259 THE ROLE OF PREFERRED SHAREHOLDERS IN FUNDAMENTAL TRANSACTIONS Ferruccio Maria Sbarbaro Adjunct Professor of Comparative Corporate Law, Link Campus University of Rome; PhD in Comparative Law, University of Salerno, Italy Email : f.sbarbaro@unilink.it Andrea Sacco Ginevri Adjunct Professor of Corporate Law, Cattolica University of Rome, PhD in Law and Economics, University of Roma Tre. Italy. Email : andrea.saccoginevri@chiomenti.net ABSTRACT In public corporations, the claim of the preferred shareholders is typically limited to a fixed dividend and a fixed amount on liquidation, and this claim shall be satisfied before the common shareholders can receive anything. Their rights to a prior, but limited, dividend resemble the rights of creditors, who also must rely on their contractual rights and do not vote in the general shareholders’ meeting. However, according to Italian corporate law, the preferred shareholders have a veto power against fundamental transactions (such as, for example, certain mergers, demergers, charter amendments) that jeopardize their preferred rights. Therefore, notwithstanding their limited percentage of share capital, preferred shareholders (i) on the one hand have the power to prevent a corporation from transactions that may increase the common shareholders’ value, and (ii) on the other hand, are not subject to any redemption right neither by the common shareholders nor by the corporation itself. In light of the above, this paper argues that granting a redemption right ex lege to the common shareholders in case the preferred shareholders vote against certain fundamental transactions may be a tool for strengthening the best interest of the corporation because it allows at the same time (aa) directors and common shareholders (representing the latter the majority of the share capital) to achieve the corporate benefits arising from such fundamental transactions, and (bb) the dissenting preferred shareholders to withdraw from the corporation at a fair market value. Even though the different approaches may reflect the different structure of corporate law with regards to the contrast between a basic “entity view” and an advanced contractual “shareholder value” vision, in the above scenarios the provision of such “exit” remedy could be intended as an effective tool to simultaneously achieve the interests of both corporation as an entity and shareholders as individual contracting parties. Keywords: Italian corporate governance, fundamental transactions, preferred shareholders, redemption rights.