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  1. 1. 1 13 Listing of an Italian company on The NASDAQ Stock Market Barbara Napolitano and Alessandra Piersimoni, Bonelli Erede Pappalardo
  2. 2. Listing of an Italian company on The NASDAQ Stock Market This chapter highlights the Italian securities enacted law no. 262 of December 28, 2005 • Expandi is a market designed for small-cap law applicable to an Italian company seeking a (the “Law 262”); the CONSOB Regulation no. companies operating in traditional sectors listing on The NASDAQ Stock Market 11971/99 (“CONSOB Regulation”); the with consolidated positions in their markets w“NASDAQ”). The following discussion CONSOB Regulation no. 11768/1998; and the and a positive track record of economical- assumes that either the Italian company is Italian Stock Exchange Regulations and financial results. already listed on the Italian Stock Exchange at Instructions (“ISE Regulations”). the time of its application to NASDAQ, or that it The watchdog in charge of the Italian ISE also regulates other market segments wishes to initiate dual-listing procedures. securities market is the Commissione dedicated to financial instruments other Dually-listed Italian companies must comply Nazionale per le Società e la Borsa (the than equity. with both U.S. and Italian securities law. “CONSOB”). Its mission includes ensuring the Unless specified otherwise, this section will Although less common, a non-listed Italian transparency of the market and the fair focus on the provisions regulating MTA and company may seek to be listed exclusively on disclosure by reporting companies. The Italian MTAX markets. the NASDAQ. In such circumstances, Italian central securities depository and settlement Listing issues listing standards and disclosure requirements company is Monte Titoli S.p.A.. The entity Requirements do not apply unless the company is responsible for the organization and In order to be admitted to ISE, a company characterized as a “quasi-public” company management of the stock exchange is BORSA must meet certain specific requirements. (that is, for example, companies with more ITALIANA S.P.A. (Italian Stock Exchange, or Notably, the issuers must: than 200 shareholders holding, in the “ISE”) that is established as a private • have filed the financial statements, aggregate, at least 5% of the company’s capital company. Its purpose consists of, inter alia, including consolidated ones, duly approved which cannot benefit from certain exemptions defining and organizing the markets’ for the last three financial years in the case in terms of financial statements). operations, the rules and procedures for the of the MTA, the last two financial years in It should be emphasized that this chapter admission and listing of companies and the the case of Expandi, or the last financial provides only a brief overview of the main management and oversight of the markets. year for MTAX; aspects of Italian securities laws and does not Regulated markets • have the last three financial statements purport to be exhaustive. An Italian company The ISE-regulated equity markets include: audited, unless they are newly-incorporated listed on the Italian Stock Exchange that • The MTA and MTAX markets on which companies; intends to list on NASDAQ, or an Italian shares, convertible bonds, warrants and • file pro-forma financial statements for the company that intends to initiate dual-listing option rights are traded. The listed last financial year (two years are required procedures both for the Italian Stock Exchange companies are divided into three cate- for listing on the Expandi), subject to a and for NASDAQ, should therefore avail itself gories, depending on the capitalisation limited audit, where extraordinary of Italian legal counsel. levels of the relevant issuers: Blue Chip; transactions have occurred in the Legal framework recent past; STAR; and Standard. Companies belonging The most relevant Italian securities laws and to STAR must comply with specific • appoint an auditing firm; regulations include Legislative Decree no. 58 of additional requirements in terms of liquidity, • approve a business plan pertaining to the February 24, 1998 (the “Unified Financial transparency and corporate governance. current year and the two subsequent years; Act,” hereinafter the “UFA”); the recently A guide for European companies to listing on the U.S. securities markets 109
  3. 3. Listing of an Italian company on The NASDAQ Stock Market • put in place an efficient management basis of a comfort letter issued by an audit firm Parties, including directors and statutory control system, complying with the or a consultant. or external auditors, who have participated in requirements set forth under the the transaction but who have not expressly Prospectus ISE Regulations; assumed liability, may nevertheless incur The prospectus must be drafted in accordance • prepare the QMAT (Quotation Management liability under general tort principles. with the forms indicated in the CONSOB Admission Test). Pursuant to Law 262, the Italian government Regulation, which makes reference to is required to issue new decrees providing for, Regulation 809/2004/CE. Listing partners inter alia, a specific regime for civil liability for the The prospectus must contain, inter alia, Issuers must appoint one or more banks or information contained in the prospectus. financial information pertaining to the last three financial intermediaries or investment firms Italian law also imposes criminal sanctions financial years, and interim financial data, authorized to operate in Italy who serve as: (i) the against any person who, for the purposes of where requested. In addition, the last two placement agent (i.e., the underwriter taking obtaining an unfair profit for himself or herself financial statements must be restated in responsibility for the retail offering); (ii) sponsor, or for third parties, willfully makes an untrue accordance with IFRS principles; the where they intend to apply for admission to listing statement or omits to state material information restatements must be audited. of shares, warrants and units of collective in a prospectus. In case of dual-listing, issuers are required investment funds without having other listed to ensure equivalence in the information Listing procedure securities; and (iii) specialist (an official market provided in the Italian prospectus and that Listing companies must file with both the ISE maker), in charge of supporting the liquidity of included in the U.S. prospectus. and the CONSOB an application form the relevant security - if they wish to list on certain requesting admission for listing and market segments (such as MTAX or Expandi). Prospectus liability authorization to publish the prospectus, The placement agent and the sponsor Pursuant to Article 94 of the UFA, a respectively, together with the relevant assume specific liabilities with respect to the prospectus must contain all information attachments. information contained in the prospectus (see needed to allow an investor to reach an The listing procedure takes approximately “Prospectus Liability”). informed assessment with respect to both the three months to complete. The time limit is The sponsor cooperates with the issuer in issuers’ activities and the securities offered. extended in the event that either CONSOB or the listing procedure, and bears, vis-à-vis ISE, Italian law, however, does not provide for ISE submits requests additional documents certain duties and liabilities. Notably, the specific civil remedies for breaches of such or information. sponsor certifies that: (i) the forecasts contained obligations. As a result, civil liability arises on Within two months, ISE customarily in the issuer business plan have been prepared the basis of general principles of law. resolves upon the admission to listing (subject on the basis of accurate analysis of the The parties involved in the securities offering to the prospectus having been made available economic, financial perspectives of the issuer; (the issuer, the selling shareholder, the placement to the public). Within the following 20 business usually the sponsor issues such certification on agent and the sponsor, as the case may be) are days or, in the event the relevant issuer has the basis of a comfort letter issued by the audit required expressly to assume liability for the other financial instruments listed on the ISE, firm; and (ii) the issuer management control information contained in the prospectus. Based 10 business days, CONSOB grants its system enables accurate information on the on general principles of law, each party, other authorization for the publication of the economic and financial situation of the issuer to than the issuer, may attempt to avoid liability by prospectus. After having verified that the be received periodically and in due time on the alleging that it acted with due diligence. 110 A guide for European companies to listing on the U.S. securities markets
  4. 4. Listing of an Italian company on The NASDAQ Stock Market financial instruments are distributed among committee appointed by the board of surveillance and vote at ordinary and extraordinary investors, ISE establishes the first trading day. (a supervisory body appointed by shareholders). shareholders’ meetings. The ordinary Issuers are required to give minority shareholders’ meeting must be called at least Corporate matters shareholders an opportunity to appoint at least once a year and resolves upon, inter alia: the Currently, only società per azioni (joint stock one director and one or more statutory auditors, approval of financial statements (except for companies) (“SPAs”) are listed on the Italian one of whom will act as chairman of the board of issuers with a dualistic structure); the stock exchange. The following chapter will, statutory auditors. By-laws, therefore, provide for distribution of dividends; the enforcement of therefore, concentrate on SPAs. special voting systems to appoint the members directors’ or supervisory bodies’ liability; and Corporate governance of the board of directors and the statutory buy-backs. Unless otherwise stated in the corporate by-laws, auditors. In addition, pursuant to Law 262, if the The extraordinary shareholders’ meetings management and control of the company is board of directors is composed of more than resolve upon any change to the company’s by- structured as follows: the board of directors, seven members, at least one director must be laws (such as issuance of new shares, capital elected by the shareholders, is responsible for independent. ISE recommends that, regardless reductions, mergers, spin-offs, etc.) the management of the company’s business. of the number of directors, some of them must Buy-backs Shareholders are also required to elect the board be independent (see “Code of Conduct”). Buy-backs are permitted subject to their of statutory auditors, that is responsible for (i) An external independent auditing firm, having received prior authorization from the generally supervising the issuer’s compliance appointed by the shareholders, verifies the ordinary shareholders’ meeting (which sets out with the applicable laws and company by-laws, correctness of the issuer’s accounting records the main terms and conditions of such (ii) the issuer’s adherence to the principles of and audits the issuer’s financial statements. purchases) and to certain other conditions and proper administration and (iii) the issuer’s An auditor is considered independent as limitations (such as, an issuer’s own shares may maintenance of an adequate organizational long as he or she is not ineligible (e.g. the only be purchased out of profits and capital structure, internal and administrative controls, auditor has a familial relationship with an reserves available for distribution and the number and accounting systems. Currently this structure issuer’s director; the auditor has a material of shares that can be purchased may not exceed is by far the most widely adopted. financial interest in the issuer; or, in very broad 10% of the total number of shares issued). A recent Italian corporate law reform allows terms, the auditor is involved in any situation Buy-backs must occur through actions Italian companies to adopt two other governance that could threaten his or her independence). that ensure equal treatment of shareholders, in structures: (a) the monistic structure (derived Law 262, inter alia, prohibits the auditors accordance with CONSOB Regulations. from the Anglo-Saxon legal system) under which from providing specific non-audit related the directors assume management services to their audited clients. Cross-ownerships responsibilities (some directors must meet certain The board of statutory auditors, on the one Cross-ownership between listed companies, or requirements in terms of, inter alia, hand, and the auditing firm, on the other, report between a listed company and an unlisted independence) and the audit committee (made any irregularity, ascertained in the performance company, may not exceed 2% and 10% up of those directors meeting the special above- of their office, to the CONSOB, and, as to the respectively, of the capital. If such thresholds mentioned requirements) carry out supervisory former, also to the competent courts. are exceeded, the company which is the last to functions; and (b) the dualistic structure (derived exceed may not exercise the voting rights for Shareholders’ meetings from the German legal system) in which the shares in excess of the threshold and must Ordinary shareholders are entitled to attend management is carried out by a management sell the excess shares. In case of non- A guide for European companies to listing on the U.S. securities markets 111
  5. 5. Listing of an Italian company on The NASDAQ Stock Market compliance, voting rights are frozen for the Reporting issues requirements. Disclosure duties also apply to company’s entire shareholding. Material information purchases of options, warrants, and other Issuers and their controlling shareholders are financial instruments with limited voting rights, Mismanagement of subsidiaries subject to certain disclosure and reporting as well as to the execution of shareholders Pursuant to the recent reform of corporate law, duties with respect to material information agreements with regard to the issuer or its a company that leads and co-ordinates the concerning the company and/or the controlling entities. management and conduct of operations of relevant securities. another company (typically a holding company Equivalence Specific disclosure and reporting duties controlling one or more subsidiaries) is liable Issuers listed in other countries are under an also apply to certain categories of persons vis-à-vis shareholders and creditors of the obligation to disclose to the Italian public all (including, controlling shareholders, subsidiaries for damages in the event of the information, if relevant, made available in shareholders owning more than 10% of the misconduct in the exercise of such guidance. such countries. share capital, top management, auditors) in Code of Conduct relation to transactions on the relevant issuer’s Other Issuers are advised to comply with corporate securities, or linked securities. Tender offers governance guidelines issued by the ISE (the The above-mentioned disclosure Italian law sets out a number of specific rules “Code of Conduct”) and to disclose, annually, requirements have recently become more governing tender offers. In particular, any their corporate governance structure and the stringent as a result of the implementation in person who wishes to make a tender offer is extent of their compliance with the Code of Italy of the market abuse directive. required to file an offering document with the Conduct. The Code of Conduct is available on CONSOB. Under certain circumstances Extraordinary transactions the ISE website. (notably, the acquisition for consideration of Issuers are subject to disclosure requirements The Code of Conduct contains guidelines more than 30% of the voting capital), it is when they carry out extraordinary transactions aimed at encouraging, amongst other matters, compulsory to launch a tender offer on all the including, mergers, de-mergers, material the formation of internal committees made up of issuer’s ordinary shares. acquisitions or divestitures; amendments to by- non-executive independent directors: in laws; and related-party transactions. Sanctions particular, the Code of Conduct recommends the Italian law imposes criminal sanctions on formation of an internal audit committee that is Periodic information persons committing insider trading and market in charge of cooperating in the assessment, inter Issuers are required to make their financial manipulation, as well as on any director or alia, of the adequacy of the accounting statements, semi-annual and quarterly reports employee who consciously bribes public officers standards adopted and their uniform application available to the public, and they must file such or similar persons in the interests of the issuer. by all of the group’s companies, evaluating the documents with the CONSOB. Issuers are subject to certain work program of the auditing firm. Relevant shareholdings administrative sanctions if directors, general Issuers are under an obligation to adopt a Purchases or sales of the voting shares of a managers, or employees commit any of the binding ethics code, which applies to members listed company that either exceed (in the event above violations in the interests of the issuer, of the management and the controlling body, of a purchase) or fall below (in the event of a unless the issuer proves that it had adopted and any other predetermined person, that, by sale) predefined thresholds (2%, 5%; 7.5%; certain measures adequate to prevent the virtue of its position and activity, may come into 10% and multiples of 5%) trigger disclosure realization of the crime. possession of price-sensitive information. 112 A guide for European companies to listing on the U.S. securities markets