Italy recently amended the law to expand its so-called “Golden Power”, the power to restrict or prohibit foreign investments in specific strategic sectors. Italian Law Decree No. 23, dating back to 2020, redefined the government’s powers in accordance with the FDI Guidelines issued by the EU Commission.
Pursuant to the broad principles outlined in the Guidelines, the Decree expands the screening powers of the Italian government to include new economic sectors. Of course, the government will have to act impartially, objectively, and publicly, invoking the protection of fundamental national interests when justifying its involvement.
Which sectors are directly concerned by the potential application of this law? The defence and national security sectors fall traditionally under stricter control of national governments, as well as the energy, transportation, communication sectors. The Decree reiterates the importance of these industries allowing the review of any transaction that may harm or constitute a material threat to Italy’s fundamental interests. These measures affect all companies, may they be private or public. As per the Decree, the same provisions will also momentarily apply to any critical infrastructure, whether physical or virtual, closely related to the aftermentioned sectors.
However, this is not the most significant change brought forth in the Decree. To contrast the economic disruption caused by the pandemic and provide respite to the affected Italian companies, the Italian Golden Power will be applied to new sectors. This “strengthened” Golden Power concerns the food, insurance, health, and finance sectors. It is worth noting that this extension is “provisional”, valid until the end of the emergency (31 December 2021), but will allow the government to step in to prevent predatory business tactics and stop foreign companies looking to buy Italian ones at a bargain.
Until the end of the year, companies will have to notify the government of any transaction involving the purchase of shares. Conditions differ between EU and non-EU entities: the latter’s acquisitions will be under the government’s scrutiny if they involve at least 10% of the corporate capital or otherwise entitle to at least 10% of the voting rights of the target (and any subsequent acquisition exceeding 15%, 20%, 25%, and 50% thresholds), in all sectors covered by the Decree and so long as the investment exceeds Euro 1 million.
If the transaction meets the conditions indicated in the Decree, the parties involved (either the seller or the buyer) will have to notify the government. The notification must include a description of the transaction and the business plan. It may also contain specific commitments to reassure that the operation will not jeopardize the Italian public interest.
Following the notification, the government will have 45 days to take action. If it deems the deal harmful, it may either impose specific conditions to mitigate its potential detrimental effects or deny the acquisition. The 45 days deadline may be extended only once to enable the gathering of further information: the parties must provide it within ten days. Once the procedure ends, the President of the Council of Ministers will issue a decree if exercising its powers or tacitly approve of the transaction.