European Business Law Review

Volume 26 (2015)

Volume 26 (2015) / Issue 5

Ferruccio Maria Sbarbaro, Andrea Sacco Ginevri, 'The Role of Preferred Shareholders in Fundamental Transactions: Preliminary Thoughts' (2015) 26 European Business Law Review, Issue 5, pp. 765–777


In public corporations, the claim of the preferred shareholders is typically limited to a fixed dividend and a fixed amount on liquidation, and this claim shall be satisfied before the common shareholders can receive anything. Their rights to a prior, but limited, dividend resemble the rights of creditors, who also must rely on their contractual rights and do not vote in the general shareholders’ meeting.

However, according to Italian corporate law, the preferred shareholders have a veto power against fundamental transactions such as, for example, certain mergers, demergers, charter amendments that jeopardize their preferred rights.

Therefore, notwithstanding their limited percentage of share capital, preferred shareholders i on the one hand have the power to prevent a corporation from transactions that may increase the common shareholders’ value, and ii on the other hand, are not subject to any redemption right neither by the common shareholders nor by the corporation itself.

In light of the above, this article argues that granting a redemption right ex lege to the common shareholders in case the preferred shareholders vote against certain fundamental transactions may be a tool for strengthening the best interest of the corporation because it allows at the same time aa directors and common shareholders representing the latter the majority of the share capital to achieve the corporate benefits arising from such fundamental transactions, and bb the dissenting preferred shareholders to withdraw from the corporation at a fair market value.

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ISSN: 0959-6941
ID: EULR2015038