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Italian Company Law: Transfer of Shares, Contractual Guarantees and Remedies

Company law

Italian Company Law: Transfer of Shares, Contractual Guarantees and Remedies

In a recent decision, the Court of Florence (court decision of 13 February 2023 - reference no. 11426/2018) outlined several relevant principles in relation to the transfer of shares in a company.

First, it was clarified that the transfer has as direct object the company share and only as indirect object the quota of the respective company assets. Consequently, a deviation over the company asset value per se has no effect on the transfer of the share, as only the economic value of the shares is affected.

For this reason, it is common for the seller to give specific guarantees about the accuracy of the financial statements and the consistency of the assets. Among the various clauses is often the seller's obligation to indemnify the acquirer against off-balance sheet liabilities. The Court of Florence has clarified that such a clause concerns an ancillary service and is not covered by the statutory warranty under Article 1497 of the Italian Civil Code, which concerns the direct characteristics of the thing sold. This aspect is also relevant about the determination of the applicable limitation period, as the court rightly stated that the buyer's claim for damages based on such a warranty is not subject to the one-year limitation period of Articles 1495 and 1497 of the Italian Civil Code, but to the ordinary limitation period of ten years. In contrast to German law, limitation periods under Italian law cannot be waived by contractual agreements.

Secondly, the court asserted that agreements concerning the assets of the company whose shares are being transferred constitute an autonomous guarantee provision and that, in the event of an obligation on the part of the seller to indemnify the transferee against off-balance sheet liabilities, the transferee is entitled to compensation, whereas the transferee is precluded from declaring rescission of the business share transfer agreement on the grounds of a material defect in the thing sold, in accordance with the statutory provisions of Articles 1495 and 1497 of the Italian Civil Code.