Shareholders and the Financial Structure of a Corporation

Abstract:     
Despite the fact that the 2003 corporate law reform in Italy undeniably increased autonomy on the part of directors (at least in share companies) to the detriment of shareholders, shareholders retain a significant role. This role arises out of recognition of their competence to draw-up the provisions of the corporate by-laws and articles of association.

This paper intends to verify the actual role played by shareholders in the principal decisions relating to the financial structure of a corporation. More precisely it aims to demonstrate that, through specific provisions in the corporate by-laws, shareholders have various tools to limit and condition the directors on making recourse to the capital markets.

The use of certain instruments to obtain funding is, in fact, often rendered conditional, by the legislator, to an express provision in this regard in the corporate by-laws or articles of association. Secondly, the by-laws or the articles of association can, in various cases, allocate shareholders the right to decide on the use of a specific instrument (as, for example, bonds).

Finally, by-law provisions relating to the corporate purpose can limit the discretion of directors on obtaining funding.

Number of Pages in PDF File: 12

Keywords: Shareholders, Corporate Law Reform Italy, Financial Structure

JEL Classification: K22, K33

working papers series