Revocation of the transformation resolution adopted by the shareholders’ meeting

by Federica Daquino

The Court of Milan, Specialized section in business matters, by judgment no. 6701 of August 1, 2022, ruled in the context of a proceeding concerning the challenge of a shareholders' resolution approving the re-transformation of the company from a joint-stock company (S.p.A.) to a limited liability company (S.r.l.).

In particular, the Court examined the relationship between the revocation of a corporate transformation resolution and the shareholders’ withdrawal right, recognising that it is possible to revoke the transformation resolution even after its registration with the Companies Register and, consequently, to proceed with a transformation that is equal and opposite to that which gave rise to the exercise of the right of withdrawal.

The case

Echidna S.p.A. (“Echidna”) held 25% of the share capital of Viridis Energia S.r.l. (“Viridis” or the “Company”).

On December 20, 2019, the Company's shareholders' meeting resolved to transform the Company from a limited liability company (S.r.l.) into a joint-stock company (S.p.A.). This shareholders' meeting resolution was registered with the Companies Register on January 17, 2020, (the “First Resolution”) and, subsequently, Echidna exercised its right of withdrawal by certified email sent on January 31, 2020.

However, on March 13, 2020, the shareholders' meeting resolved to re-transform the Company from a joint-stock company (S.p.A.) to a limited liability company (S.r.l.) (the “Second Resolution”) and, on March 31, 2020, Echidna again notified its withdrawal to the Company. 

The Company, due to the re-transformation, considered invalid both the first and second withdrawals exercised by Echidna.

Echidna therefore brought an action before the Court of Milan against the Company challenging the Second Resolution, in order to:

  • declare the Second Resolution null and void pursuant to Article 2379 of the Italian Civil Code;
  • in the alternative, declare the Second Resolution voidable pursuant to Article 2377 of the Italian Civil Code;
  • ascertain the irrelevance of the Second Resolution in relation to the withdrawal exercised on January 31, 2020;
  • in the further alternative, order Viridis to compensate for the damages pursuant to Article 2500 bis of the Italian Civil Code.

In particular, the plaintiff argued that the Second Resolution should be considered null and void or voidable because it was adopted after the registration of the First Resolution with the Companies Register. According to Echidna, the First Resolution became irrevocable with its registration, pursuant to Article 2500 bis of the Italian Civil Code.

The Company appeared in court and requested, primarily, that the plaintiff’s claims be rejected and, by way of counterclaim, that it be ascertained and declared that Echidna had no right to withdraw pursuant to Article 2473 of the Italian Civil Code because it had given its consent to the transformation of the Company from a limited liability company (S.r.l.) to a joint-stock company (S.p.A.).

The decision

The Court of Milan, Specialized section in business matters, by judgment no. 6701 of August 1, 2022, dismissed Echidna's claims and, sustaining Viridis's counterclaim, declared that the withdrawal exercised by Echidna on January 31, 2020, was ineffective and that the subsequent withdrawal notice on March 31, 2020, was invalid.

Specifically, the Court of Milan referred to the provisions of Article 2437 bis of the Italian Civil Code, which grants the Company a “ius poenitendi” following the exercise of the right of withdrawal by a shareholder. Pursuant to Article 2437 bis, paragraph 3, of the Italian Civil Code, the company is granted a period of ninety days to revoke the resolution that entitles shareholders to exercise their right of withdrawal.

According to the Court, it is not correct to limit the scope of the revocation under Article 2437 bis, paragraph 3, of the Italian Civil Code by invoking its interference with the provisions of Article 2500 bis of the Italian Civil Code. The latter, in fact, prevents the invalidation of a transformation resolution once registered with the Companies Register, limiting the remedy to compensation for damages.

The issue in this case, however, concerned the admissibility of revoking a transformation resolution. According to the Court of Milan, the Article 2437 bis, paragraph 3, of the Italian Civil Code expressly allows such revocation.

In essence, it is legitimate to adopt a resolution that provides for a transformation that is equal and opposite to that which gave rise to the exercise of the right of withdrawal. Such re-transformation resolution precludes “ex lege” the exercise of the right of withdrawal by the dissenting shareholder or, if already exercised, renders it ineffective by eliminating the legal basis for the withdrawal.

In conclusion, the effect of the Second Resolution is to preclude the exercise of withdrawal by the shareholder and, if exercised, to render it ineffective.

For the reasons indicated above, the withdrawal validly exercised by Echidna on January 31, 2020, became ineffective after the Second Resolution was registered with the Companies Register on March 17, 2020. That resolution, adopted within the 90-day period provided by law, effectively revoked the First Resolution that had legitimised the withdrawal. The re-transformation resolution, as it was duly adopted by the Company within the framework of its ius poenitendi, removed the changes that justified the withdrawal and thereby rendered it ineffective.