Small shareholders as consumers in Italy
(By Associazione Consumatori Piemonte )

CONSUMERS AND SHAREHOLDERS

CONTENTS; 1. Savers-Shareholders as consumers. A need to distinguish the saver’s role as shareholder and as company member. 2. Consumers’ Associations and Shareholders’ Associations. 3. Legitimating of Consumers’ Associations and defence of diffused shareholding. The forbidding of investment encouraging operations.

1) Savers-Shareholders as consumers. A need to distinguish the saver’s role as shareholder and as company member.

During the last couple of years, recent financial scandals involving such Multinationals as Cirio and Parmalat resulted in public opinion, as well as Cabinet and Parliament focusing on the matter of saving’s and savers’ defence.
Presently, there are in Italy two kinds of associations dealing with savers protection – Consumers’ Associations, the most outstanding of which are those recognized as representative nationwide by the Act # 281/98; and some small savers’ associations, often tightly linked to legal offices offering assistance and consulting for savers.
A preliminary point to the analysis of the relationship between consumers’ and shareholders’ associations is verifying whether and how a single saver can be deemed a consumer.
Economically speaking, seeing shareholder and consumer as equivalent roles seems to be against the principle whereby investing and consuming are opposite options of resource using, as saving and investment are usually the part of income not intended to consuming. However, a mere economical distinction between the two roles doesn’t allow to single out a precise notion o consumer as resulting in EU and Italy’s regulations. These define consumer as the weaker party in contracting, rather than in choices regarding economic resources.
In the Italian law, several definitions of consumer can be found in different acts actuating EU Directives about consumers’ protection. As we can’t deepen this point here, we just can quote the definition of consumer as “the one who acts either for his/her interests or for his/her family’s – that is, not within a professional activity, but for private purposes.
The most significant definition (significant insofar as it covers a general notion), finds itself in Article 2 of the Act # (July 30, 1998), regarding consumers’ and users’ rights. Here, they are defined as “natural persons purchasing or using goods or services for purposes not related to their possible professional or entrepreneurial activity. We can wonder if such a definition includes savers and, particularly, shareholders.
Yet, Italian law doesn’t provide a definition of saver. Instead, Financial regulation (58/98), uses only the word >investor<, without requiring that this be an natural person and act outside of his/her professional sphere.
Therefore, protection laid in favour of investors apply to all of them – that is, to all those purchasing financial instruments. In some cases, such as in investment encouraging regulated by articles 94 ff. and Financial Regulation, law allows to give up publishing of information papers and communicating to Consob for offers of financial instruments to institutional investors (or financial intermediaries, such as banks, commodities managing companies and Sicav.
Undoubtedly, a distinction between consumers and savers has no legal ground. Non professional saver is included in the notion of consumer – this is a consumer of specific products (financial instruments), and a user of specific services (investing services). The irrelevance of such a distinction arose from the regulation for abusive contract clauses – particularly from §6 of art. 1469bis. This lays an exception to abusive clauses rules for contracts regarding commodities and financial instruments, thus showing how a non professional contracting party purchasing shares can be deemed a consumer when the other law requirements exist.
The definition of consumer seems to be not an obstacle to recognising savers as consumers. Its typical elements are a contract for purchasing goods and goals outside of a professional sphere, and a contracting natural person.
An individual who wants to buy a share is consumer both when he signs the purchasing agreement (* goods), and when he acts through a bank-run or SIM-run intermediation service. As he/she doesn’t frequently purchase and sell shares, he/she is not become a frequent speculator, so he/she will not become an entrepreneur and will thus remain a saver – hence, a consumer.
Beyond this doubt, it is yet to be explained whether a saver is a consumer only when he/she signs a purchasing agreement, or also before the company issuing the shares he/she owns.
Because of the need of a contract (or at least a pre-contract) for anyone to become a consumer, we need to explain whether a purchasing contract is needed, or the company agreement is relevant by itself. As no serious doubt exists as to the former, it seems harder to find an answer as to the latter.
A company agreement, being an associating contract, looks unfit to implement the definition of consumer given by art. 2 of Act #281/98 – this does not involve either purchasing goods or using a service. Providing goods for an economic activity in order to share its profits (definition by Italian law of a Company agreement – art. 2247, Civil Code) does not match the structure of consumers’ contracts. A saver/shareholder, as a company member, does not consume anything at all – he/she provides goods as described above.
Moreover, point 10 of the Introduction of EU Directive # 93/13 regarding abusive contract clauses openly excludes Company agreements from the target of this directive. .
Along with this, another reason can be a ground for this solution. It has been correctly maintained that an employee is not a consumer . Even if an employee is a weaker party in a contract and needs a special protection, it has been remarked that such a protection is committed by law to other and specific regulations.
Similarly, a saver/shareholder, as a part of a company minority, enjoys a special protection (both in national and EU law) outside of the one granted to contract parties .

Thus the saver/investor’s situation can be split in two moments. As a purchaser of shares, he/she is a consumer. As a shareholder, his/her position is under the provision of the company agreement, and this makes him/her a minority member.
Because of this, consumers’ associations aren’t legitimated to inhibitory actions to defend the position of shareholders within the company. They may not file responsibility actions against managers, supervisors or general-directors by art. 129 Financial regulation (58/98), or motions against company deliberations, or apply for an urgent inhibiting order for mergers or spin-offs deemed against shareholders’ interests

2) Consumers’ associations and shareholders’ associations

Two different kinds of associations are intended by Italian law to the protections of the savers’ diffused interests – consumers associations (Act # 281/98) and shareholders associations (Act # 58/98).
Art. 141 of the Financial Regulation introduced into the Italian system shareholders associations, which are allowed to collect voting mandates for the assemblies of Companies whose shares are dealt in the Stock Market. Such a collecting doesn’t undergo limits by art. 2372 Civil Code, regulating the same point in general terms. These associations can collect mandates from their members and vote even diversely in the assembly, provided they match the instruction given by each member.
Three requirements must be fulfilled to detain such powers – a) they must have been founded by an authenticated draft; b) They mustn’t carry out any entrepreneurial activity, unless these are directly bound to reach the association’s goal; c) they must have at least 50 natural persons as members, each of which must not own shares for more of 0.1% of total voting shares.
Act # 281/98 regulates powers and requirements of Consumers’ Associations representative nationwide. Law qualifies them as such when they have been founded and operating no less than 3 years before, with a democratic internal regulation and no fewer members than 0.05 % of the Italian population and present in no less than 5 Italian regions

con un numero di iscritti non inferiore agli abitanti di ciascuna regione.

Such associations are by law representative of general interests and are legitimated to file suits for: inhibiting conducts going against consumers’ interests; adopting measures to clear harmful effects of these conducts; having such orders printed on one or more newspapers.

3. Legitimating of Consumers’ Associations and defence of diffused shareholding. The forbidding of investment encouraging operations.

Being now clear when a saver/shareholder can be seen as a consumer, and having described the power of the associations, it is yet to be explained if and how consumers’ associations can protect single and general interests of shareholders, and can file suits for conducts being against their interest, e.g. an illegal investment encouraging.
In the Act regarding Financial Intermediation, consumers are never referred to. Yet it doesn’t mean that their protection is outside of the Act’s goals. Indeed, many factors make clear that protecting consumers lies beneath rules regarding both financial markets and share issuers. The Parliamentary Act committing to the Cabinet to file the Act mentioned above lays a reformation of markets according to guidelines improving “protection of saving and minority members” (art. 21/4, Act # 52/96). Still, art. 5 of the Financial Regulation lists, as goal of supervising, transparency, fair conducts, good managing, and investors’ protection.
It has been purposed to see shareholders’ associations as equivalent to consumers’ associations, rather than seeing how the latter can protect shareholders.
It has been maintained that associations legitimated to the protection of general interests by Act # 281/98 can’t represent savers’ interests, because this Act (art. 1/2) does not include the users of financial services in consumers and users. .
But this point doesn’t seem to be able to deny to the associations the protection of shareholders (or would-be shareholders). Art. 1/2 does not give a definition of consumer – it lists consumers’ and users’ fundamental rights instead. It is not probably possible to maintain that the users of financial services (i.e. those who buy shares through and only through a financial intermediary) are not consumers. Moreover, some rights listed there can well include shareholders’ rights. Such concepts as “safeness”, “quality of products and services”, “appropriated information”, “fair advertising”, “fairness, transparency and equality in contracting” (art. 1/2 – b, c, e) do seem to apply also to what takes place in a financial investment – safe investing, information mandatory for issuing companies, fair advertising.
Fairness, not that different from good faith (art. 1175 Civil Code), equality, not that different from equal treatment (art. 92 Financial Regulation), as well as transparency as a key market element do not show any gap between consumers’ rights and savers’ rights.
Moreover, the information right by art. 1 – c Act # 281/98 plays a key role as to shareholders. Price of shares and available information are tightly linked to one another, so that “price is the flag embodying existing market information” . The highest efficiency is when market can evaluate every information available in it. . A saver purchases a share upon available information, especially upon those he/she must be given by the issuing company.
Given the potential dangers of Stock Market operations, art. 94 of the Financial Regulation forces those promoting an investment to publish an information paper containing all information needed to “reach a correct opinion about economic and financial situation, and the evolving lines of the Issuer, as well as about financial products and the rights arising from them”
Carrying out investment encouraging operations without such a prospect, or with an illegal, partial or misleading one can implement conducts against consumers interest by art. 3 Act # 281/98. Consumers’ associations representative nationwide will be allowed to apply for an inhibition, as every requirement for this seems to exist – saver buying a share is a consumer; the interest to enjoy proper information lies within consumers’ basic rights; issuing an illegal prospect violates these interest; CONSOB control, even careful and penetrating, can’t be seen as the only saving protecting way; inhibitory action, as a preventive, general and comprehensive remedy can be filed against non strictly-contractual conducts, as is publishing of prospect that can violate savers/consumers interests.