Corporate governance of Italian limited liability companies: special rights of quotaholders on distribution of dividends

Italian limited liability companies (S.r.l.) may introduce provisions regarding specific quotaholder rights to net profit distribution in their articles of association.

This possibility is provided for by Article 2468, paragraph 3 of the Italian Civil Code (“ICC”), as a derogation from the general rule established in Article 2468, paragraph 2, according to which the rights of quotaholders are allocated in proportion to their respective participation.

However, the exact scope of Article 2468, paragraph 3 of the ICC has been subject to various interpretations. According to a recent study of the National Council of Notaries, Article 2468, paragraph 3 of the ICC permits to adjust the articles of association to different quotaholder needs. The articles of association may therefore:

(i) confer to a specific quotaholder a right to net profits not proportionate to the par-ticipation owned although it is not permitted to exclude a quotaholder from any right to net profits;

(ii) establish a right of priority in favour of a quotaholder to receive a minimum amount of the net profits generated by the company. The remaining net profits will be allocated in proportion to the respective participations of the other quotaholders. It is not permitted, however, to confer a right to a fixed amount, irrespective of whether or not any net profits are generated;

(iii) establish a specific quotaholder right to the net profits deriving from a specific busi-ness of the company.

Furthermore, according to a broad interpretation of Article 2468, paragraph 3 of the ICC the articles of association may confer to a quotaholder a right to the distribution of the liquidation assets not proportionate to the participation owned.

It shall be noted that such clauses may be referred either to dividends whose distributions has already been resolved by the quotaholders or to the net profits as merely reflected in the ap-proved balance sheet. The articles of association shall therefore be drafted in order to clarify whether such clauses refer to the former or to the latter.