Cross-Border Mergers, Change of Applicable Corporate Laws and Protection of Dissenting Shareholders: Withdrawal Rights Under Italian Law

Abstract

The European common legal framework for cross-border mergers and acquisitions is becoming more and more clear, and cross-border M&As are on the rise, also as a consequence of the application of the principles of freedom of establishment and movement. A cross-border merger can either have the side-effect of, or be primarily aimed at, a change of the applicable company laws for one of the companies participating in the transactions. In this respect cross-border mergers, often driven by substantial economic factors, are also crucial for regulatory competition among the different European company law systems. This Article addresses the issue of the protection of minority shareholders who do not consent to the merger (or acquisition), discussing what seems to be one of the most important protections provided under Italian law: withdrawal rights. An analysis of protection of minorities vis-a-vis a change of the applicable company laws, in particular achieved through a merger, is very relevant, but often overlooked, in the discussion on the development of a market for rules in Europe. In fact, the existence and relevance of effective minority protections, such as in particular withdrawal or appraisal rights, contributes to both define the relative attractiveness of the different legal systems from the point of view of the company's stakeholders, and to limit the ability of majority shareholders and/or managers to shop around for the fittest company law system.

Keywords: Cross-border Mergers, M&As, Protection of minorities, Appraisal Right, Withdrawal Right, Regulatory Competition, Corporate Governance

JEL Classification: K22