A key role is reserved for non-executive independent directors in the legislative framework of corporate transactions with related parties, where a clear risk can be seen of a conflict of interest between control- ling shareholders and minority.55 Such transactions are, for this reason, subject by law to special rules of transparency and fairness. 56
The risk that the company enters such transactions on less favour- able terms than those which would have occurred in the absence of the condition of correlation means that this phenomenon has become, especially in the last decade, absolutely crucial for the protec- tion of investors, in order to avoid the expropriation of minority shareholders. 57
According to the recent Consob Regulation containing provisions relating to transactions with related parties,58 to strengthen the role of non-executive independent directors in all stages of the process of approving the transaction, giving adequate information to the public, an entity is a related party to a company if: (a) directly or indirectly related, through subsidiaries, trustees or an intermediary: (i) controls the company, is controlled by, or is under common control; (ii) holds a stake in the company to exert significant influence over the entity;
(iii) exercises control over the company jointly with others; (b) is an associate of the company; (c) is a joint venture in which the company is a participant; (d) is one of the key management personnel of the company or its parent; (e) is a close relative of a person referred to in paragraphs (a) or (d); (f) is an entity in which a person referred to in paragraphs (d) or (e) exercises control, joint control or significant influence or owns, directly or indirectly, a significant portion, but not less than 20 per cent of voting rights; (g) is a supplementary pension fund, collective or individual, Italian or foreign, established for the employees of the company, or any other entity associated with it.
Transaction with a related party must be understood in the same Consob Regulation, including any transfer of resources, services or obligations between related parties, regardless of whether for valu- able consideration, including merger transactions, spin-off by incor- poration or strictly non-proportional spin-off, if carried out with related parties, and any decision on the allocation of wages and
economic benefits, in whatever form, for members of the administra- tive and control bodies and management personnel with strategic responsibilities.
With regard to the regulation of transactions with related parties and the role it played in the independent directors, Art. 4 of the Consob Regulation requires first of all that the boards of directors or management board of the company shall adopt, as specified in this regulation, the necessary procedures to ensure transparency and substantial and procedural fairness of related party transactions, establish the manner and timing with which they are provided, to independent directors or board members advising on transactions with related parties as well as to the management and supervisory bodies, information on transactions, and related materials, before deliberations, during and after the execution thereof.59 Resolutions on the procedures and any amendments shall be adopted following the favourable opinion of a committee, even specially formed, composed entirely of independent directors or, for companies that adopt the dual management and supervision system, of independent management and supervisory board members. Should no more than three independent directors remain in office, the resolutions shall be adopted following the favourable opinion of the existing inde- pendent directors or, failing that, after the non-binding opinion of an independent expert. The procedures provided for in para. 1 shall ensure coordination with the administrative and accounting proce- dures pursuant to Art. 154-bis of the Consolidated Law.60 In the inter- ests of transparency, companies must make available to the public any opinions of directors or independent directors and independent experts. 61
In the event that a related party transaction is also subject to the reporting requirements set out in Art. 114, para. 1 of the Consolidated Law,62 the communication to be disclosed to the public must be contained among other things, in addition to other information to be published pursuant to that rule, an indication that the counterparty to the transaction is a related party and description of the nature of the relationship as well as the possible approval of the transaction despite the contrary opinion of the directors or independent. 63
With regard to the procedures for the approval of the resolutions relating to transactions with related parties, the Consob Regulation poses different disciplines depending on whether the transactions
are of lesser or greater importance, according to the criteria laid down therein, and depending on the type of company governance (companies adopting traditional management and control systems or single-tier, companies adopting dualistic management and control systems, certain other types of companies). For example, for transac- tions of greater importance for companies that adopt the traditional management and control systems or single-tier, Art. 8 of the Consob Regulations 64 states that the procedures shall at least foresee: (a) the reserved right to resolve of the board of directors; (b) a committee, including specially formed, composed entirely of independent direc- tors unrelated or one or more components of the same delegates are involved in the negotiation phase and the initial inquiry through receiving a complete and timely information and the possibility of request information and to comment to the managing bodies and entities responsible for the conduct of negotiations or investiga- tion; (c) that the board of directors approves the transaction after the reasoned opinion of the committee indicated in (b) on the interest of the company upon completion of the transaction and on the convenience and the substantial correctness of the underlying terms, or, alternatively, whether other methods transaction approval are applied to ensure a decisive role by a majority of independent and unrelated directors; (d) if at least three independent directors unrelated are not available, specific internal controls equivalent to those provided by the paragraphs (b) and (c) to protect the substan- tial correctness of the operation. Procedures may foresee, subject to the statutory provisions required by law, that the board of directors approves transactions of greater importance despite the contrary opinion of independent directors, provided that the completion of these transactions is authorized, pursuant to Art. 2364, para. 1, no. 5, of the Civil Code by the shareholders’ meeting acting in accordance with Art. 11, para. 3 of the Consob Regulation.
With regard to rules relating, in particular, the banking industry, Art. 53, para. 4-quarter of the Consolidated Banking Law providesr that the Bank of Italy, in compliance with the resolutions of the Interministerial Committee for Credit and Savings, governing conflicts of interest between banks and affiliated entities in relation to other types of relationships of an economic nature.65 This legal framework includes, first, the identification of “related parties” and of the subject to these connected, to be considered as a whole as a
“connected person” and, in a second part, the conditions and limits for risk-taking banks and banking groups in respect of related parties.
This is without prejudice to the different rules on “risk concentra- tion” contained in the New Minimum Capital requirements for banks, contained in Bank of Italy Circular no. 263 of 2006.
The new rules of banking transactions with related parties takes into account international standards of supervision established in this regard by the Basel Committee on Banking Supervision. In detail, the Core Principle no. 11 provides that, in order to prevent abuses arising from exposures to related parties and to manage conflicts of interest, the supervisory authorities should have the power to require that these relationships, developed in a transparent and objective way,66 are effectively monitored and appropriate measures are taken to control or mitigate the risks.
In Italian law, then, the discipline of risk assets in respect of related parties aims to limit, in practice, the risk that the proximity of certain people to decision-making centres of the bank might compromize the objectivity and impartiality of the operations, providing specific decision- making procedures that apply to these transactions.