• LATEST NEWS & INSIGHTS 10 February 2023

    Posted on: 10/02/2023



    The Council of State, in the judgment under review, ruled on the Government’s veto power on a corporate acquisition in the food sector. This is one of the limited decisions of the administrative judge on the subject of special powers of the Government.


    As well known, Decree-Law No. 21/2012 discards the previous principle of the ‘golden share’, conferring certain ‘golden powers’ of general nature to the State. These powers, subject to the conditions provided for by the Law, consist in the power to oppose a veto and/or impose conditions for the implementation of extraordinary transactions. This ‘measure’ gives the national legal order the power to control investment operations aimed at the acquisition of companies operating in strategic sectors, thus granting to the government the authority to ‘oppose’ certain corporate transactions. The State has the power to dispute the entry of ‘undesirable’ shareholders into the entity’s corporate structure.


    In the judgment under review, the Council of State firstly reiterates that the use of special powers constitutes an administrative (and therefore not political) act and is therefore subject to review by the administrative Court. At the same time, case law qualifies such actions as acts of high administration, acknowledging the Government’s wide discretion on the matter, consequently a judicial review on the less extensive deed. This derives from the fact that the guidelines on special powers are aimed at protecting national security, a concept with blurred and undetermined boundaries (to the extent that it increasingly includes the so-called economic security). The extent of the administrative judge’s review is therefore limited to verifying the existence of the prerequisites for the use of the special powers and the compliance with law constraints. In this respect, Judgement No. 289 of 9 January 2023 states that: “the golden power, in fact, represents the procedural timeframe established by law to guarantee national interest in specific economic macro-areas taken into consideration; as such, and specifically because it is set to protect the fundamental (“strategic”) interests of the national community, valued upon the discretion of the Council of Ministers, it requires equally broad, elastic, flexible and inclusive regulatory grounds, which allow for the maximum and most effective protection of the (very significant) underlying interests: any allegation of vagueness and generality is excluded from this perspective.”


    Secondly, in the light of the plaintiff’s complaint concerning the alleged conflict between the preliminary investigation phase (in this case carried out by the Ministry of Agriculture, which initially declared that the conditions for the use of the special powers did not exist) and the decisional phase carried out by the Government which has decided to use the power of veto with the contested decree, the Judge stated that “the national procedure on the subject of ‘golden power’ is, indeed, split in two-phase“.


    In this regard, it has been clarified how the aforesaid procedure clearly provides for an initial phase of a purely preliminary nature aimed at the acquisition of all the relevant facts in order to reconstruct and assess the operation in an analytical and systemic manner, for the benefit of the subsequent final assessment: this phase which is significantly defined by Presidential Decree no. 86 of 2014 as “preparatory activity for the use of special powers“, is carried out by a special Coordination Group, made up of senior management personnel of the Presidency of the Council of Ministers and of the various Ministries concerned.


    The second phase, on the other hand, is decisive and is the exclusive prerogative of the Council of Ministers, which: “does not limit itself to an atomistic, spot-transmission and, so to say, “accounting” and harmless exploration of the specific characteristics of the operation, but considers it in the context of the general purposes of national policy, weighing its impact both on the economic-productive structure of the socio-economic sector concerned, and on the broader structure of the national economy, and, finally, on international relations and on the overall political-strategic positioning of the country in the international arena“.


    For these reasons, given the two-phase structure of the proceedings pursuant to Law Decree No. 21/2012, the Council of State concludes that the Government’s veto decree on the corporate transaction is legitimate and free from the alleged flaws. The decision-making phase envisages the participation of the political leadership of all the State administrations, so that notwithstanding obtaining the factual data during the preliminary investigation, it constitutes a highly discretionary phase whose decision must be taken not only from an economic and financial perspective, “but in a more global strategic sense”.


    Lastly, it should be noted that the Council of State’s ruling, although one of the few decisions issued on the subject of golden power, could pave the way for other rulings on the subject: and indeed, once the administrative judges have determined the use of the power of veto as an act of so-called “high administration”, it goes without saying that, on the one hand, the Government has been assigned broad discretion on the matter, and on the other, given the increase in the number of transactions notified for the purpose of assessing Golden Power, it is possible to imagine more and more rulings that, by attempting to provide clarifications and rules, gradually raise the threshold of the possibility of reviewing and assessing the measures adopted by the Government.










    The Court of Como – focusing on the extent of the scrutiny that the Judge is called to have when faced with an application for homologation of a simplified liquidation composition with creditors – recently granted an application for a simplified composition with creditors despite the fact that it did not provide for any minimum satisfaction for a large part of the applicant’s creditors and despite the opposition of some creditors not involved in the negotiations.


    By decree of October 3rd, 2022, the Court of Como approved an application for homologation of the simplified composition with creditors pursuant to Article 18 of Law Decree 118/2021 (which regulations are now contained in Articles 25-sexies and 25-septies of the Code of Corporate Crisis and Insolvency – “CCII“) after completion of the verifications that the legislator requires the Judge to carry out in this particular recently introduced procedure.


    This decision is of particular interest as it probably represents the first ruling of homologation of a simplified composition with creditors and provides a very useful overview of the Court’s evaluations for such a purpose, evaluations that partly depend on the specific features of this new procedure compared to the traditional composition with creditors.


    In fact, the simplified composition with creditors for the liquidation of assets is mainly characterised by the absence of the creditors’ approval who are not requested to express themselves regarding the debtor’s proposal, whereas in the composition with creditors it is not possible to obtain homologation without having previously obtained the majority of creditors’ votes required by law. Further differences relate to the absence of the requirement to certify the truthfulness of the debtor’s representations and the feasibility of the proposed plan, whereas in the composition with creditors an independent professional is required to express an opinion on these crucial aspects, and the feasibility of the plan is subsequently examined by the Court before the homologation is granted, where the plan’s non-manifest failure to achieve its objectives. In addition, there is no minimum threshold for creditors’ satisfaction which, on the contrary conditions the admissibility of the traditional composition with creditors (if of a liquidation-type, as is also the simplified composition with creditors).


    However, this new type of procedure – which, as already seen, brings undoubted advantages for the debtor – cannot be freely accessed: indeed, the law provides that the debtor may only file an application for a simplified composition with creditors if the negotiations, conducted properly and in good faith under the new negotiated crisis resolution procedure governed by Article 12 et seq. of the CCII, have failed. The simplified composition with creditors is therefore a residual instrument that cannot be invoked by the debtor from the very outset: a debtor accessing the negotiated crisis resolution for the sole purpose of obtaining homologation of a simplified composition with creditors would be using the tool in a distorted and abusive way.


    As can be perceived, this procedure may lead to a deterioration of the creditors’ position when compared to the traditional composition with creditors, which is why the Court’s scrutiny for homologation is more significant , since it has to make up – at least in part – for the lack of provision for approval by the creditors to whom the proposal is addressed, creditors who are exclusively entitled to oppose the homologation.


    In this ruling, the Court clearly illustrates the extent and characteristics of the examination that it is required to carry out for the homologation. As a preliminary step, the Court verifies the debtor’s status as an entrepreneur, the prerequisite of the state of crisis, the territorial jurisdiction of the Court, the integrity of the adversary process and the timeliness of the application. The Court then goes on to examine the conditions for admissibility of the application by referring to the report of the independent professional who followed the negotiated crisis resolution procedure, which shall outline that the negotiations were conducted by the debtor and creditors in good faith and fairness, were not successful, and that the solutions to the crisis identified in Article 23(1) and (2) of the CCII were deemed unfeasible. Once the analysis has been positively completed, pursuant to Article 18 of Law Decree no. 118/2021 the Court is requested to verify (i) the compliance with the legitimate causes of pre-emption and (ii) the lack of prejudice of the composition proposal with respect to the creditors, i.e. the allocation of a benefit to the individual creditor , which must not be less than what they could obtain in the judicial liquidation.


    The Court of Como focused in particular on the latter aspect, as the composition proposal provided for the payment, not in full, of certain privileged creditors (employees and the mortgage creditors), while no payment was envisaged in favour of unsecured creditors due to insufficient resources. On this point, the Court shared the expert’s and the auxiliary’s opinion, who had not evaluated the proposal as detrimental to the prospect of judicial liquidation, having verified that there were no assets or liabilities that could have been represented differently in a liquidation scenario, nor would the distribution of resources among creditors have been different. In this case, the Court valued the fact that, in the two scenarios (simplified composition with creditors and judicial liquidation), the atomistic transfer of the assets would have allowed for the same realisation and the circumstance that, with regard to the prospects of realisation through the legal actions available, judicial liquidation would not have led to better results than those obtainable under the simplified composition with creditors. In addition, the composition proposal provided for a provision for risks and charges that constituted a possible additional asset that was not present in the liquidation scenario and contemplated a manifestation of interest in the purchase of the debtor’s business conditionally subject to homologation of the composition with creditors, purchase that would not have been realistic in the alternative scenario. Therefore, the Court, while stigmatising the “excessively rewarding” nature of the new institution, concluded that it was not possible to configure, in the alternative of judicial liquidation, prospects of greater benefits than those that could emerge from the proposal, either for unsecured creditors (who would not have found satisfaction in either procedure) or for privileged creditors (who were expected to be partially reimbursed).


    From a different perspective, it is particularly interesting to note the Court’s rejection of one of the objections to the homologation proceedings brought by a creditor, who complained about the failure to comply with the requirement that negotiations be carried out in good faith and fairness: some creditors, according to the objector, had not been called upon to participate in the negotiated crisis resolution procedure. Well, the Court rejected the objection on the assumption that, as the business plan presented in the negotiated crisis resolution procedure had been drafted, an agreement with the employees for the purpose of converting the industrial activity was fundamental and a priority: since such an agreement had not been reached, effective negotiations with other creditors were essentially useless, and therefore the non-involvement of such creditors was not deemed to hinder the homologation of the simplified composition with creditors.








    With the 2023 Budget Law (Law 197/2022) the legislator introduced significant changes in order to provide for the taxation in Italy of capital gains derived by non-residents from the alienation of investments in non-resident companies and entities whose value derives, directly or indirectly, mainly from real estate located in Italy.


    Specifically, a 26% tax may be levied on gains derived by non-resident investors from the alienation of shares or interests in non-resident companies or entities if, at any time during the 365 days preceding the alienation, these shares or interests derived more than 50 per cent of their value directly or indirectly from immovable property (real property) situated in Italy.


    The reference to indirect investment implies that this provision applies also to the alienation of shares of a non-resident company or entity participating in one or more vehicles investing mainly in real estate located in Italy.


    Real estate property used directly in the exercise of the activity of the company and real estate properties to whose construction or exchange the business activity is aimed are not taken into account for the purposes of calculating the 50% threshold.


    Furthermore, capital gains deriving from the alienation of listed securities are not subject to tax and a clarification is awaited to exclude the taxation also on the alienation of units in real estate investment funds.


    Capital gains realized by EU or EEA UCITS or investment funds whose manager is subject to regulatory supervision under the AIFM directive are not subject to taxation.


    The new provisions must be coordinated with double taxation treaties, most of them (but there are important exceptions) currently not allowing Italy to tax such income and, therefore, preventing the full functioning of the new rules.


    The change must, however, be read in relation to the amendments to the double taxation agreements provided for by the Multilateral Convention to Implement Tax Treaty related Measures to Prevent Base Erosion and Profit Shifting (MLI), a multilateral convention promoted within the OECD – already signed by 100 states including Italy – whose effect will be to modify in a substantially automatic way the bilateral double tax treaties.


    Article 9 of the MLI provides for the right of the State in which immovable property constituting more than 50% of the value of a non-resident company or entity is located to tax the income deriving from the alienation of the shares in that company or entity. Once the MLI will enter into force for Italy (not before 2024) some double tax treaties executed by Italy will be modified allowing capital gains on disposals of investments in real estate companies to be taxed.









    On February 8th, 2023, The Organisation for Standardisation has adopted ISO 31700 rule. Data controllers will now have guidance, with principles and requirements to implement-by default and from the design stage of a process, product or service involving the processing of personal data-in order to ensure the proper protection of consumers’ personally identifiable information (PII).


    The so-called “Privacy by design” has origins that predate EU Reg. 2016/679 (GDPR) itself, which now enshrines it in Article 25(1). As much as this principle was also the subject of the 32nd World Conference of Privacy Commissioners, held in Jerusalem in 2010, its first elaboration, however, dates back to the late 1990s, by Anna Cavoukian (at that time Commissioner for Information and Privacy of Ontario and today Executive Director of the Global Privacy and Security by Design Centre in Toronto).


    The rationale for Privacy by Design is to ensure that organizations do not merely engage in formal compliance, but adopt – with a proactive, preventive, and default approach-organizational technical measures (such as pseudonymization and anonymization) “[…] taking into account the state of the art and the costs of implementation, as well as the nature, scope, context, and purpose of the processing, as well as the risks.”


    The aim is to ensure: protection and security throughout the lifecycle of the product/service offered; visibility and transparency of the entire personal data processing process; and centrality of the user, who must be put first through full respect for his or her rights.


    The crucial nature of Privacy by design in relation to the principles of accountability, as well as the effectiveness of protection for the rights and freedoms of the data subjects has led to ISO 31700 being warmly welcomed by experts in the field.


    Already in the days leading up to Feb. 8, standards ISO 31700-1:2023 (“Consumer protection-Privacy by design for consumer goods and services-Part 1: High-level requirements“) and ISO/TR 31700-2:2023 (“Consumer protection-Privacy by design for consumer goods and services-Part 2: Use cases“) were published on the International Organization for Standardization website.


    The former document aims to establish high-level requirements aimed at ensuring privacy throughout the product or service lifecycle; the latter addresses three use cases (online retail, fitness company, smart locks), with accompanying analysis, in order to help owners to understand the requirements in ISO 31700-1.


    These are 30 requirements/guidelines that assist data controllers in the full and proper implementation of privacy principles. Areas covered include, without limitation the following: privacy statements; privacy due diligence methods; transparency and accountability in the design and operation of consumer products that deal with PII; analysis and implementation of privacy controls based on consumer context and needs; and management of possible data breaches.


    The standard is intended for a broad target audience (startups, multinationals, organizations of all sizes) and applies to all products that use PII, whether physical goods or intangible services (such as SaaS – software as a service).


    In a market such as today’s-which is increasingly digital and characterized by shared platforms and interconnected devices-it becomes crucial to hold data controllers accountable with a view to greater protection of consumers and their personal data.


    Based on the above considerations, although the adoption of the new ISO standard would constitute an additional and also not insignificant cost for the organization (CHF166 and CHF145), in a cost-benefit balance, greater weight should be given to the future benefits that the organization would enjoy: greater assurance of compliance with respect to what is required by the GDPR; greater customer/consumer trust, resulting in greater competitiveness in the marketplace; lower legal or reputational risks for the company; and greater likelihood of being able to demonstrate to the authority its diligence in protecting personal data.






    DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.




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