The Italian Supreme Court rules on the mandatory offer and the related sanction of suspension of voting rights

Introduction
Article 106 of the Italian Code of Financial Markets lays down the mandatory offer rule whereby a person that acquires a shareholding in excess of 30 percent of the share capital of a joint-stock company must make an offer for all the shares within the following 30 days. In case of violation of the mandatory offer rule, Article 110 CFM provides that all the voting rights of the infringer are suspended.
The Court of Cassation in its recent judgment issued in the case no. 26793/2019 L v Consob dealt with the scope of application of Articles 106 and 110 CFM, giving guidance on which circumstances an infringement of the mandatory offer rule can be established.
Facts of the case
By the decision made on 16 April 2009, case no. 26793/2019, L v Consob, Consob, the Italian financial regulator, levied a fine on CL for violating Articles 106 and 110 CFM. CL purchased a shareholding in excess of 30% of Lazio Spa, a quoted company and also a football club playing in the Italian major league, Serie A. Consob found that CL did not make a mandatory offer on the remaining shares of Lazio and exercised the  voting rights inherent in his shares in four general meetings of Lazio that took place  between December 2006 and September 2008.
CL appealed the decision of Consob. More precisely, the LC v Consob determined by the Court of Cassation revolved around the question whether CL lawfully exercised his voting rights at the general meeting of 26 October 2007.
The rulings of the Court
The Court observed that on 31 October 2006 CL acquired shares of Lazio in excess of the 30% threshold in Article 106 CFM. Then, pursuant to Article 106 CFM, on 2 December 2006 CL, holding more than 30% of the shares in Lazio, submitted a takeover bid that was open from 27 December 2006 through January 2007. At the end of the offer LC obtained a further 10,79% of the share capital of Lazio. 
For the above reasons, the Court took the view that, at the date of 26 October 2007, CL complied with Article 106 CFM and could then lawfully exercise his voting rights in the general meetings of the company. Indeed, though being the owner of a stake in excess of the statutory 30% threshold, he had duly made a mandatory offer and, accordingly, complied with all the conditions set out in Article 106 CFM.

Comment
In L v Consob the Court of Cassation clarified that, in order to abide by the prescription in Article 106 CFM, a person holding shares in a quoted company in excess of 30% has to make a take-over bid on the traded shares owned by third parties even after exceeding the statutory threshold. In other words, making this step is the essential condition for this person to make his shareholding compliant with Article 106 CFM, thereby avoiding the serious penalties for non-compliance in Article 110 CFM. Such penalties, as hinted above, include the freezing of the voting rights associated with all the shares owned by non-compliant perso

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