Null and void quotaholders’ decisions for the abuse of the majority

The Italian Supreme Court, with order no. 2660 of 29 January 2024, ruled upon the invalidity of a quotaholders’ meeting resolution due to abuse of the majority. In particular, the Court reaffirmed that such conduct can lead to the invalidation of a quotaholders’ meeting resolution where it finds no justification in the interest of the company, or is the result of intentional fraudulent activity by the majority quotaholders aimed at harming the rights of a minority shareholder.

The case
The case stems from the adoption of an LTD quotaholders’ meeting resolution., which was passed with the favourable votes of two quotaholders holding 34% and 33% respectively of the company’s capital. The decision was pertained to the removal of both the pre-emption right and the mere approval clause from company’s by-laws in the event of transfer of quotas. 

The minority quotaholders didn’t voted in favour of the amendment and took legal action to ask the court to either (i) firstly ascertain their right to withdraw from the company, or (ii) as subordinate option, ascertain that the quotaholders’ resolution was null and void.

As the first instance judge rejected the claims, the quotaholders appealed the decision to the Florence Court of Appeals.

After losing also in appealing, the minority quotaholders filed recourse to the Italian Supreme Court, claiming, among others, the violation and false application of articles 2479 e 2479-ter of the Italian civil code. In particular, they complained that the Court of Appeal had wrongly excluded the invalidity of the resolution for the abuse of the majority as in compliance with the company’s interest, without considering the possibility that this resolution could be intentional fraudulent activity by majority quotaholders in prejudice to the participation and property rights of minority quotaholders.

The judgment
The Italian Supreme Court has reversed the decision of the Court of Appeal and reaffirmed its previous order no. 27387/2005. The court stated that a majority abuse can invalidate a resolution made by shareholders if the resolution lacks justification in the company’s interest, or if it is the result of intentional fraudulent activity by the majority aimed at harming the rights of minority shareholders.

The Italian Supreme Court has also clarified that the latter occurs if the majority quotaholder's vote is aimed at harming the interests of the other shareholders, or it is intended to unreasonably benefit the majority shareholders with a prejudice for the minority ones, in violation of the general principle of good faith in the performance of the corporate contract.

According to the Supreme Court, the Court of Appeal had only considered whether the resolution complied with the interest of the company. This was particularly in relation to the fact that it allowed the selling shareholder to leave the company, thereby resolving internal conflicts and deadlock within the company. It had, however, failed to examine whether the resolution had been approved with the specific purpose of harming the interests of the minority quotaholders.

Therefore, the Supreme Court accepting the appeal, overturned the second instance decision, and remanded the case to the Court of Appeal for a new ruling.