CORPORATE | Determination of exchange ratio for mergers

On 14 November 2023, the Court of Milan issued its judgement in case No. 32636/2021 conforming to the recent Italian Supreme Court’s case law according to which the exchange ratio for a merger is not deemed to consist of an exact value mathematically calculated. On the contrary, the exchange ratio has to be determined by the directors – at their technical discretion – within a reasonable range of figures, capable of absorbing even minor deviations, which are not the product of unreasonable, unmotivated and arbitrary choices. Founding its reasoning on such principle, the Court rejected the claim of a shareholder alleging that the incorrect calculation of the exchange ratio of a merger by incorporation involving numerous companies resulted in a fewer number of its shares in the incorporating company. In particular, the evaluation had been performed using the discounted cash flow principle before the early termination of a contract by one of the involved companies.

Newsletter n. 96 – May 2024