Posted on: 05/11/2021

    The joint civil sections of the court of cassation on the merger by absorption: survival or extinction of the absorbed company?


    The Joint Civil Sections of the Supreme Court of Cassation have recently pronounced on the legal qualification of the “merger” and on the legal standing of a company merged and cancelled from the Register of Enterprises, identifying the relevant subjective effects on which the Italian legislator has not dedicated a specific rule.


    The chance for the ruling was provided to the Supreme Court by the appeal against an appeal judgment, confirming the first instance judgement, in the part in which it had deemed the proceedings to have been validly brought by a company that had been merged and cancelled from the Register of Companies, in application of the principle of law affirmed by order no. 2637 of the Joint Sections of the Supreme Court, on February 8, 2006, which, as a result of the amendments made by the reform of company law, had reconstructed the merger as a modifying-evolving event and not (also) as an extinction event for the absorbed company.


    In the case referred to in the judgment at stake, a limited liability company that was merged by absorption into another limited liability company and cancelled from the Register of Companies in July 2004 requested in 2008 the ascertainment of the simulation of two sales contracts. On the merits, the local court held that the proceedings brought by the absorbed limited liability company were validly instituted even though the company had been removed from the Register of Companies because: (i) the merger involves, pursuant to art. 2504-bis of the Italian Civil Code, a mere evolutionary-modifying event of the same entity, which maintains its identity, even though in a different organizational structure; and (ii) in any case, the absorbing company intervened in the proceeding before the Court in May 2011, ratifying the actions of the director of the absorbed company, hence healing the acts carried out by the falsus procurator.


    Following the appeal to the Supreme Court, due to the contrast existing in the case law regarding the effects of the merger by absorption, the case has been assigned to the Joint Sections.


    To address this issue, it is necessary to start from the analysis of art. 2504-bis of the Italian Civil Code, according to which the company resulting from the merger, or the absorbing company assumes “the rights and obligations of the participating companies, continuing in all their relationships, including the ones of a procedural nature, prior to the transaction”. The legislative omission regarding the definitive extinction or survival of the company merged by absorption has, over the years, paved the way for two different approaches of the case law, which can be summarized mainly as follows: (i) the thesis of the evolutionary-modifying nature with survival of the absorbed or merged company and (ii) the thesis of the extinction with devolutive-succession effect.


    (i) The first thesis establishes that, in the event of a merger, the absorbed company does not cease to exist but still exists through a new organizational structure, as if it were the result of an amendment to the articles of incorporation. As a consequence, in the event of cancellation of the merged company from the Register of Companies, there would be no interruption of the proceedings pursuant to art. 300 of the Italian Civil Procedural Code, since this would be a purely evolutionary event for the company, not an extinctive nor a successional one.


    (ii) On the other hand, the second thesis holds that only the absorbing company has the active procedural legitimacy, since the merger would cause the extinction of the absorbed company with devolutive-succession effect.


    The Supreme Court, in its judgment no. 21970/2021, settles this contrast, adhering to the second of the aforementioned theses and arguing that the merger, by giving rise to an event modifying the articles of incorporation for all the companies involved, determines a phenomenon of:


    (i) juridical and economic concentration of all the legal relationships, assets and liabilities, owned by the absorbed or merged company, which must be imputed to a different legal entity, i.e. the absorbing company or the one resulting from the merger,

    (ii) corporate reorganization of assets, people and capitals which are otherwise allocated, according to the economic program developed in the merger plan;

    (iii) extinction of the absorbed company which is cancelled from the Register of Companies. Also the company name, the registered office, the administrative bodies, the nominal capital of the absorbed company cease to exist. It follows that no subjective legal position or any legal relationship remains with the absorbed company: the absorbed company is therefore coherently to be considered extinct;

    (iv) succession, since there is a real dissolution or extinction of the legal entity and not a mere modifying event. In particular, the Supreme Court frames the merger in a succession corresponding to the succession mortis causa. The succession of the absorbing company to the legal relationships of the absorbed company entails the active and passive legitimacy of the absorbing company with regard to the relationships originally belonging to the absorbed company; whereas the absorbed company loses its autonomous procedural legitimacy, both active and passive.


    Consequently, the following principle of law has been affirmed: “The merger by absorption extinguishes the absorbed company, which cannot therefore start a lawsuit in the person of its former director, without prejudice to the right of the absorbing company to voluntarily intervene in the course of the lawsuit, pursuant to and for the purposes of art. 105 c.p.c., in compliance with the rules that govern it”.


    Finally, in the event that the merger takes place during the proceedings, the Joint Sections state that the interruption of the trial would not be determined sic et simpliciter, since it would continue naturally in the hands of the absorbing company, by virtue of the specific mention of the procedural relationships contained in art. 2504-bis of the Civil Code. This is because the latter has become the owner of both the substantive and the procedural relationships of the extinct company, by way of derogation from the provisions of article 299 of the Code of Civil Procedure.


    Therefore, the relevance of the judgment at stake can be traced back to the innovative and simplifying scope with which the phenomenon of the corporate merger has been reconstructed as a succession. On the other hand, by virtue of the fact that, pursuant to art. 2504-bis of the Civil Code, all the relationships, both substantive and procedural, of the merged company are continued by the incorporating company, without the interruption of the proceedings under art. 299 ss of the Italia Civil Procedure Code, the healing effect of the intervention of the absorbing company in legal proceedings in relation to all the acts carried out by the absorbed company has been established, even after the extinction of the latter.







    Pre-contractual liability for unjustified interruption of negotiations and indemnifiable damage and evidentiary effectiveness of electronic documents.


    In its recent, even if brief, order published on 27 October 2021 with No. 30186, the Second Section of the Court of Cassation reaffirmed a very important principle of law, which had been already established long time ago and recalled another one, in the matter of evidence, which is equally indisputable.


    The principle in question is that, in the matter of pre-contractual liability for unjustified interruption of negotiations, the indemnifiable damage is limited to the negative interest (as opposed to the interest in performance), represented both by the expenses needlessly borne during negotiations with a view to the conclusion of the contract, and by the loss of further opportunities to enter an equally or more advantageous contract with others.


    Consequently, the damages that can be indemnified in the event of pre-contractual liability do not include the loss of profit deriving from the unsigned contract which, on the contrary, had been recognised in the case at stake by the judges of the Court of Appeal. This is a decision in line with the precedents of the Supreme Court, at least as far as the last fifteen years are concerned (see for example Cass. N. 19883/2005 and Cass. No. 23289/2006).


    In the same order, the Court then affirmed a principle as to the evidentiary effectiveness of electronic documents: an e-mail message constitutes an electronic document containing a computerised representation of acts, facts or legally relevant data which, albeit without a signature, is one of the digital reproductions and mechanical representations referred to in Article 2712 of the Civil Code and, therefore, forms full evidence of the facts and things represented if the person against whom it is produced does not disavow its conformity with the facts or things in question.







    Business crisis: Law Decree No. 118/21 converted into Law No. 147 of 21 October 2021. What’s new?


    Law no. 147 of 21 October 2021 has been published in the Official Gazette, converting Law Decree no. 118 of 24 August 2021, “Urgent measures concerning business crisis and company reorganisation, as well as further urgent measures in the field of justice”, the so-called “Pagni Decree”.


    Let us briefly examine the changes made when the Law Decree was converted into law.


    Objective condition for the activation of the negotiated crisis settlement.

    First of all, the amendments that were likely to intervene on Article 2, paragraph 1 (concerning the objective condition for the application for the appointment of the expert and the activation of the negotiated settlement of the crisis) were not accepted in order to eliminate any reference to the “insolvency” of the company: instead, the condition remained unchanged, represented by the conditions of financial or economic-financial imbalance that make it likely the crisis or insolvency, in which it is, however, possible to rehabilitate the company. For this reason, the insolvent entrepreneur is not prevented from entering, but it is essential that the reorganisation is feasible through negotiations, i.e. that the insolvency is reversible. This means that if a state of insolvency is detected, negotiated settlement is not precluded, provided that the expert sees concrete prospects of rehabilitation.


    Conduct of the entrepreneur in negotiations.

    Article 9 has been rewritten to regulate the conduct of the entrepreneur in negotiations: while the original wording of the rule, in addition to maintaining the ordinary and extraordinary management of the company in the hands of the entrepreneur, established the obligation of the latter, in the event that the likelihood of insolvency emerges, to manage the company in such a way as to avoid prejudice to the economic-financial sustainability, a distinctive rule has been inserted in the conversion: the entrepreneur in a state of crisis manages the business in such a way as to avoid prejudice to the economic-financial sustainability of the business; if, on the other hand, he is in a state of (reversible) insolvency, he must manage the business in the overriding interest of creditors.


    Obligation to appoint supervisory bodies and adaptation of the articles of association.

    During the conversion of the law, Article 1-bis was also inserted, which postpones by one year – i.e., to the date of approval of the financial statements for the year 2022 (and not 2021) – the obligation for limited liability companies and co-operative companies established before 16 March 2019 to appoint the control bodies or the auditor and, if necessary, to align the memorandum and articles of association with the provisions of Article 2477, paragraphs 2 and 3, of the Italian Civil Code. On the subject of internal controls, it should be noted that Article 15 of Law Decree No. 118/2021 (on the obligation of the controlling body to report in writing the conditions for the submission of the request for the appointment of an expert) has been converted into a broader wording: any reference to the exemption or mitigation of the responsibility of the controlling body in case of failure to comply with the reporting obligation has been eliminated.


    National electronic platform.

    As regards the national telematic platform governed by Article 3 of Law Decree no. 118/2021, which can be accessed from the website of each chamber of commerce, following the amendments made to Article 3, paragraph 1 of the Law Decree, it is managed by the system of chambers of commerce through Unioncamere and under the supervision of the Ministry of Justice and the Ministry of Economic Development. On the platform are available: a detailed checklist containing operational indications for the drafting of the recovery plan; a practical test to verify the reasonable pursuit of recovery. On conversion, the protocol for conducting the negotiated settlement was also added to the above-mentioned list.


    Application for the appointment of the expert.

    The application for the appointment of the expert, as referred to in Article 5, must contain not only a declaration of any pending bankruptcy petitions against the petitioning entrepreneur, but also a declaration that the latter has not filed any petitions pursuant to Articles 161 (also in the case of paragraph 6) and 182-bis (also in the case of paragraph 6) of the bankruptcy law. (Article 5(3)(d)).

    The expert is chosen from a special list (set up by the chamber of commerce of each head of region and of the provinces of Trento and Bolzano), in which the company is registered, only if he or she meets the requirements set out in Article 3, paragraphs 3 and 4, Law Decree No 118/2021. The new wording of Article 3 correctly equates the categories of chartered accountants and lawyers through the reference, for both, to “previous experience in the field of corporate restructuring and business crisis”, as ascertained by a commission established at the Chambers of Commerce of the regional capitals and autonomous provinces of Trento and Bolzano which received the application and which are composed of one member designated by the President of the Chamber of Commerce, a member appointed by the Prefect and a magistrate appointed by the President of the specialised business section of the Court of the regional capital (or autonomous province) in which the Chamber of Commerce which received the application is located. Following the amendment of Article 3 during the conversion of the law, professionals may only submit an application for inclusion in the list to the professional association to which they belong, which, moreover, assumes a filtering function as regards the completeness of the application and the documentation for the purposes of inclusion in the list.

    With regard to the duties of the commission, a reference to the fact that previous training experience in mediation may constitute a preferential qualification for appointment as an expert has been included in the conversion.


    Prohibition for the appointed expert to take on new assignments.

    A restriction has been added to Article 4 with the aim of avoiding that the expert so appointed may be conditioned by the prospect of further assignments, once the negotiated settlement procedure has been completed. For the next two years after the closure of the negotiated settlement, the expert shall not have any professional relationship with the entrepreneur. In addition, it was added that the expert must be a third party with respect to all the parties and that also the subjects with specific expertise and operating in the economic sector in which the entrepreneur or the statutory auditor used by the expert must not be linked to the company or other parties interested in the recovery operation by personal or professional relationships.


    Duration of the expert’s appointment.

    As regards the timing of the negotiated settlement, the conversion law limits the duration of the assignment by providing that, once the term of one hundred and eighty days for the search of an adequate solution to overcome the conditions referred to in Article 2 has expired, the assignment may be extended, if all the parties agree, for a maximum of one hundred and eighty additional days (Article 5, paragraph 7).


    Succession of applications.

    Paragraph 8-ter of Article 5 provides that, before the expiry of one year from the filing of an application, no new application for the appointment of an expert in the field of reorganisation may be filed.


    Suspension from recapitalisation or dissolution obligations.

    With regard to the suspension, until the conclusion of the negotiations or the filing of the application for a negotiated settlement, of the rules contained in Articles 2446, paragraphs 2 and 3, 2447, 2482 bis, paragraphs 4, 5 and 6, 2482 ter of the Italian Civil Code and on the dissolution due to reduction or loss of share capital, in the event of conversion a clarification has been inserted to the effect that the relevant declaration may be made either with the application for the appointment of the expert or subsequently, by means of an entry in the telematic platform.


    Appeal for the confirmation or modification of protective measures.

    Article 7 of Law Decree No. 118/2021, as amended by the conversion law, provides that the appeal to the court identified pursuant to Article 9 of the Bankruptcy Law for the confirmation or modification of the protective measures or the re-application of the precautionary measures necessary to complete the negotiations must be filed on the same day of the publication of the petition and the acceptance of the expert and that, with the appeal, the name of the expert must no longer be filed, but his acceptance.


    Powers of the judge and necessary authorisation in the event of the transfer of a company or its branches.

    With regard to the judicial authorisation to transfer the company or its branches, by way of derogation from Article 2560, paragraph 2, of the Italian Civil Code (essentially without the transferee’s liability for the debts), provided for in Article 10, paragraph 1, letter c) of Law Decree No. 118/2021, during the conversion of the Law Decree, the very broad expression was added whereby the judge will dictate the measures deemed most appropriate, taking into account the requests of the parties concerned in order to protect the interests involved. It will be interesting to see how this provision, which entrusts the judge with a delicate balancing of the interests at stake, will be interpreted.







    Wind and photovoltaic power plants: in the near (but not very near) future, suitable areas will be identified.


    In the next twelve months, operators in the renewable energy market will have to deal with the planning of suitable areas for the installation of renewable energy plants.


    This planning policy, provided for by Directive (EU) 2018/2001, was included in Article 5 paragraph 1 of Delegated Law no. 53/2021, dedicated to the principles and criteria for the transposition of European legislation.


    In order to facilitate the integration and dissemination of renewable energy plants, through the use of the spatial planning tool, the draft legislative decree for the transposition of Directive (EU) 2018/2001, provides for the adoption (Article 20) of one or more Ministerial Decrees which establish the principles and standard criteria for the identification of surfaces of suitable areas for the development of installations.


    Priority should be given to establishing the criteria for the identification of:

    – areas suitable for wind and photovoltaic installations

    – surfaces, derelict industrial area, jeopardized areas, abundant and marginal areas suitable for the installation of renewable energy plants.


    The specific identification of the areas is delegated (after the implementation of the Ministerial Decrees) to the Regions, according to the principles and criteria contained in the Ministerial Decrees and with the support of a national digital platform that will contain information on the territories, existing plants and on the potential capacity to be installed.


    The draft legislative decree provides:

    – that areas not included among the suitable areas cannot be considered unsuitable for installations

    – a simplified and faster authorization procedure for plants to be located in suitable areas: the obligatory non-binding opinion on landscape and the reduction of 1/3 of the procedure times.


    In order to encourage the development of initiatives in the areas identified as suitable, the next ministerial decree may consider to:

    – vary the instruments that incentivize renewable sources (e.g. differentiation of power quotas by geographical areas)

    – further simplify the authorization procedures for the installations to be realized in impaired areas and similar areas


    The national principles and criteria, and the choices by the Regions, shall consider:

    – the ongoing need to reconcile the protection of the landscape, cultural, agricultural, forestry and environmental heritage, with the need to achieve the objectives of total installed capacity at least equal to that identified by the National Integrated Energy and Climate Plan, in order to pursue the decarbonization targets

    – the characteristics and availability of renewable resources, grid infrastructures and their potential development, as well as electricity demand and its dislocation.


    The time needed to have a clear national and regional planning framework will probably be long (at least 12 months are expected); however, it is necessary to remember that in order to have an effective planning, the areas must be identified in consideration of the needs represented above, including the effective availability of the renewable resource, which in some cases, as for the wind resource, is particularly laborious to identify.


    The spatial planning tool, if properly implemented, will be a useful tool both for private operators and for national and regional energy policy, since it can contribute to the simplification and transparency of the permitting procedures and therefore to the achievement of decarbonisation targets.







    The Privacy Authority fines Sky Italia for over three million euros for unlawful telemarketing activity.


    Wild telemarketing is back on the front pages of the press after another sanction by the Italian Data Protection Authority (“Garante“).


    The Authority issued a fine of more than €3.2 million to Sky Italia (“Sky” or the “Company”) due to promotional calls made in violation of data protection law, prohibiting in addition the further processing of the data for marketing purposes.


    Sky’s marketing activity was carried out using lists acquired from other companies. The Garante ordered to adopt specific security and organisational measures to deal with the situation of non-compliance with national and EU data protection law.


    The sanction arrived at the conclusion of a detailed inspection, which began as a result of several reports and complaints from people who received unsolicited calls promoting Sky’s services, directly from the Company or through third-party call centres.


    The Garante found numerous breaches, including: 1) the lack of information and the expression of an appropriate consent 2) the use of unverified contact lists bought from third parties.


    In its defence, the Company argued that the consent given by the user to the company that created the contact list was sufficient and constituted an adequate legal basis for communicating the data to third parties for promotional purposes. On the contrary, the Garante stated that, for the purposes of the applicable legislation, Sky should have provided adequate information to customers, making them aware of the origin of the data. Only after having obtained the consent of the data subjects could they have proceeded with the promotional activity.


    The Authority also pointed out that it would have been Sky’s duty to verify the lists by cross-referencing them with its own blacklists, in order to not contact individuals who had expressed the wish to not receive promotional calls regarding Sky services.


    The Garante ordered Sky, to facilitate the exercise of rights by the interested parties, to indicate among the contacts to receive such requests also the PEC address indicated in the Italian register of companies, which until now the Company had not considered a valid point of contact for privacy requests. Sky Italia will also have to appoint as data processor the suppliers who carry out promotional activities on its behalf. This makes clear that the Company, as data controller, has to supervise and verify the management of promotional activities.


    In determining the amount of the sanction, it has been considered 1) the seriousness of the violations found, which refer to systematic conduct rooted in Sky’s procedures, and 2) the circumstance that the Company, which has an historical presence in the Italian market, should have made its choices in compliance with data protection legislation.







    The gradual elimination of IRAP in the context of the proposed tax reform: repeal or remodeling?


    The draft law for the reform of the tax system approved on October 5th, 2021, delegates the Italian Government to adopt one or more legislative decree(s) to implement the gradual elimination of IRAP.

    As known, the regional tax on productive activities (“IRAP”) applies in case of exercise of a habitual productive activity within the territory of one or more Regions.


    This tax is determined by applying to the relevant taxable income (so-called “value of net production”) the tax rate that ordinarily applies at 3.9%. The rules for calculating the value of net production are different from those applicable for the calculation of the taxable income relevant for income taxes, and differ according to the type of taxable person (e.g. for enterprises and commercial entities, the IRAP taxable base is calculated as the difference between the value and costs of production as shown in the P&L albeit with the exclusion of some items).


    In this scenario, article 6 of the draft law for the reform of the tax system, approved by the Council of Ministers on October 5th, 2021, provides (finally) for the “gradual elimination” of IRAP.


    The above mentioned provision of the draft law does not specify the principles and criteria to be followed by the implementing legislative decree(s), but only clarifies that:


    a) the proposed elimination should be enacted in the context of the “wider” revision of the structures of the personal income tax (as set forth by Article 3 of the draft law) and the corporate income tax (“IRES”) as well as of the taxation of business income (as provided for by Article 4 of the draft law);


    b) in any case, the proposed elimination must not affect the funding of public health system (IRAP finances the funding of the Regions in the context of the public health system).


    Based on the above, therefore, the proposed reform entails two fundamental aspects: the first one is the direct link of the “gradual elimination” of IRAP with the reform of the income tax structure, the second one is the guarantee that such reform shall not affect the current financing of the national public health system.


    In this latter respect and considering the mandatory financial regulations of Article 10, paragraph 2 of the same draft law, lacking official clarifications the gradual elimination of IRAP could be implemented – rather than with its repeal – through the effective increase of the current IRES rate (currently at 24%) by introducing a new surcharge of the corporate income tax (e.g. a new regional surcharge to IRES of 5%).


    This possible solution, however, could lead to an additional distortion of the tax system existing the risk that, de facto, further to this “merger” the relevant taxpayers could face a new higher and less competitive IRES “single” tax rate (29%) compared to the previous aggregate tax rate of IRES plus IRAP (24% + 3,9% = 27,9%).


    As a valid alternative, therefore, the Italian government could try to find the requested financial resources (i) at a first stage, through the repeal of IRAP applicable to professionals and small taxpayers only (by also considering that the ratio legis of the entire tax reform is to reduce the tax burden applicable to small taxpayers), and (ii) at a later stage, eliminating the application of IRAP to all other taxpayers.






    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.





    Go to link