REDUCTION OF SHARE CAPITAL TO PARTIALLY COVER LOSSES OF MORE THAN A THIRD, A NEW PERSPECTIVE?
With Recommendation no. 204 of July 5th, 2022, the Milan Notarial Council intervenes on the interpretation of the measures that can be implemented in the case of occurrence of losses exceeding one third of the share capital of S.p.A. (Società per Azioni) and S.r.l. (Società a responsabilità limitata), without affecting the legal minimum.
In this circumstances, pursuant to articles 2446 for S.p.A., and 2482-bis for S.r.l., of the Italian Civil Code, the management body shall convene the shareholders’ meeting in order to expose the financial situation of the company, through a report containing the observations of the audit body, and to resolve upon appropriate measures to be taken in the so-called “grace period” (periodo di grazia), i.e. the period between the arising of the losses and the approval of the financial statements for the following fiscal year.
If, upon approval of the following financial statements, the loss is still exceeding one third of the share capital, the latter shall be reduced in proportion to the losses occurred.
In this respect, until now the prevailing legal literature and case law provide that, in the circumstances referred to in the aforementioned articles, only two possibilities for the shareholders may be followed, namely: (i) to carry forward the losses, or (ii) to proceed directly to cover the loss in its entirety.
This well-established interpretation is based on a twofold order of reasons:
– the literally interpretation of the rule, which would provide for an identity between loss and reduction of the share capital, and;
– the risk of circumvention of the alarm system provided for in articles 2446 and 2482-bis of the Italian Civil Code through the partial coverage of the loss aimed at hiding the real financial situation of the company to third parties.
The Recommendation intervenes on this interpretation, providing for the possibility for shareholders to also partially cover the loss, during the “grace period”, by making partial reductions of the share capital.
In fact, the Milan Notarial Council recognizes full freedom of action to the shareholders to cover the loss during the grace period, stating that the full coverage of the loss becomes mandatory only if the losses are not reabsorbed under the limit of one third of the capital, within the shareholders’ meeting convened to approve the financial statements of the following year.
The Recommendation also states that the danger of circumvention feared by legal literature and case law is in fact groundless since the partial coverage through reductions of the share capital is subject to the mandatory regime of legal publicity, which safeguards the interest of third parties.
Finally, the Recommendation specifies that this interpretation does not affect the discipline relating to “sterilized” losses occurred in the financial years as of December 31st, 2020 and/or December 31st, 2021, provided for by Law no. 178/2020 which provides for the suspension, for five fiscal years, of the obligations to cover such losses and of the cause of dissolution referred to in Article 2484 par. 1, n. 4 of the Italian Civil Code.
p.orzalesi@macchi-gangemi.com
a.frau@macchi-gangemi.com
g.magistrali@macchi-gangemi.com
NEGOTIATED CRISIS RESOLUTION: IS IT POSSIBLE TO INITIATE A SIMPLIFIED COMPOSITION WITH CREDITORS IF A DEBT RESTRUCTURING AGREEMENT WITH TAX SETTLEMENT IS FEASIBLE?
The Court of Bergamo recently rejected a proposal for a simplified liquidation composition with creditors submitted by a company following the negotiations carried out within the framework of the negotiated crisis resolution procedure. The Court’s well-argued decision helps to clarify the eligibility requirements of the application to access this new instrument.
By decree of September 21st, 2022, the Court of Bergamo declared inadmissible a proposal for a simplified composition with creditors for the liquidation of the assets submitted by a company pursuant to Article 25-sexies of the Code of Business Crisis and Insolvency in force since July 15th, 2022, due to the lack of a minimum requirement provided by the law to access the procedure; such requirement concerns, in particular, the fact that the simplified composition with creditors can only be requested as a residual measure if other crisis regulation instruments are unworkable.
The decree is particularly relevant because in its reasoning, the Court of Bergamo retraces the prerequisites of the application for simplified composition with creditors, provides useful indications on the extent of the examination entrusted to the Court in respect of the validity of the application, and clarifies when the application can be admitted, specifying that the instrument invoked is not admittable unless all the other specific instruments provided by the new Code as possible outcomes of the negotiated crisis resolution procedure have been proved as effectively unworkable.
It is worth recalling, first of all, that in the context of a negotiated crisis resolution procedure, pursuant to paragraph 1 of Article 25-sexies of the new Code “when the expert declares in his final report that the negotiations were carried out fairly and in good faith, that they were unsuccessful and that the instruments identified pursuant to Article 23, paragraphs 1 and 2, letter b) are not feasible, the entrepreneur may submit, within 60 days following the communication pursuant to Article 17, paragraph 8 [editor’s note: the final report drawn up by the expert at the end of his mandate], a proposal of composition with creditors by sale of assets together with the liquidation plan and the documents indicated in Article 39 […]”. Paragraphs 3 and 4 of the same article further provide that “The court, after assessing the validity of the proposal, having acquired the final report referred to in paragraph 1 and the expert’s opinion with specific reference to the likely outcome of the liquidation and the guarantees offered, shall appoint an auxiliary pursuant to Article 68 of the Code of Civil Procedure, assigning the same a term for filing the opinion referred to in paragraph 4 […]” and that “by the same decree, the Court orders that the proposal, together with the auxiliary’s opinion and the final report and the expert’s opinion, shall be communicated by the debtor to the creditors indicated in the filed list […] and sets the hearing date for the approval”.
For the purposes hereof, it should be recalled that, as a prerequisite to access the simplified composition with creditors, at the end of the negotiations, the debtor shall give evidence of the fact that the other available instruments were explored and are unworkable: (i) the so-called business continuity agreement (Article 23, para. 1, letter a); (ii) the so-called moratorium agreement (Article 23, para. 1, letter b); (iii) the agreement entered into by and between creditors and entrepreneur and signed by the expert which has the same effects as the agreement in execution of a certified restructuring plan (Art. 23, para. 1, letter c); (iv) the application of approval of a debt restructuring agreement (Art. 23, para. 2, letter b).
As already stated, according to the aforementioned Article 25-sexies of the new Code, the Court, before verifying whether the conditions for approving the proposal for the simplified composition with creditors are met, shall examine the validity of the application, verifying the existence of the minimum legal requirements to access the procedure, such as competence, the timeliness of the application and the existence of the prerequisites described in the provision, including the actual unfeasibility of all the instruments listed above.
In the case submitted to the Court of Bergamo, the plaintiff had timely filed the application before the competent Judge, representing that the indebtedness is related almost entirely to debts owed to the Italian Revenue Agency and social security institutions. It is important to point out that in his final report, the expert had concluded that, although the negotiations had been conducted fairly and in good faith, the instruments identified pursuant to Article 23, para. 1 and 2, letter b) of the Code had not been workable, although it appeared that “the tax and social security settlement or, alternatively, the proposal for a simplified composition with creditors appeared feasible”.
In light of the latter circumstance, the Court of Bergamo held that the proposal for a simplified composition with creditors was not idoneous for passing the scrutiny of rituality because it lacked one of the prerequisites that necessarily have to be met together for the granting of the application.
Contrary to the expert’s assertion, it had emerged that not all of the instruments (other than the simplified composition with creditors) listed in Article 23 of the Crisis Code were actually unworkable: it appeared to be possible to apply for approval of a restructuring agreement in the context of which the tax settlement referred to by the same expert in his final report could have found a place.
In their report, in particular, the expert had reported that the Italian Revenue Agency and the social security institutions had merely indicated that they were not able to actively participate in the negotiations and that the filing of a tax settlement proposal was considered “feasible for them”.
The Court, therefore, drew the conclusion that recourse to the simplified composition with creditors could not be considered an “extrema ratio” (as the legislator had conceived it in the drafting of the Code and, in particular, of the rules on the negotiated crisis resolution), given that the instrument set forth in Article 23, para. 2, letter b) of the new Code (under which the debtor could pursue the road to recovery through recourse to a tax settlement) was still applicable.
s.rossi@macchi-gangemi.com
g.bonfante@macchi-gangemi.com
PAYWALLS: LEGITIMATE?
The decision of many news online editors to prevent access to their websites without subscribing or accepting cookies for advertising purposes is causing discussion and has once again brought to the attention of the Privacy Guarantor, so called Garante, the legitimacy of this type of tool (so-called Paywall). But what does the legislation provide for and what do the other authorities think?
There has been much talk in recent days about the initiative taken by many Italian newspapers to block access to their sites unless they purchase a subscription or consent to profiling via cookies.
The issue has been the subject of various opinions from European guarantor authorities and is currently being examined by the Garante.
But what is a cookie wall (or rather, a paywall)?
It is a particular type of cookie banner, which, unlike the classic ones, only provides a “take it or leave it” option. If you do not accept all the cookies, access will be totally or partially inhibited; if you accept them all, then you will be able to browse freely.
This type of banner is particularly used in the online publishing sector, where reading quality articles and content is conditional not only on the purchase of subscriptions or other monetary payments, but also on the possibility of exploiting users’ personal data for marketing (or even profiling) purposes.
The question that arises is whether the consent given can be understood as truly “free” and what the consequences of clear monetisation of personal data might be.
But what do the regulations and the authorities say?
Cookie consent is provided for in the ePrivacy Directive, as well as in the cookie guidelines of June 2021. The Garante has repeatedly reiterated the unlawfulness of cookie walls, except in cases where “the site offers the data subject the possibility of accessing, without giving consent to the installation and use of cookies, equivalent content or services“. In essence, therefore, personal data “will only indirectly represent a counter-performance of the service provided, remaining, however, extraneous to the contractual synallagma”, uniting the privacy rule with that of the consumer code.
Today, following the initiatives taken by Italian online editors, the issue is in the process of being examined by the Garante, but in other countries the authorities have already expressed themselves on the point. In particular:
1. In France, the CNIL – Commission Nationale de l’Informatique et des Liberté has indicated certain criteria for the legitimacy of a paywall. In particular, the existence of a fair alternative for accessing the web, as well as a balance in the relationship between user and site owner (e.g. a possible dominant position on the market). The fee must also be reasonable and any registration obligation must be justified. The paywall must also not be a means of ‘bundling’ with other data processing purposes that are not strictly necessary and, most importantly, in the event of payment, no cookies must be used (except technical ones).
2. In Austria, similarly, the concept of “pay or okay” is considered lawful, subject to the following conditions: compliance and conformity with privacy legislation; a non-exclusive service and a non-dominant market position of the site owner. It is also forbidden for public entities or those providing public services. The price, as in France, must be reasonable and fair and, in the latter case, no processing for advertising purposes may be carried out.
All in all, the criteria we have just seen appear to be entirely “assimilable” and replicable in our regulatory system as well, although they do suffer from a certain vagueness in certain aspects where “reasonableness” is mentioned that could become uncertain or difficult to apply.
One hopes that the Italian Garante will take a position on this point, and that the competent bodies at European level will also clarify the legitimacy of the instrument. In the meantime, one must be very cautious when using this type of banner cookie.
f.montanari@macchi-gangemi.com
l.laterza@macchi-gangemi.com
IMU (MUNICIPAL PROPERTY TAX) ON FIRST HOUSE: DOUBLE EXEMPTION TO SPOUSES LIVING IN TWO DIFFERENT MUNICIPALITIES.
Stop paying IMU for spouses who reside and habitually reside in two different homes, irrespective of the municipality in which they are located. The Constitutional Court ruled this and by ruling No. 209 of October 13, 2022, it reestablished the right to the exemption for each primary home of persons married or in a civil union, declaring illegitimate the provision of the 2011 “Salva Italia” Decree regulating the property tax.
In the case at hand, the Naples Tax Commission had raised, with reference to Articles 1, 3, 4, 29, 31, 35, 47 and 53 Cost., questions of constitutional legitimacy of Article 13, paragraph 2, fifth sentence, Law Decree No. 201/2011, as amended by Article 1, paragraph 707, letter b), Law No. 147/2013, in particular in the part IMU exemption was not provided for the home used as main residence of the family nucleus, in the event one of its members is a registered resident under the Population Register and lives in a property located in another municipality.
According to the provisions of Article 13, paragraph 2 of Law Decree No. 201/2011, husband and wife are, in fact, obliged to indicate which of the two homes they own is the main one and to pay the IMU on the other one, which is considered a second property.
Until now, the rule applied only to spouses, while mere cohabitants could own two houses, one each, without paying property tax because they were both primary residences.
Ruling No. 209 of Constitutional Court eliminates this distinction, specifically to prevent it from constituting discrimination against couples who decide to unite in marriage or by civil union. Indeed, the Constitutional Court, in its ruling No. 209 of Oct. 13, 2022 on the subject, declared that “In our constitutional system, tax measures structured in a way that penalizes those persons who formalized their relationship by uniting in marriage or forming civil union cannot be considered “legitimate””.
“In a context such as the current one, in fact,” – it is explained – “characterized by increased labour mobility, development of transportation and technological systems, and the evolution of customs, it is more frequent for people united in marriage or civil union to agree to live in different places, reuniting periodically, for example on weekends, remaining within the framework of a material and spiritual communion.”
Therefore, in order to recognize the exemption on the “first house,” not considering sufficient, for each spouse or person bound by civil union, the registered residence and habitual abode in a given property, determines a clear discrimination with respect to de facto cohabitants, who, under the same conditions, are instead granted, for each respective property, the aforementioned benefit.
In summary, the censured rule would infringe on:
– the “equal rights of workers forced to work outside the family home” (Articles 1, 3, 4 and 35 Const.);
– the “equal right of married taxpayers to de facto partners” (Articles 3, 29 and 31 Const.);
– the principles of tax paying capacity and progressivity of taxation (Article 53 Const.);
– the family as a natural society (Article 29 Const.);
– the “expectation with respect to provisions for the formation of the family and the fulfillment of related tasks” (art. 31 Const.);
– the protection of savings (art. 47 Const.).
The Constitutional Court then clarifies the responsibility of municipalities and institutions to carry out the necessary controls in the circumstance the spouses intestate one property each in order not to pay taxes on the second one as well. Indeed, declarations of constitutional illegitimacy do not in any way determine a situation in which “second homes” can benefit.
In conclusion we can state that the Consulta’s ruling No. 209/2022 opens the way for taxpayers to apply for an IMU refund and excludes municipal assessments. Taxpayers should pay attention to the deadline to apply for refund!
C-256/21 – EU COURT ON JURISDICTION CONCERNING TM INVALIDITY COUNTERCLAIMS.
By means of a recent decision of October 13th, 2022, the Court of Justice of the European Union (CJEU) has answered the question on whether an EU trademark court hearing an action for infringement based on an EU trademark – the validity of which is challenged by means of a counterclaim for a declaration of invalidity – still has jurisdiction to rule on the validity of that mark, in spite of the withdrawal of the main action.
The company KP (KP) is the owner of the EU word trademark ‘Apfelzügle’ registered on October 19th, 2017, for goods and services in Classes 35, 41 and 43 and denoting a vehicle designed for the harvesting of apples, consisting of several trailers pulled by a tractor. On September 2018, TV, a fruit farm operator (TV), and the Municipality of Bodman-Ludwigshafen (MBL) published a promotion concerning an activity involving the harvesting and tasting of apples as part of a ride on the ‘Apfelzügle’.
KP brought an action for infringement before the Landgericht München (Regional Court, Munich, Germany), seeking an order barring TV and MBL from using the term ‘Apfelzügle’ for the services covered by that mark. TV and MBL filed counterclaims for a declaration of invalidity, pursuant to Article 59(1)(a) of Regulation 2017/1001 (EUTMR), read in conjunction with Article 7(1)(b), (c) and (d) thereof.
In the course of those proceedings, KP withdrew its action for infringement, while TV and MBL continued in pursuing the counterclaims. Eventually, the Regional Court Munich held that those claims were admissible, hence declaring KP’s mark invalid in respect of the services in Class 41. On appeal, the Oberlandesgericht München (Higher Regional Court, Munich, Germany) decided to stay the proceedings and refer the above question to the CJEU for a preliminary ruling.
In its decision, the CJUE based itself, first, on settled case-law on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, pursuant to which a counterclaim, although brought in proceedings initiated by means of another legal remedy, shall be deemed as ‘a separate and self-standing claim’ (par. 38), to the point that it can be distinguished from a ‘mere defence’ and its outcome ‘does not depend on that of the action for infringement on the occasion of which it was brought’ (par. 40).
Secondly, the Court observed that jurisdiction on invalidity or revocation of an EU trademark (EUTM) is shared, pursuant to Articles 63 and 124 EUTMR, between the EU trademark courts designated by the Member States and EUIPO – European Union Intellectual Property Office. Given the above, in connection with the so-called ‘priority’ principle, the Court observed that, if it were the case that the owner of an EUTM could deprive an EU trademark court of the possibility of ruling on a counterclaim for invalidity purely by withdrawing their infringement action, the scope of the jurisdiction conferred on EU trademark courts ‘would effectively be disregarded’ (par. 52).
Thirdly, the CJEU relied upon its previous case-law in order to stress that, to the avoidance of unnecessary multiple proceedings and the subsequent risk of contradictory judgments, compelling the party who filed a counterclaim to initiate proceedings before EUIPO in the event of withdrawal by the principal ‘would run counter to the principle of procedural economy’ (par. 56). In addition, the Court outlined that depriving the EU trade mark Court – in the event of withdrawal of the main action – of the possibility to give judgment on a counterclaim for a declaration of invalidity would allow the proprietor of an EU trade mark ‘to continue to use, as the case may be in bad faith, an EU trade mark that could be registered in disregard of the absolute grounds for refusal of registration referred to in Article 7(1) of Regulation 2017/1001’ (par. 57).
On those grounds, the CJEU answered the question referred by ruling that ‘Article 124(a) and (d) and Article 128 of Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark, must be interpreted as meaning that an EU trade mark court hearing an action for infringement based on an EU trade mark the validity of which is challenged by means of a counterclaim for a declaration of invalidity still has jurisdiction to rule on the validity of that mark, in spite of the withdrawal of the main action’.
m.baccarelli@macchi-gangemi.com
m.lonero@macchi-gangemi.com
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