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Italy rejects extension to special loyalty share rule
February 5, 2015 / 6:48 PM / 3 years ago

Italy rejects extension to special loyalty share rule

MILAN/ROME, Feb 5 (Reuters) - Italy will not extend a rule that makes it easier for long-term shareholders to strengthen their voting powers in companies, the government said on Thursday, following strong opposition from foreign investors.

Rome last year introduced a law allowing companies to amend their bylaws to boost the influence of longer-standing investors by granting them multiple votes for each share they own.

Drinks group Campari, builder Astaldi and hearing aid firm Amplifon adopted the scheme last week, taking advantage of a short-term provision under which only a simply majority was required to change their statutes.

After the government on Thursday rejected a proposal to extend the simple majority rule until the end of 2015, from February a two-thirds majority is needed to introduce the loyalty share scheme.

Economy Minister Pier Carlo Padoan said in a statement the government would not consider any extension as it was “necessary to preserve the certainty of the rules, an essential element for investor confidence”.

Earlier this week, a group of foreign funds, which collectively manage assets worth more than $8.8 trillion, and independent directors at some of Italy’s biggest companies called on the government of Prime Minister Matteo Renzi to rule against any extension.

They were concerned that under the simple majority rule passing the scheme would have become a mere formality for many companies in Italy, where 90 percent of listed companies have some form of dominant shareholder. A two-thirds majority rule usually required for a statute change gives minority shareholders a greater say.

“This decision sends a strong message to the markets that the Italian government is serious about attracting international investment and safeguarding good governance standards in line with global best practice,” said Sacha Sadan, director of corporate governance at Legal & General Investment Management, a London-based asset manager, speaking on behalf of the group.

Italy introduced the multiple-vote scheme to convince small and medium-sized firms to list more shares on the stock market without owners necessarily losing control of a company they have in some cases run for generations.

But some investment funds say the measures could concentrate power into the hands of a small group of shareholders to the detriment of minority stockholders.

Reporting by Agnieszka Flak in Milan and Isla Binnie in Rome; Editing by Mark Potter

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