Related-Party Transactions and the Intricacies of Ex Post Judicial Review: The Parmalat/Lactalis Case

There is no better chance to test the working of a regulation on related party transactions than in the context of a sale of pricey wholly-owned assets by the controlling shareholder to its own publicly-traded subsidiary company. Two decisions of the Parma District Court on a controversial asset sale involving a well-known Italian listed company and its French parent company were the first to apply the 2010 Italian regulation on related party transactions to a high-profile intra-group transaction. The court was asked to scrutinize whether the parent company had unduly appropriated value of the subsidiary to the detriment of the minority shareholders of the latter by having the subsidiary acquire some corporate entities wholly owned by the parent for a higher price than their market value. While the court decisions effectively highlight the importance of complying with all of the procedural safeguards set forth in the regulation as they are instrumental to ensuring fair dealing between the listed company and its related parties, a few doubts remain as to how judicially assess the fair price of an intra-group corporate control transaction when said procedural protections have been breached.