Progress made on Italy's LBO legal framework

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September 2001 has seen important developments within the legal framework that regulates LBO activity in Italy. Following pressure from AIFI, the Italian venture capital association, the Italian government has approved the so-called â€œLegge Mironeâ€, concerning the use, by one company, of debt financing for the acquisition of a target company. The new regulation is aimed at clarifying two provisions of the Italian Civil Code, one regarding the purchase by a company of its own shares (article 2357), the second concerning the guarantees provided by the target company for the purchase of its own shares (article 2358). Although this constitutes an important positive step, AIFI explains that the law in question will have to be followed by further legal changes, which AIFI will be working on in coming months.

The progress made over LBO-related issues follows on from further improvements to regulations concerning Italian closed-end funds. The Bank of Italy has in fact welcomed proposals put forward by AIFI that aim to conform the Italian structure to the widely used LPs of Anglo-Saxon origin. The proposal more clearly defines the institutional investor category and gives greater freedom to General Partners and Limited Partners to negotiate a fundâ€™s terms and conditions. These provisions will clarify the distinction between retail and institutional investors and subject the two categories to very different regulations.