Article 30 Nov. 2023

Evaluation of Shares and Conventional Withdrawal of the Shareholder: A New Direction

Partner Paolo Cocchini, associates Federico Criscuoli and Carmine Buonanno wrote an article on the shareholder's right of withdrawal, under Italian law.

Read the full article below.


The shareholders’ right of withdrawal (i.e. “recesso”) is a very pragmatic issue in corporate law, especially as a mechanism to protect investors’ interests in the face of significant corporate changes or actions that might affect their position within the company.

Shareholders of companies incorporated under Italian law are necessarily granted the right to withdraw under certain specific circumstances (i.e. “recesso legale”); furthermore, Italian companies may provide in their articles of association (i.e.statuto”) additional circumstances that act as triggers, allowing shareholders to exercise withdrawal right, named “conventional” (i.e.recesso convenzionale”).

The next step following the exercise of the right of withdrawal is the evaluation of the participations involved, and the criteria used for such evaluation. Recent guidance from notary public associations has introduced greater flexibility on these criteria, as further detailed below.

Italian Legal Framework of withdrawal rights

The legal basis for the right of withdrawal can be found in the Italian Civil Code, in articles 2437 and 2437-bis for joint-stock companies (i.e.società per azioni”) and article 2473 for limited liability companies (i.e.società a responsabilità limitata”).

These articles, relating to recesso legale, detail the grounds that may trigger the right of withdrawal of shareholders, i.e. the occurrence of events that may substantially affect the shareholders’ position within the company or compromise the value of their investment such as, among others, the change of the company’s object or the elimination of one or more grounds for withdrawal.

In addition, both joint-stock companies that do not resort to capital market and limited liability companies can allow for recesso convenzionale, setting further triggers for withdrawal, either in their articles of association or in the articles of incorporation.

The main difference between recesso legale and recesso convenzionale being that while the former cannot be derogated (with the exceptions of the two grounds provided for by Article 2437, par. 2 of the Italian Civil Code), the latter can be modified and regulated by the shareholders as it expresses the private interest of the parties (see decisions of the Italian Civil Supreme Court, section I, no. 2979, dated 16/02/2016, and no. 5126, dated 06/04/2001).

Notary guidance on recesso convenzionale - conventional right of withdrawal

As underlined by the Notarial Board of Milan with the decision no. 74 dated 22 November 2005[1], joint-stock companies that do not resort to capital market and limited liability companies may provide for additional grounds for withdrawal, beside the ones set in the Italian Civil Code:

  • at the occurrence of specific events, which may be of any kind, e.g. often, the passing of resolutions by corporate bodies on specific matters or above a set threshold;
  • for a just cause (“giusta causa”), which is a concept developed mostly by courts’ decisions and often linked to a work relationship;
  • by will of the shareholder, to be exercised at any time, but in this case exclusively with a prior notice of 180 days[2].

It is worth noting that shareholders’ autonomy with regard to the regulation of conventional withdrawal covers other aspects of the right, including the identification of the beneficiaries (i.e. the possibility of granting the right of withdrawal only to specific shareholders in limited liability companies and of creating categories of shares granting such right in joint-stock companies), as well as the liquidation of the shares and the related evaluation.

Flexible evaluation of the shares according to the Notary Committee of Triveneto[3]

It is important to highlight that the evaluation of shares becomes a critical aspect when shareholders decide to exercise their right of withdrawal on conventional grounds.

While the Italian legal framework provides specific guidelines when the right of withdrawal is granted by law (see Article 2437-ter of the Italian Civil Code for joint-stock companies and Article 2473 for limited liability companies), when the shareholders exercise the right on conventional grounds the evaluation of the shares involved becomes a nuanced process, often involving negotiation and careful consideration of various factors.

In the absence of pre-set criteria for evaluation in conventional withdrawal cases, shareholders and the company typically engage in negotiations to determine a fair value of the shares. This negotiation process may involve financial experts, appraisers, or third-party valuation specialists to assess the company’s commercial and financial health, future developments, and other relevant factors.

In some cases, there may be shareholders agreements in place that dictate specific procedures and methodologies for share evaluation in withdrawal situations. These agreements can provide a structured framework for determining the fair value of shares and help avoid prolonged disputes.

In light of recent guidance, as per orientation no. H.H.15[4], the Notary Committee of Triveneto has reaffirmed the principle articulated in 2005 by the Notarial Board of Milan. This principle suggests that clauses granting conventional rights of withdrawal may establish a lower liquidation value than the one derived from applying the legal criteria outlined in the Italian Civil Code.

In such instances, the lower liquidation value essentially serves as the consideration for the general right of withdrawal under Article 1373, par. 3 of the Italian Civil Code. According to this provision, parties to a contract are free to agree on a withdrawal clause (favoring one or both parties) and, eventually, on the amount of money that the party endowed with such a right shall pay to the other either at the contract’s signing (“caparra penitenziale”) or upon withdrawal (“multa penitenziale”).

Fairness as legal limit

If, on the one hand, the new orientation of the Notary Committee of Triveneto clearly states the legitimacy of a lower liquidation value for conventional withdrawal, on the other hand the shareholders’ autonomy may not extend so far as to completely neutralize such liquidation value (e.g. acknowledging only the shares’ nominal value) nor reduce it without complying with criteria ensuring fairness.

This represents a new approach to the matter: the same abovementioned orientation of the Notarial Board of Milan placed no limits on the discretion of the parties in determining the value of the shares in the event of conventional withdrawal, deeming even an unfair liquidation value as legitimate in all the cases in which the law did not grant such right to the shareholders. In this case, the only effect would simply be to make it much less likely for such a right, which does not exist by law, to be exercised.

On the contrary, according to the Notary Committee of Triveneto, fairness shall represent the legal limit to the broad autonomy recognized by Italian law to the shareholders: this principle has been also established by the Court of Rome with the judgement no. 903 dated 15 January 2020, according to which the clause of the articles of association that sets a liquidation value for the shares equal to their nominal value is unlawful.

Indeed, the articles of association may certainly provide for different criteria, but such criteria shall always ensure an evaluation in line with the actual value of the company’s assets, eventually reduced by a fair amount which shall represent the consideration for the exercise of the right of withdrawal granted to the shareholders.


[2] Such term, which may not be reduced but can be increased by the parties, is set pursuant to Articles 2437, par. 3 and 2473, par. 2 of the Italian Civil Code.

[3] The Notary Committee of Triveneto is an influential body composed of all the notary boards of the northeastern Italian regions.


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