The contribution, prepared by attorneys Niccolò Medica and Antonio Vigliotti, was published in N&T Plus Diritto – Il Sole 24ORE.
Consob published, on January 21, 2022, attention notice no. 1/22, expressing its views on the presentation of a list by the Board of Directors of a listed company for the renewal of the same Board.
Article 147-ter of Legislative Decree no. 58 of February 24, 1998 (“TUF”) regulates the procedures for the election of Boards of Directors of Italian listed companies.
Although the TUF does not expressly provide for it, the Bylaws of some listed companies provide for the possibility, also for the Board of Directors, to present a list of candidates in view of the renewal of the same Board; legal scholars have deemed such provision admissible, provided that it does not prejudice the appointment of members expressed by minority shareholders.
The Corporate Governance Code – approved on January 31, 2020 by the Corporate Governance Committee, composed of business associations (ABI, ANIA, Assonime, Confindustria) and professional investors (Assogestioni) and Borsa Italiana, whose institutional purpose is the promotion of good corporate governance of listed companies – also provides, with reference to the possible presentation of a list of candidates for the renewal of the Board by the administrative body, that the same be “implemented according to procedures that ensure its transparent formation and presentation“, and that the administrative body be assisted by the Nominations Committee, composed predominantly by independent directors.
With attention notice no. 1/22, Consob, while reserving further assessments, has affirmed the importance of ensuring the widest transparency and documentability of the possible process of formation and presentation, by the administrative body, of a list of candidates for the renewal of the Board of Directors.
This must also occur through adequate minutes of the meetings of the Board of Directors and of the committees possibly involved, so that the procedure leading to the selection of specific candidacies is clearly and substantively evident, also with respect to the selection criteria previously identified.
Consob acknowledges the fact that, precisely in order to guarantee maximum transparency, the Boards of Directors of some listed companies are adopting a specific procedure aimed at regulating the process of identifying candidates in its various phases and at governing the contribution provided in such process by the various subjects involved.
Consob further highlights the importance of enhancing the role of independent members of the Board of Directors, with the involvement of the Nominations Committee (as provided for by the Corporate Governance Code), composed predominantly by independent directors, or of specially constituted committees or alternatively of the Nominations Committee, but with modified composition, and with the coordination of an independent figure, to ensure the transparency and objectivity of the process: on this point, Consob notes, it is up to the interested companies to define the most appropriate process for the possible formation and presentation of the list.
Equally important, in Consob’s view, is the management of the phase of dialogue with shareholders, which must be characterized by transparency and documentability and, in case of adoption by the company of a policy for managing dialogue with shareholders in general, must occur in compliance with such policy.
A further aspect concerns the conduct of directors during the meetings in which voting takes place on the composition of the Board of Directors list.
On this point, Consob, while recalling article 2391 of the Italian Civil Code and therefore the obligation of transparency for directors who have declared their availability to be re-elected (providing a precise account of any interest, on their own behalf or on behalf of third parties) and the obligation of enhanced motivation of the Board of Directors’ decision, points out that, in cases where among the candidates on the list on which the Board of Directors must vote there is the name of one or more of the current directors, the latter could nonetheless participate in the voting.
Consob also emphasizes the importance of considering any relationships of relevance under the slate voting rules between the list presented by the Board of Directors and lists possibly presented by shareholders who are present directly or indirectly (for example through corporate representatives of companies in their group) in the same Board. Consob considers critical, for example, the participation of directors who are shareholders of the issuer or corporate representatives of companies in the groups of such shareholders in the phases of specific identification of candidates to be included in the Board of Directors list.
Correct and complete information on the list presented by the Board and on the procedures for the formation of such list is, always according to Consob, essential not only to allow shareholders to make informed voting decisions (also thanks to timely publication of the Board’s list concurrently with the publication of the notice of call of the Assembly, or, if not possible, with reasonable advance notice with respect to the deadline for the deposit of shareholders’ lists, together with any indication of candidates for the positions of Chairman and Chief Executive Officer), but also to allow the market to adequately assess the process.
Among the latest points of attention provided by Consob, not only the fact that shareholders presenting a list declare the absence of relationships with the list presented by the Board of Directors (or specify any significant relations together with the reasons why such relations were not considered relevant for the existence of a connection), but also the fact that the qualification of a shareholder as a “related party” is not in itself precluded in the event that directors are elected on the basis of a list of candidates presented by the Board of Directors.
