Release of a shareholder from negative consequences of contribution

With the ruling n. 17500 of July 4, 2018 the Supreme Court clarifies the conditions for validity of a shareholders agreement which grants a put option to one of the shareholders as an indemnity instrument aimed to transfer the risk inherent to the contribution to other shareholders.

The further appeal was submitted against the decision of the Court of Appeal of Florence with which the majority shareholders of a joint-stock company were sentenced to pay a considerable amount in favor of the minority shareholder, having the judges deemed the shareholder agreement between the new shareholder, who has bought 40% of the share capital, and three old shareholders of the company by which, in order to guarantee the new shareholder from any negative consequences of the contribution, to the letter was given a put option at a fixed price of the entire participation within a given deadline.

The fixed-price put option has allowed to the new shareholder to sell its shares at the price initially paid, with addition of the costs for recapitalization and financing of the company, with interest, despite a significant reduction in the value of the shares following the losses that the company suffered after the new shareholder had joined the company.

The Supreme Court was asked whether the internal agreement between the shareholders, by which some of them undertake to release others from the negative consequences occurred after the contribution to the share capital, by granting a put option within a term given and at a fixed price, is valid and effective. The aforementioned put option did not reflect the actual value of the shares, especially in light of the presence of interests on the whole amount, able to neutralize the loss in value of money occurred in the meantime or even to make profits.

On this occasion, the Supreme Court recalled that exclusion from losses or profits according to the provisions of art. 2265 c.c., the single shareholder is excluded absolutely and constantly from one or the other situation or from both.

The ratio of the provision of art. 2265 c.c. is to preserve the purity of the causa societatis and should be therefore identified at a necessary division of the results of the business, typical of the entire social structure and with real relevance to the company; while no impact in this sense, according to the Supreme Court, can assume the purely internal transfer of risk between shareholders or to a third party, when it does not change the structure and function of the social contract, or the position of the shareholder in the company, and therefore has no effect on the company itself, which will continue to impute losses and profits on its shareholdings, in compliance with the provision of art. 2265 c.c.

The Court emphasizes the necessity to analyze, for the purposes of the application of art. 2265 cc, the specific cause of the agreement, stating that it is not forbidden to the parties to set up an agreement in which the specific cause is mixed, as both corporate and financing, with the function of guarantee related to the ownership of the shares.