 July 2018 the Supreme Court of Cassation (Decision 17498) examined the admissibility of a put option clause in a shareholders' agreement of an Italian joint stock company by which one shareholder was committed to indemnify the other shareholders from any losses arising from payments to the company for stock capital contributions or other payments having a similar effect (eg, by granting a put option's right to be activated by the exiting shareholder within a deadline term).
Therefore, if an exiting shareholder which has lost the equity participation which it contributed to a company exercises its put option right, the other shareholders must purchase the shareholding participation at an agreed price, including accrued interests.
The court held that the put option clause complied with company law and a violation of Article 2265 of the Civil Code occurs only if a shareholder is permanently excluded from a company's profit or loss.
Clauses providing indemnification to the benefit of a single shareholder by other shareholders for any loss incurred arising from payments to the company as capital contribution and other financing do not violate the mandatory rule set by Article 2265 of the Civil Code, as the aim of this clause is to secure the company's financing by shareholders as well as their right to exit and be reimbursed in the event of the company suffering losses.
The Supreme Court of Cassation's decision confirms that Italian company law admits shareholder agreement clauses in line with the international principles of lex mercatoria.
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