Abuse of majority shareholding: A recent decision from the Italian Supreme Court

The Italian Supreme Court[1] recently ruled that the amount of damages suffered by a shareholder due to an abusive resolution approved by majority shareholders (i.e., a resolution aimed only at jeopardizing minority shareholders’ rights) regarding issuance of new shares must be determined at the time when said resolution is approved, regardless of whether monetary consequences for minority shareholders arise only after that time.

The case brought to the attention of the Supreme Court can be summarized as follows:

  1. the minority shareholder claimed that the majority shareholders approved issuance of new shares (i) aware that the minority shareholder would not be able to underwrite the new shares due to financial difficulties and, hence, (ii) triggered a significant reduction in the value of such shares;
  2. following related resolutions, the minority shareholder gifted a portion of her shares to her partner and sold the remaining shares to a bank at a significantly reduced price;
  3. the minority shareholder and the majority shareholders entered into a settlement agreement whereby the majority shareholders agreed to pay to the minority shareholder an amount determined based on the loss of value of the shares triggered by the abovementioned resolutions;
  4. the majority shareholders requested that the Court of Milan annul the settlement agreement, claiming that the amount of the settlement was determined without their being aware that the minority shareholder gave away part of her shares prior to selling her remaining shares to the bank and entering into the settlement agreement;
  5. the claims of the majority shareholders were rejected by the Court of Milan and the relevant appellate court.

The Supreme Court agreed with the interpretation of applicable laws provided by the appellate court. Namely, according to the appellate court and the Supreme Court, the amount of damages must be determined at the time when the resolution is adopted, regardless of subsequent actions and circumstances (gifting shares, sale to a third party, and so on) and related financial effect on the damaged party.

[1] Italian Supreme Court, decision No. 18770/2021 of July 2, 2021.

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