In Italian closed-door meetings, shareholders do not have the opportunity to participate directly. The format was introduced during the COVID-19 pandemic—but even though restrictions on other in-person gatherings have long since been removed, corporate issuers’ temporary right to hold closed-door meetings has repeatedly been extended. Most recently, the Italian “DDL Capitali” or “Capital Markets Bill” allows the format to remain in place not just for 2024, but indefinitely, if shareholders approve article amendments to that effect.
Companies have already put this amendment on their AGM ballot and, based on our engagement discussions with Italian issuers, many more are expected to follow during the upcoming Italian proxy season. This post provides background on the topic and an overview of Glass Lewis’ Benchmark Policy approach.
Background
To navigate the restrictions imposed on in-person gatherings by the COVID-19 pandemic, most European markets pivoted to virtual meetings. Many European states have since passed legislation to regulate virtual meetings, providing that safeguards allowing shareholders to ask questions and otherwise participate as if they were physically present are built into national law. Increasingly, those safeguards and opportunities for remote participation are being offered even when the meeting is held in-person (i.e. a “hybrid meeting”).
By contrast, for Italian closed-door meetings, only a shareholder representative holding proxies is allowed to be physically present, and the proceedings are not generally broadcast. Any shareholder questions have to be submitted ahead of the meeting and addressed by the board at least by three days before the AGM.
The so-called “Capital Markets Bill” ends the general right for Italian companies to hold closed door shareholder meetings (from 2025), but it has introduced the possibility for companies to continue using this meeting format indefinitely, if shareholders approve an amendment to a company’s articles of association (with a 2/3 majority requirement).
Glass Lewis Perspective
Closed-Door Meetings
In our view, closed-door meetings without any form of virtual transmission should be avoided at all costs, as preventing in-person attendance or active virtual participation leads to a substantial reduction in the ability of shareholders to exercise their rights and enter into dialogue with company directors and other stakeholders. Addressing shareholder questions in advance of the general meeting could increase transparency for remote shareholders around items that might previously have only been addressed during the AGM; however, in most cases those voting by proxy will have already cast their ballots before such questions are addressed.
We will closely evaluate proposals to allow for the convocation of general meetings in a closed-door format on a case-by-case basis. However, we will generally recommend voting against these proposals, unless the proposed amendments specify that the closed-door meeting format would only be used in exceptional circumstances, such as a public health crisis. Further, we expect such amendments to include a commitment to publicly disclose the exceptional circumstance that warrants holding the meeting in a closed-door format as part of the meeting notice.
Virtual Meetings
As discussed in our Benchmark Policy Guidelines for Continental Europe, we will however be more supportive of Italian companies that instead seek to amend their articles of association to allow for virtual-only meetings. We will generally recommend that shareholders support such resolutions provided that board provides the following commitments:
- The procedure and requirements to participate in a virtual-only meeting will be disclosed at the time of convocation; and
- There will be a formal process in place for shareholders to submit questions to the board, which will be answered in a format that is accessible to all shareholders.
We will continue monitoring how companies use these meeting formats in proxy season 2024 to further refine our policies.