Table of contents
Top stories
The 2021 Italian Budget Law entered into force
The 2021 Italian Budget Law no. 178 of 30 December 2020, entered into force on 1 January 2021:
- strengthens companies’ liquidity by extending to 30 June 2021 the validity of (a) the “Guarantee Italy”, which will also operate on assignment without recourse (“pro soluto”) and loans with debt renegotiation, (b) the Guarantee Fund for SMEs’ (see The Client Update no. 3/2020), whose endowment has been also increased by EUR 4,5 billion, as well as of (c) the extraordinary moratorium regime for SMEs. It also allows for credit consortia (“Confidi”) lend to SMEs up to EUR 40,000 for each transaction;
- introduces other capital-strengthening measures specifically designed for large companies, by increasing from 30% to 50% the maximum amount of the tax credit on losses accrued in 2020, which can be benefited in relation to capital increases resolved in the first half of 2021, as well as by setting at EUR 1 billion the limit for the subscriptions into SMEs’ equity by the “Fondo Patrimonio PMI” to be made in 2021;
- sets forth a tax credit for capital losses on individual saving plans, provided that the credit itself does not exceed 20% of the amount invested in such plans, which must be held for at least 5 years; and, finally
- provides for (a) an exemption of the withholding tax on profits paid to foreign UCITS funds, as well as to those established in a EU or EEA Member State, and whose manager is subject to the home country’s supervision pursuant to the AIFMD, and (b) the exclusion from taxation of capital gains registered by the above mentioned funds.
Converted into law the “Ristori” Decree
By means of the conversion into law of the Ristori Decree (namely, Law no 176 of 18 December 2020, entered into force on 25 December 2020), it has been:
- increased by a further 50% the non-refundable contribution granted to catering operators located in areas of high or maximum severity and high risk of COVID-19 contagion, which will also operate, for 2021, in favour of shopping centres’ retailers, as well as food and beverage producers;
- simplified the provisions on over-indebtedness procedures, by recognising (a) the qualification of “consumer” to shareholders of partnerships and limited partnerships who have taken on debts unrelated to the partnerships’ business, (b) the irrelevance of slight negligence for the purpose of judicially assessing the merits of a crisis settlement plan, (c) to the members of one and the same family the possibility to submit a single crisis settlement procedure, and (d) to unlimited liable partners to benefit from the effects of a crisis settlement agreement submitted by their company; and, finally
- postponed to 19 May 2022, the entry into force of the class action which was introduced to protect users’ homogeneous rights against enterprises or public services or public utilities management companies.
Corporate/Laws of contract
EU Commission launches a public consultation on the harmonisation of insolvency laws in the EU
EU Commission’s consultation aimed at increasing convergence between EU Member States’ national insolvency legislation, in order to foster cross-border investments, will end on 26 March 2021. Anyone who might be interested by insolvency proceedings, as well as enterprises, academia are invited to express their own views on the (i) liability and duties of corporate directors in the vicinity of insolvency, (ii) status and duties of insolvency practitioners, (iii) ranking of claims, (iv) avoidance actions and,(v) identification and preservation of assets belonging to the insolvency estate.
EU Commission’s consultation on insolvency law of 18th December 2020.
“Golden power”: specified assets of national interest in strategic sectors
Among the strategic assets that are subject to the so-called “golden power” (see The Client Update no. 3/2020), in the banking, finance and insurance sectors, the Italian Government has recently indicated (i) critical infrastructures (including platforms for the multilateral trading of financial instruments or monetary deposits), (ii) critical technologies (such as AI, DLT, blockchain), and (iii) economic activities of strategic importance, even if carried out by intermediaries, exercised by enterprises with an annual net turnover not lower than 300 million Euros and an average number of employees not lower than 250 ones.
On the implementing regulation of the Fund for safeguarding employment levels and continuity of business activities
The national Fund for the safeguarding of employment levels and continuity of business activities, established by the so-called Relaunch Decree for the rescue of companies in economic difficulty, will also operate (i) in favour of companies holding assets of strategic importance for the national interest, (ii) upon presentation of a restructuring plan, (iii) by employing 300 million euros and, (iv) through Invitalia by participating in the stock capital of the company at issue (if in crisis, but not in difficulty) or in that of the acquiring one and (if already in difficulty) also making quasi-equity investments therein.
New Corporate Governance Committee’s recommendations to listed companies
In order to foster a more efficient implementation of the new Corporate Governance Code, for the year 2021, listed companies are invited to:
- integrate sustainability in the definition of their own strategies, risk management and internal control system, as well as remuneration policies;
- justify, on an individual basis, the possible non-implementation of independence criteria; and
- with regard to remuneration policies, to (i) strengthen the link between that variable and performance objectives, (ii) limit the possibility of making expenditures not linked to predetermined parameters, (iii) verify that the amount of remuneration of non-executive directors is appropriate to their competence, professionalism and diligence, required by the nature of their office.
On the new CNDCEC’s rules of conduct for non-listed companies’ statutory auditors
Effective 1 January 2021, new rules of conduct laid down by the CNDCEC are going to apply to non-listed companies statutory auditors. Among the main novelties, it is worth mentioning:
- an increase of the board of statutory auditors’ supervisory powers on the rules governing the setting up and effective implementation of adequate administrative, organisational and accounting frameworks, by availing itself of a specific test; and
- the above board’s duty to assess, at least once a year, the existence of professionalism requisites and the absence of disqualification grounds in respect of its members, under penalty of ceasing office.
Italy lags behind on remuneration policies
According to a recent survey carried out by the US advisory company “Morrowsodali”, in foreign investors’ view, Italy is lagging behind with regard to remuneration policies adopted by listed companies. The lack of information on performance indicators used as a guide for the definition of incentive plans for such companies’ directors and the high severance pay paid to their staff is the most critical issue identified by foreign investors, who are calling for a greater alignment between remuneration and long-term company strategies, sustainability indicators and human capital management.
Morrowsodali Lighthouse of October 2020.
To what extent the so-called “business judgement rule” may be judicially reviewed?
The negative outcome of the company’s activities or single corporate acts of a given company cannot be attributed to its directors, with the consequent unquestionability of the latter’s management choices (the so-called “business judgement rule”), if not in terms of its bluntly reckless and imprudent nature, which must be assessed “ex ante”.
On the seizure of a limited liability company’s quotas
In ordering the seizure of a limited liability company’s quotas, the competent judge must solely assess their instrumental nature with regard to the commitment of a crime, regardless of whether or not the free availability of such quotas may permit the continuation of the crime in question, by increasing the consequences thereof, or the commitment of new ones.
On the statutory auditors’ liability for omitted supervision
Statutory auditors who, in the event of suspicious transactions, do not proceed to inspections and controls, thereby infringing the duty to act with diligence and good faith in the interest of shareholders and creditors, are to be held liable jointly and severally with the directors of the same company.
Criminal Court of Cassation, sec. V, decision no. 156 of 24th November 2020 (text available in Italian only).
Banking law
EU Commission’s strategy for tackling NPLs
For the purpose of favouring an efficient management of NPLs’ upcoming flows by banks, the EU Commission recommends to:
a) the EU Parliament and Council to swiftly reach an agreement on a legislative proposal for harmonising rules on the accelerated of out-of-court collateral enforcement of the related guarantees; and
b) EU Member States to (i) intervene on national insolvency procedures, (ii) promote the development of secondary markets for distressed assets, through the setting up of an EU data hub aimed at strengthening the transparency of NPLs’ data market, as well as (iii) create and develop synergies among national AMCs, so as to allow banks to continue lending money to households and companies.
BCBS amends prudential treatment on NPL securitisations
After having identified risk weight miscalibration affecting transactions concerning NPLs’ securitisations, BCBS has recently amended its technical capital requirements, suggesting member jurisdictions to implement, by no later than 1 January 2023, a specific definition of NPLs’ securitisation and setting out that exposures related to the latter are subject to a risk weight factor equal or higher than 100%, except for positions risk-weighted using external ratings-based approach.
BCBS’s amendments on prudential treatment concerning NPL of 26th November 2020.
On the new definition of default according to the BoI
The BoI has recently pointed out that the new definition of UE default, which entered into force on 1 January 2021, pursuant to which intermediaries classify their clients for prudential purposes, will neither affect the reporting to the Central Credit Register Data, nor introduce a ban on the granting of overdrafts. If any, it may affect their contractual relations with clients. The latter will have to be informed by intermediaries about the implications of the new rules and individually contacted, in order to prevent possible defaults not caused by debtors’ financial difficulties.
On the consultation over BoI’s Supervisory Provisions for banks concerning the organisation and corporate governance framework
A public consultation on the BoI’s provisions governing the organisation and corporate governance framework for banks, will end on 22 February 2021. Proposed amendments, for EU law alignment purposes, include the introduction of:
- the increase from EUR 3.5 billion to EUR 5 billion in the balance sheet asset threshold below which “small and non-complex institutions” are to be identified;
- a gender quota in the composition of administrative and supervisory bodies; and
- a requirement for significant banks to adopt a policy for managing dialogue with shareholders.
BoI’s recommendation on less significant banks’ dividends’ distribution and variable remuneration policies
In order to safeguard less significant banks’ capacity to absorb losses and grant loans to support the national economy, the BoI has recently issued a recommendation whereby the same should – up until 30 September 2021 – to refrain from paying out dividends and exercise extreme prudence in calculating variable remuneration. Those banks that intend nonetheless pay out dividends should first verify their capital adequacy and generation capacity and then contact the BoI, so that the latter can assess whether the scope of dividends’ distribution envisaged can be deemed prudent. Likewise, the BoI would assess carefully the above banks’ variable remuneration policies, focusing on the latter’s impact on capital ratios.
On the legitimacy of reporting the individual names of the partners of a general partnership to the Central Credit Data Register
According to the Supreme Court, the reporting to the Central Credit Register Data of the names of the partners unlimitedly liable of a general partnerships (società in nome collettivo) is lawful, provided (a) that such reporting has been carried out taking into account the partners’ corporate status and, (b) without making it subject to the circumstance that the reporting bank qualified as “disputed” the credits at issue. Indeed, the latter term must be solely referred to the underlying relationships reported and not also to the persons linked to them, pursuant to the applicable laws.
Civil Court of Cassation, sec. I, decision no. 28720 of 16th December 2020 (text available in Italian only).
Financial law
On the public consultation on EBA’s guidelines concerning investment firms’ remuneration policies
A public consultation on the new EBA’s guidelines on investment firms’ remuneration policies, aimed at ensuring a level playing field among the latter within EU, taking into account nature and scope of their own activities, will end on 17 March 2021. Industry is invited to comment on (i) the guidelines’ scope of application and goals, (ii) governance on remuneration policies and, (iii) application of waivers to the requirement to pay out a part of the variable remuneration of identified staff.
EBA’s consultation on investment firms’ remuneration policies of 17th December 2020.
Just published ESMA’s cloud outsourcing guidelines
Taking into account the risks arising from cloud outsourcing arrangements, ESMA has recently issued some guidelines which aims, on the one hand, at promoting the adoption of a convergent NCAs supervisory approach on such outsourcing arrangements and, on the other hand, supporting the same NCAs in the identification, monitoring and mitigation of the afore-said risks. According to ESMA, rights and obligations of the parties must be clearly defined in a written agreement, while enterprises must include, in their internal policies, information on security requirements, as well as verify cloud services providers have adopted adequate safeguards in this regard.
ESMA’s cloud outsourcing guidelines of 18th December 2020.
Consob’s reporting requirements of PRIIPs’ creators
Consob has recently amended its Issuers Regulation, as well as its resolution concerning the modalities of access to documents containing the key information on “PRRIPs”, establishing that, the creators of those PRIIPs that are marketed in Italy to retail investors, must make electronically available to Consob itself, from 1 January 2022, information on such products, as well as those related to structured data before their marketing.
On the relevance of the intermediary’ rules of conduct
According to the Supreme Court, the fact that the intermediary’s contractual counterparty is a professional client (i.e, qualified trader) does not mean that it goes exempt from the rules of conduct applying to the same. Therefore, whenever an intermediary itself is sued by an investor for alleged damages resulting from an breach of the afore-said rules, the intermediary can be held liable, unless it proves to have acted in full compliance with the specific diligence required by the law.
On the objective scope of the intermediary’s obligation to acquire a written order
Whether the intermediary has informed its client on the unsuitability of a given transaction, the further obligation to acquire a written order from the client itself – whose goal is to underline to the latter the relevance of his/her investment choice and, at the same time, provide evidence for intermediary – is fulfilled by the simple reference to the warning on the afore-said unsuitability.
Civil Court of Cassation, decision no. 21313 of 22th October 2020 (text available in Italian only).
On Consob’s authority aimed at ascertaining the “corporate control” definition
The Council of State has recently ruled that the legal basis of Consob’s regulation authority aimed at ascertaining the notion of “corporate control” is represented by the so-called “implicit powers” theory. As a result, the exception to the substantive legality principle, which is represented by the afore-said Consob’s authority, must be balanced by strengthening the rules on the participation to the related administrative proceedings of the sanctionable parties.
Council of State, sec. VI, decision no. 7992 of 14th December 2020 (text available in Italian only).
Financial services/FinTech
On the measures for a high common level of cybersecurity across the Union
With the aim of strengthening EU cyber resilience, the EU Commission has recently adopted a Directive proposal for repealing the existing NIS (the so-called “NIS 2”) and better tackling new challenges brought by the ongoing digital transformation. In particular, the proposal:
- extends the scope of the Directive, by adding new sectors reported as “critical” for the economy and society;
- strengthens companies’ security requirements, as well as the role of the Cooperation Group in shaping strategic policy decisions on emerging technologies;
- introduces more stringent supervisory measures for NCAs, in order to harmonise sanctionary regimes across the EU; and
- increases information sharing and cooperation among NCAs.
Compliance
Data protection
On the scope of the “explicit consent” envisaged by PSD2
By means of its guidelines on the interplay between PSD2 and GDPR, the EDPB has recently clarified that the “explicit consent” required by the PSD2 for PSPs to access, process and retain personal data does not represent the legal basis for the processing of such data, but may be regarded as an additional requirement having contractual nature. As a result, PSPs must ensure that end-users are aware of the specific categories of personal data that will be processed, as well as of the purposes of the processing, by drafting specific clauses to be explicitly accepted by them.
The Data Protection Authority sheds light on Brexit’s impact on data protection
According to the Data Protection Authority, after Brexit:
- until 30 June 2021, the GDPR will continue to apply to transfers of data to the UK;
- the so-called “one stop shop” mechanism will no longer apply to cross-border disputes or complaints on data protection with UK data controllers or processors, unless a new establishment is set up by the latter in an EEA Country; and
- UK data controllers and processors must appoint a their own representative in the EEA.
Can EU Member State’s NCAs initiate a proceedings before a competent court for an alleged infringement of the GDPR with respect to cross-border data processing?
Despite the supervisory authority of the main or (single) establishment of the data controller or processor being competent to act as the “lead supervisory authority” for the cross-border processing carried out by the same controller or processor (under the so-called “one-stop-shop” mechanism), the EUCJ’s General Advocate has recently pointed out that the GDPR enables NCAs to take legal action for an alleged infringement thereof also with respect to cross-border data processing, provided that it does so in such situations and according to those procedures set out in the same GDPR and, in relation to conducts that have occurred after the date of entry into force of GDPR itself.
CJEU General Advocate’s Opinion Case C‑645/19 of 13rd January 2021.
Anti-money laundering
Just published EBA’s methodology for ML risk assessment
EBA has recently published a specific methodology for ML risk assessment, specifying how it will identify emerging ML risks and carry out the above risk assessment. More specifically, the risk identification will be followed by the setting out of the related scope, as well as the identification of NCAs (taking into account the nature of the specific risk), which will carry out the assessment in coordination with EBA and, the drafting of a report containing the consequent outcomes.
EBA’s methodology for ML assessments of 17th December 2020.
Procedural law
Investors and non-actual subscribers of a company’s capital increase can constitute themselves as civil parties in a criminal proceedings
Investors and non-actual subscribers of a company’s capital increase can constitute themselves as civil parties in a criminal proceedings acting for damages. The former with regard to the offence of obstruction to supervisory functions, since it is irrelevant that the offended party (namely, the NCAs in question) and the (alleged) damaged one are not the same, and the latter with regard to the offence of false statements in prospectus, should the same prove to have purchased the shares at issue by relying on the false information contained in the prospectus.
Court of Treviso, Judge’s office for Preliminary Investigations, order of 12th December 2020
On the evidence of claims’ ownership in “en bloc” assignment of claims
The publication in the Italian Official Gazette of a notice having as object an “en bloc” assignment of claims, made by the assignee, is aimed at making the assignment effective with respect to the assigned debtor, but does not prove the claims’ ownership, since the assignee is required to prove the existence of the relevant assignment contract and its content.
Civil Court of Catanzaro, decision of 22nd November 2020.
List of abbreviations
AI: artificial intelligence.
AIFMD: Directive (EU) 2011/61 of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.
AMCs: asset management companies.
BCBS: Basel Committee on Banking Supervision.
BoI: Bank of Italy.
CNDCEC: The National Council of Accountants and Tax Experts
Consob: the National Financial Markets Authority.
DLT: distributed ledger technology.
EDPB: European Data Protection Board.
EEA: european economic area.
EUCJ: Court of Justice of the European Union.
Fondo Patrimonio PMI: it has been introduced by Law Decree no 34 of 19 May 2020 (Relaunch Decree) in order to support companies which decide to invest in their own relaunch.
Issuers Regulation: Consob Regulation no.11971/1999, as amended.
ESMA: European and Securities Market Authority.
GDPR: Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016, on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation).
Invitalia: the national agency for inward investment and economic development, owned by the Ministry of Economic and Finance.
ML: money laundering.
NIS: Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union.
NCAs: National Competent Supervisory and Regulatory Authorities.
NPLs: non performing loans.
PSD2: Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) no. 1093/2010, and repealing Directive 2007/64/EC.
PRIIPS: packaged retail and insurance-based investment products.
PSPs: payment initiation service providers.
SMEs: small and medium sized enterprises.
UCITS: Directive2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EC, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities as regards depositary functions, remuneration policies and sanctions.