The Regulation of LBOs under English and Italian Company Laws

Abstract

This paper carries out a comparative analysis of the regulatory framework for leveraged buy-out operations (LBO) under the English Company Act and the Italian Civil Code. The 2003 Act has made and the 2006 Company Law Reform will make significant amendments to Italian and English company laws governing LBOs, respectively. On the one hand, the 2003 Act has codified the principle that LBOs are not prohibited per se by the Civil Code provision governing the giving of financial assistance. On the other hand, the 2006 Company Law Reform is expected to introduce a different regime for financial assistance depending on whether public companies are involved or not with the transaction. Transactions between public companies and private-to-public companies transactions will be still subjected to an outright ban on financial assistance, while the provision of financial assistance in connection with transaction between private companies will be liberalized. First, the article gives a short account of the quite strict regime for LBOs under the original text of the Civil Code and the 1985 Company Act. Then, it focuses on the novelties of the regulation of LBOs that have been recently introduced into the Italian legal system or will be shortly introduced into the English legal system. It may be interesting to compare the approaches taken by the English and Italian lawmakers for the regulation of LBOs and to evaluate whether there exist any similarities.