The #VanghePulite investigation has raised doubts about modus operandi of Federconsorzi 2, alias CAI SpA, regarding the incorporation of agricultural consortia into joint-stock companies, and their consequent loss of the legal condition of mutuality prevailing in favor of the members (1,2).
A legal opinion pro-truth of 8 May 2020 signed by professor lawyer Andrea Zoppini – addressed to the North-East Agricultural Consortium and recently received by our editorial staff through a different source (in the Attachment) – offers authoritative confirmation of the doubts and criticisms offered by many parties.
1) Federconsorzi Operation 2
The case submitted to Professor Andrea Zoppini concerned the Federconsorzi 2 operation, as planned and partly implemented in the following months and years.
Declared objective of the operation was the reorganization and rationalization of the activities of the Agricultural Consortia of the Northeast, Emilia, Central South, Adriatic and Terrepadane. The latter – as we have seen – managed to resist the repeated attacks of Coldiretti’s magic circle (3,4,5).
All agricultural consortia above mentioned were cooperative companies with prevalent mutuality, pursuant to law 33 July 2009 n. 99, art. 9.
1.1) CAI and CAI Real Estate
The Federconsorzi operation 2 predicted:
– the complete separation, by each Consortium, of ‘company branches‘ consisting of properties declared as instrumental to carrying out the typical activity, plants and equipment, working capital, personnel and related liabilities, cash and a part of the financial debt;
– the establishment, by Società Consortile Consorzi Agrari ScpA (SCCA), of a limited liability company (Consorzi Agrari d’Italia or CAI Srl), to then be transformed into a joint-stock company (CAI SpA). With transfer to the same, by SCCA, of a business branch; (6)
– the subscription, by the Agricultural Consortia and Bonifiche Ferraresi SpA, of capital increases to be released in cash as regards BF and through the transfer of the respective business branches as regards the Consortia;
– the contextual contribution by the Consortia to another newly established company, CAI Real Estate Srl, of its ‘business branches’ or rather, real estate assets, together with debt of a financial nature, in order to implement a plan for real estate disposals and repayment of bank debt (7,8).
1.2) Investment agreement and shareholders’ agreements
As part of the operation Federconsorzi 2, the parties intended to achieve:
– an investment agreement on the operation as a whole
– a shareholders’ agreement concerning, among other things, the governance of CAI SpA (see paragraph 3 below)
– a shareholder agreement between the Consortia to organize a ‘unitary management’ of their choices with reference to CAI.
2) Agricultural consortia and indirect mutuality
Some activities and mutual policies prescribed to agricultural consortia, such as:
– innovation and improvement of agricultural production
– preparation and management of services useful to agriculture, as well as where appropriate
– agricultural credit operations in kind e
– advance payment to producers in the event of delivery of agricultural products to voluntary storage
«can also be carried out by agricultural consortia through the participation in joint-stock companies in which the consortia have the majority of votes exercisable at the ordinary meeting.
The activities that the aforementioned companies exercise for the benefit of the members of the agricultural consortia who hold their participation are carried out in compliance with the mutualistic aims and objectives of the consortia» (law 410/99, article 2-bis). (9)
2.1) Agricultural consortia, the role of the Assembly
The analysis of the statute of the North-East Agricultural Consortium led Professor Andrea Zoppini to evaluate the need for its reform. The Shareholders’ Assembly must in fact be involved, in an extraordinary meeting, to:
– ‘expressly provide that its mutualistic exchange can also be implemented indirectly allowing members to obtain the advantages deriving from participation in the Consortium through downstream investee companies. As well as
– ensure ‘to members who do not intend to participate in the change in the corporate purpose and the mutual program in the above-mentioned sense of exercising the right of withdrawal’. And where appropriate
– to assert ‘the competence of the administrative body of the Consortium to make the subsequent determination in reference to the completion of the Operation and the Contributions’.
2.2) Agricultural consortia, statutory amendments
‘The decisions on the primordial rights of members’ – according to the jurisprudence of the Court of Rome – ‘go beyond the management powers of the directors and fall within the implicit competence of the assembly, regardless of the type of joint-stock company chosen’. (10)
The social object of the agricultural consortia should in any case be reviewed and where necessary subjected to a formal modification by the members’ assembly, as can be seen from the opinion of the prof. Zoppini. ‘Taking into account that this modification, having an impact on the mutual cause and, therefore, on the primordial interests of the members (…) results, in fact, in a substantial change (…) of the corporate purpose, as such reserved for shareholders’ resolution’.
‘If this does not happen, since it is a cooperative company with prevalent mutuality by law, one could be integrated pathology in terms of achieving the mutualistic aim, with consequent activation of the remedies provided by the civil code’.
3) CAI SpA, the extraordinary powers of the minority shareholder BF SpA
The investment agreement subject of examination, as underlined by Professor Zoppini, predicted that ‘in no case, even following the adjustment of the shareholdings, can BF’s shareholding exceed 49,9%‘.
The shareholders’ agreement on the governance of Consorzi Agrari d’Italia (CAI) SpA, alias Federconsorzi 2, however, reserves extraordinary powers to Bonifiche Ferraresi SpA both in the Assembly and in the Board of Directors.
3.1) BF, superpowers in the assembly
The resolutions of the Assembly of the members of CAI SpA concerning the so-called ‘Relevant Meeting Matters’, nevertheless, ‘may be adopted exclusively with the favorable vote of the Category B Shares’ attributed to BF alone.
‘Among the Relevant Assembly Matters include, among other things:
- mergers and splits
- capital increases
- convertible bonds
- modifications to the corporate object
- amendments to the statutory clauses relating to the deliberative quorums of the Assembly, to the Relevant Assembly Matters, to the composition of the Board of Directors, to the deliberative quorums of the Board of Directors and to the Relevant Board Matters
- amendments to the statutory clauses relating to the powers of the CEO and the General Manager
- approval of the budget, business plan and their modifications
- allocation of the operating result and distribution of dividends
- transfer of all or most of the company’s assets through a single operation or several linked operations
- early dissolution of Newco [CAI SpA, ed.]’.
3.2) BF, superpowers in the Board of Directors
CAI SpA must be administered by a Board of Directors composed of an odd number of Directors, between 7 and 15, of which:
– half (if applicable rounded up to the nearest whole number), of which one with the role of President, designated by the Agricultural Consortia (category A shareholders) and
– the other half (if applicable rounded to the nearest whole number), of which one with the functions of Chief Executive Officer, designated by BF SpA (Category B Shareholder).
Extraordinary powers of the minority shareholder BF SpA express themselves to the Board of Directors in the following terms:
– relevant board matters. ‘The resolutions of the Board of Directors relating to the so-called “Relevant Board Matters may be adopted exclusively with the favorable vote of the majority of the directors appointed upon designation’ by BF
– casting vote. In the event of an equal vote in any resolution of the Board of Directors, the decisive vote of the CEO, appointed by the Board of Directors from among the directors designated by BF, will prevail.
4) CAI SpA, what governance?
The lawyer Andrea Zoppini, full professor of civil law at the University of Roma Tre, in the opinion pro-truth under consideration:
– acknowledges the formal compliance with the requirements for participation of agricultural consortia in joint-stock companies (see paragraph 2 above), and yet
– note ‘the concrete unfolding of the balance of power between the Parties as regulated by the BF Shareholders’ Agreement (and, in particular, the veto power reserved to BF in Shareholders’ Meeting Matters Relevant and in Relevant Board Matters)’
– suggests ‘to strip the same [Shareholders’] Agreement of all those clauses that have the concrete effect of attributing to the BF shareholder a power of hetero-management of Newco [CAI SpA] or, in any case, of substantially weakening the requirement of the majority of exercisable votes in the ordinary assembly held by the Consortia, a requirement which – although only implicitly – is evidently centered and built on the notion of control‘
– recalls the concept of ‘substantial control‘ expressed in jurisprudence as well as by CONSOB, which ‘unequivocally links the assessment to the dynamics of the assembly’, For ‘also evaluate the opportunity to intervene on the BF Shareholders’ Agreement to possibly eliminate not only the provisions that give BF the power of veto at the meeting, but also those that give the directors representing the BF shareholder the power to paralyze the adoption of certain resolutions within the management body‘. (11)
4.1) Profiles of illegitimacy and possible consequences
‘The possible introduction (or permanence) of provisions of this nature could lead one to believe that, despite the formal permanence of ownership by the Consortia of the majority of the votes exercisable in the assembly, the decision-making axis at managerial level – and therefore control (…) – is in fact transferred to the BF member.
The same provisions would therefore end up frustrating and even defeating the mutualistic purpose that the Consortia must pursue (…) and could consequently integrate the conditions to give rise to:
a) initiatives of reporting to the judicial authority by the cooperator members (of many members who hold one tenth of the share capital or one tenth of the total number of members), pursuant to articles. 2545-quinquiesdecies and 2409 cod. civil for serious irregularities in management to the detriment of the Company;
b) any findings of irregularities by the Ministry of the Economic Development (‘MISE’ [now MIMIT, ed.] or ‘Supervisory Authority’) following a cooperative review or extraordinary inspection aimed at ascertaining the mutualistic nature of the Consortia, the participation of the members in the mutualistic exchange with the Company and the absence of profit-making purposes, pursuant to the combined provisions of the articles. 2545 quaterdecies cod. civil and 4 and 8 of Legislative Decree 220/02);
c) dissolution by act of the Supervisory Authority pursuant to art. 2454 septidecies cod. civil and the art. 12 of Legislative Decree 220/02, where the MISE should ascertain that the Consortia do not pursue the mutualistic purpose, or are not in a position to achieve the purposes for which they were established’. (12)
5) AAA Supervisory Authority wanted
Professor Andrea Zoppini – former undersecretary in the government led by Mario Monti and legal advisor to the Presidency of the Council of Ministers – also reported ‘specific precedents in which the Supervisory Authority, in the context of extraordinary inspections conducted at consortia, paid particular attention (…) to the pursuit of the mutualistic objectives of the consortium indirectly, through participation in joint-stock companies, concretely verifying that the ‘profit-making entity was effectively an instrument for the realization of mutualistic objectives (…)‘.
The supervisory authority moreover, is today represented by the Ministry of Business and Made in Italy (MIMIT) which has in fact already intervened in matters concerning the Federconsorzi 2 operation. Not to monitor the substantial control of BF SpA, the mutuality and the capital (7) burned to the Agricultural Consortia, but rather to rage against Terrepadane, the only one of the aforementioned consortia to have repelled the siege of the magic circle of Coldiretti. And the Emilia-Romagna TAR censored the acts, underlining the ‘misuse of power’ and the ‘deviant and contradictory drift of the Ministry’s discretion‘. (5)
6) Provisional conclusions
The ‘Pyramid of Gesmundo’ is confirmed to be poorly built on sand, from an economic point of view – as has already been observed in the cases of AgriCorporate Finance, CAI Real Estate, Agri Centro Nord/Sud (13) – and from a legal point of view, as the opinion in question he confirms.
The names of the protagonists, once again, recur. (13) However, a determined intervention is still awaited, for the protection of Italian farmers, so that the authorities responsible for supervising the events referred to here are forced to fulfill their duties.
#VanghePulite
Dario Dongo
Programme: Prof. Attorney Andrea Zoppini. Opinion pro-truth 8 May 2020
Footnotes
(1) Dario Dongo. CAI SpA, Federconsorzi 2. Federico Vecchioni’s Big Binge and Coldiretti’s magic circle. GIFT (Great Italian Food Trade). 16.2.21
(2) Dario Dongo. Federconsorzi 2 aka CAI SpA, a bit of clarity. GIFT (Great Italian Food Trade). 15.3.21
(3) See paragraph ‘Terrepadane, resistant farmers’, in the previous article by Dario Dongo. Federconsorzi 2, AgriRevi, AIPO (Unaprol). Gold business for Coldiretti’s magic circle. GIFT (Great Italian Food Trade). 15.3.21
(4) Dario Dongo. Terrepadane repels the assault of Coldiretti’s magic circle. #CleanSpades. GIFT (Great Italian Food Trade).
(5) Dario Dongo. Terrepadane, TAR Emilia-Romagna censures the Ministry of Enterprise. GIFT (Great Italian Food Trade).
(6) CAI was established as an LLC, please note, for the specific purpose of being able to entrust the estimate of the properties conferred by the Agricultural Consortiums to private appraisals commissioned by itself. And only subsequently was it transformed into a joint stock company, in order to avoid the evaluation of the assets by experts appointed by the Court (as in fact required for joint stock companies).
(7) Dario Dongo. Federconsorzi 2 and CAI Real Estate, the real estate treasures of the Agricultural Consortiums. GIFT (Great Italian Food Trade).
(8) Dario Dongo. Federconsorzi 2, CAI Real Estate Srl. Millionaire tax evasion or fraud? #CleanSpades. GIFT (Great Italian Food Trade).
(9) Compliance with this rule in CAI SpA remains doubtful, given the extraordinary powers granted to the minority shareholder BF SpA. See the paragraphs ‘Governance and asymmetries’, ‘Illegitimate matters reported’, in the previous article by Dario Dongo. Agricultural Consortiums of Italy SpA, Federconsorzi 2? The poison dossier. GIFT (Great Italian Food Trade).
(10) Thus Court of Rome 1.4.19 in Foro it., 2019-I, p. 2559; Trib. Rome, 12.6.19/10.10.19 in Foro it., 2020-I, p. 367
(11) See the pro-veritate opinion in the Annex, points 31,32,33. With reference to CONSOB Communication 13.9.17, on the TIM case (prot. 0106341)
(12) Opinion pro-truth in the Annex, point 34
(13) Dario Dongo. AgriCorpoFiasco, Federconsortia 2, Agriconfidi. The collapse of the ‘Pyramid of Gesmundo’. GIFT (Great Italian Food Trade).
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
