PROCEDURE FOR PERFORMING TRANSACTIONS WITH RELATED PARTIES

Transcription

1 PROCEDURE FOR PERFORMING TRANSACTIONS WITH RELATED PARTIES Approved by the Board of Directors on 18 December

2 This document (the Procedure ) presents the procedural rules that apply to transactions with parties related to Telecom Italia S.p.A. (hereinafter, Telecom Italia or the Company ) performed directly by the Company or through its subsidiaries, pursuant to the Regulation adopted by the CONSOB in its resolution no /2010 and subsequent amendments (hereinafter, the CONSOB Regulation ). The substance of the disclosure (object, content, methods and timing) remains wholly governed by the Consob Regulation. Section I Definitions and Taxonomy Definitions 1. Where not otherwise specified, the definitions as per the CONSOB Regulation and the Corporate Governance Principles of the Company shall apply. 2. Transaction (or, in the plural, Transactions ) is taken to mean any transfer of resources, services or obligations between related parties, regardless of whether for valuable consideration. 3. Party and parties related to Telecom Italia are understood to be the subjects defined as such by the CONSOB Regulation. Aside from their definition as related parties pursuant to accounting principles, the Procedure also applies to the participants of shareholders agreements pursuant to art. 122 of Consolidated Law on Finance regulating the candidacy for the position of Board Member of the Company, in those cases where the majority of the Board members appointed comes from the slate thus presented. 4. "Inter-group transactions" are understood to be transactions with subsidiary companies, including those subject to joint control, as well as transactions with associated companies, provided that in the subsidiary or associated companies that are parties to the transaction there are no interests of other parties related to Telecom Italia. Interests arising from the mere sharing of one or more executives with strategic responsibilities between the company and the subsidiaries or associated companies are not considered to be significant interests. 5. The owner of the transaction is, alternatively: 2

3 - the Telecom Italia manager in charge of carrying out the transaction as within his/her sphere of competence or the co-ordinator of the various structures involved in performing the transaction performed by the Company; - the Telecom Italia manager in charge of the relative Department/Management of the subsidiary performing the transaction; - with regard to the transactions performed by a subsidiary company referring directly to the top Management of the parent company Telecom Italia, its Chief Executive Officer. 6. "Regular transactions" are understood to be transactions carried out in the course of regular business, generating costs and revenues, and related financial activities. In determining whether a transaction falls within the ordinary course of business or associated financial activities, the following elements may be taken into account: - the purpose of the transaction; - the recurrence of the type of transaction in the context of the business of the company performing it; - the size of the transaction; - the contractual terms and conditions, given that contract clauses that differ from standard business usage and practice can be a significant indicator of nonordinariness; - the nature of the counterpart and the consistency of its characteristics with the type of transaction performed; - the time of approval and completion of the transaction. 7. Market or standard equivalent terms" are taken to mean terms similar to those usually charged to unrelated parties for transactions of a corresponding nature, extent and risk, or based on regulated rates or at fixed prices or those charged to persons with which the issuer is obligated by law to contract at a certain price. a. the conditions established by independent authorities and in any case non-modifiable (public and market-list offers to which, for the present purposes, the internal lists based on documented and verifiable benchmark procedures are equated); b. the conditions defined as a result of an adequately documented and verifiable competitive procedure, concluded by acquisition of a number of irrevocable offers, including from non related parties. 8. The Managerial Committee is composed of the Group Compliance Officer (who coordinates it), the General Counsel and the Chief Financial Officer, joined each time by the 3

4 top ranking Telecom Italia manager of the relative hierarchy competent in such regard, inasmuch as - owner of the transaction performed directly by Telecom Italia, or - in charge of examining or approving the transaction performed by a subsidiary. 9. Independent board members are understood to be the members of the Board of Directors of Telecom Italia having the requisites of independence provided for by the Self- Regulatory Code of Borsa Italiana S.p.A Those subjects who are counterparties of the transaction or parties related to the counterparties of the transaction are called related parties. 11. The body within the board required to express preventive opinions on transactions, as provided for by the CONSOB Regulation, is called the Directors Committee. Identification of the Directors Committee 12. Opinions on material transactions are expressed a. by the Control and Risk Committee when the transaction is of minor relevance, b. collectively, by the Independent Directors when the transaction is of major relevance, in any case always without the participation of the board members related to the transaction in question. 13. In the present Procedure, Directors Committee refers alternatively to the Control and Risk Committee and the committee of all the independent Directors. Chairman of the Directors Committee refers to the Chairman of the Control and Risk Committee, unless he or she is a related party to the specific transactions, in which case the chairing of the committee is assigned to the most long-serving independent director (or, subordinately, the oldest independent director). 14. The formal evaluations and decisions of the Directors Committee are minuted and documented in the minutes book of the Control and Risk Committee. 15. It is understood that, as regards transactions which the Company s Corporate Governance Principles attribute to the jurisdiction of the Nomination and Remuneration Committee, this acts as a Directors Committee according to its own operating regulations, without the support of the Managerial Committee and in any case without the intervention of any nonindependent members where the transactions are defined as of major relevance. 4

5 Taxonomy 16. The Procedure distinguishes between non-material and material transactions, in turn divided into transactions of major and minor relevance on the basis of the value indexes (understood as the ratio between the countervalue of the transaction and the net consolidated equity or, if greater, the Company's stock market capitalisation), assets and liabilities defined by the CONSOB Regulation, which the Procedure adopts in full. 17. The following are considered material: a. any transactions which are not classified as non-material pursuant to the following point, and in any case b. transactions subject by law, company bylaws or the Corporate Governance Principles of the Company to approval by the Board of Directors of Telecom Italia. 18. The following are considered non-material (and therefore excluded from application of the CONSOB Regulation): a. any transactions of a value of 2 million euro or less; b. regular transactions concluded at conditions equivalent to market or standard conditions: i. established by independent authorities and in any case non-modifiable (public and market-list offers to which, for the present purposes, the internal price lists based on documented and verifiable benchmark procedures are equated) - without value limits; ii. defined as a result of an adequately documented and verifiable competitive procedure, within the limits of point 7 without value limits; iii. at arm s length up to a value of 10 million euro or less; c. inter-group transactions, without value limits; d. resolutions of the shareholders meeting on the matter of remuneration, as per articles 2389, first and third subsections and 2402 of the Italian civil code; e. resolutions regarding the remuneration of directors and key managers, which satisfy the requisites of the CONSOB Regulation; f. remuneration plans based on financial instruments approved by the shareholders meeting pursuant to art. 114-bis of Consolidated Law on Finance and the relative executive transactions; g. any further transactions which the CONSOB Regulation excludes from its sphere of application. 5

6 19. The classification of transactions and the definition of the respective decision-making process are performed with the help of a dedicated software application for handling transactions with related parties, available for consultation by the Telecom Italia manager or by the subsidiary s chief responsible for the transaction as soon as the essential features of the same have been defined (subject, terms, conditions) and in any case before it is carried out. The suggestions resulting from the software are notified to the offices of the Group Compliance Officer wherever they require intervention of the Management Committee. Consultation of the software is not required for inter-group transactions or in any case transactions having a value of 100,000 euro or less. After the completion of the transaction, having previously performed all the activities required according to the Procedure, the manager who is owner of the transaction enters - without delay - the confirmation of such transaction in the dedicated software application. 20. If considered appropriate - the Board of Directors may classify as material any transaction performed by Telecom Italia or by its subsidiaries; - the Control and Risk Committee may classify a transaction submitted for its assessment as being of major material relevance; - the Managerial Committee may devolve single transactions for assessment by the Control and Risk Committee. 21. As regards transactions not susceptible to valuation, the Managerial Committee is called on to decide on whether such should be devolved to the Directors Committee, promptly informing the Chairman of the Directors Committee and Chairman of the Board of Directors of its decision. The Directors Committee is entitled to transfer/devolve assessment of the transaction to itself. Section II Rules of procedure Conduct required of the management 22. Before engaging in a transaction, in due time and as soon as the essential elements of any document that is binding upon Telecom Italia or another subsidiary Company are known, the respective Manager will check whether the counterpart is an entity included in the list of related parties and in this case will submit the transaction to the requirements of this Procedure. 6

7 23. The transactions are considered jointly in terms of the commitment assumed by the Company. Therefore, for the purpose of calculating the countervalue, reference must be made to the whole transaction considered, for its entire duration, even if it exceeds one year, or, in the case of multiple connected transactions, which are required for the achievement of the same purpose or result, reference must be made to the total countervalue of all the connected transactions. Competencies in the oversight of transactions 24. The Directors Committee, following a prior investigation and assessment in favour of continuing with the audit carried out by the Managerial Committee, expresses its opinion regarding the material transactions of Telecom Italia, and in any case transactions, other than inter-group transactions, that are subject to approval by the Board of Directors of Telecom Italia. 25. The Managerial Committee monitors as a precautionary measure - the material transactions carried out by the subsidiaries of Telecom Italia and - the non-material transactions carried out by Telecom Italian and/or its subsidiaries, within the limits specified herein. 26. Transactions other than those subject to assessment by the Directors Committee or to monitoring by the Managerial Committee are entrusted entirely to the management, which is responsible for the same. The management operates in observance of the Group s Code of Ethics and the set of rules, procedures and controls which Telecom Italia - on its own behalf and as parent company of the Telecom Italia Group- has set itself in the form of self-regulation, as well as any applicable legal disposition or regulation. 27. Aside from the applicable validation and verification procedure, the management responsible for the transactions keeps sufficient evidence of a documentary nature on the method of execution and on the conditions, including economic, of their performance so as to assure total transparency and verifiability, also in terms of comparability between these conditions and market or standard equivalent terms. The annexes to this Procedure detail the transactions by amount and purpose. Transactions to be monitored by the Management Committee 28. The Managerial Committee performs preliminary monitoring, by means of an appropriate investigation: 7

8 a. of transactions that are subject to the opinion of the Directors Committee, issuing a recommendation regarding the continuation of the authorisation process; b. the material transactions carried out by the subsidiaries of Telecom Italia; c. non-material transactions, regardless of whether carried out by Telecom Italia or by the subsidiaries of Telecom Italia, inter-group transactions, i. non-regular (i) not susceptible to valuation or (ii) of a value of over 100,000 euro and up to 2 million euro; ii. regular not concluded at conditions equivalent to market or standard conditions, (i) not susceptible to valuation or (ii) of a value of over 100,000 euro and up to 2 million euro; iii. regular concluded at conditions equivalent to market or standard condition, (i) not susceptible to valuation or (ii) of a value of over 5 million euro and up to10 million euro. 29. Each member of the Managerial Committee contributes his/her expertise to preparing the preliminary documents and resolutions, with separate responsibilities according to the area of expertise. Without prejudice to verification of the procedural correctness of the transaction, the competent management hierarchy remains responsible for assessing the Company s interest in concluding such transaction, as well as the benefits and substantial correctness of the relative conditions. The management in charge is required to exhibit documents and information to prove the comparability between the conditions of the proposed transaction and market or standard terms. Transactions subject to assessment by the Directors Committee 30. In the case of transactions subject to preliminary assessment by the Directors Committee, it is the responsibility of the General Counsel to inform the Committee without hesitation, so that it may promptly commence the relevant activities. 31. In performing its activities the Directors Committee is supported by means of a preliminary investigation by the Managerial Committee and may avail itself of the assistance, at the Company s expense, of independent experts of its choice. 32. It is the responsibility of the Managerial Committee (and within it, first and foremost of the top grade manager competent in such matter for each individual transaction) to ensure the accuracy and completeness of the information on the transactions subject to assessment by the Directors Committee. With regard to the activities to be carried out jointly, normally the information is supplied to the Committee by means of documentation made available at the same time as the meeting is convened and in any case with the advance 8

9 notice allowed by circumstances. The Chairman of the Board of Directors is responsible for monitoring the adequacy and timeliness of flows of information to the Directors Committee. 33. The Directors Committee normally acts through its Chairman or other member designated by the Committee itself ("the Rapporteur ). Such person deals with preparing the preliminary documents with a view to the collective expression of an opinion on the relevant transaction, availing of the support of the Managerial Committee and/or of the consultant appointed as required, and in any case in such a manner as to safeguard the independence of the Directors Committee s opinion. 34. In any case, as regards transactions of major relevance the Chairman of the Directors Committee or Rapporteur a. is involved in the phases of negotiation and investigation through a complete and prompt flow of information ensured directly by the manager owner of the transaction, in documentary or oral form; b. is entitled to request information or to formulate comments to the Company s delegated bodies and to the subjects appointed to conduct the negotiations or preparation of the preliminary documents. 35. The opinions of the Directors Committee (duly noted in the minutes) contain adequate grounds as regards the Company s interest in concluding the transaction as well as the benefits and substantial correctness of the relative conditions. 36. The procedure described above also applies in the case of transactions of major or minor relevance pertaining to the sphere of competence of the shareholders meeting. In such event the Directors Committee intervenes in the preparation phase of the preliminary documents and in the formulation of the proposal to subject to the shareholders, expressing at the full meeting of the Board of Directors a motivated opinion on the Company s interest in concluding the transaction as well as the benefits and substantial correctness of the conditions contained in the proposal. Transactions subject to the approval of the Board of Directors 37. The Board of Directors has sole competence for approving the conclusion - of transactions of major relevance (by Telecom Italia or its subsidiaries, when subjected for its approval pursuant to the Corporate Governance Principles of the Company). 9

10 38. The Chairman of the Board of Directors agrees with the Chairman of the Directors Committee on when to put the matter on the agenda and on the documentation to be made available in preparation for a full meeting of the Board of Directors, normally at the same time as the meeting is convened and in any case with the advance notice allowed by circumstances. 39. The negative opinion of the Directors Committee shall be deemed binding and irrefutable. Any opinion unfavourable to the conclusion of a transaction is brought to the attention of the full Board for information, along with a report on the relevant motivations. 40. The Board of Directors may adopt framework-resolutions relative to a series of sufficiently defined and homogeneous transactions and with predetermined categories of related parties, on the basis of the favourable opinion of the Directors Committee and for a period of not more than one year. Depending on the estimated maximum amount of the transactions to be performed, the procedural rules for transactions of major or minor relevance described above apply to the framework-resolutions adopted. Reporting 41. The Directors Committee validates the contents of the information notice to be published in the case of transactions of major relevance. 42. The Board of Directors, the Directors Committee and the Board of Statutory Auditors receive a report from the Managerial Committee at the first useful meeting - on the performance of material transactions. The Managerial Committee in particular confirms their realisation at the terms already known to the Directors Committee, or specifies the variations made by the management to ensure coherence with the opinion expressed by the Directors Committee; - on the individual transactions concluded through implementation of the frameworkresolutions of the Board of Directors. 43. The Directors Committee reports on the activities performed to the full meeting of the Board of Directors and Board of Auditors at the first useful meeting and, in any case, at least once every three months, ensuring the promptness needed to comply with the transparency requirements of the Regulation. 44. On a quarterly basis, the Compliance Department - regardless of the verification and validation process followed - will make random checks over the consistency of the conditions and terms of such transaction with market or standard equivalent terms, reporting back to the Directors Committee. 10

11 Section III Final Provisions Revision of the Procedure 45. The Board of Directors will evaluate on a yearly basis the adequacy of the Procedure, considering in particular any changes made to the ownership structure and the effectiveness of the Procedure itself in practical application. 46. The responsibility for expressing a favourable opinion of every amendment to the Procedure is attributed to the Control and Risk Committee. Deployment of the Procedure 47. The Procedure shall be construed as an instruction from Telecom Italia to all its subsidiaries ex art. 114, sub-section 2, Consolidated Law on Finance. 48. The deployment of the procedure is ensured by dedicated operating instructions approved by the Managerial Committee. 49. It is the responsibility of the Management Chiefs and Central Management of Telecom Italia and/or of the Chief Executive Officers of the subsidiaries of Telecom Italia to ensure that their respective collaborators, inasmuch as managers responsible for the transactions, observe and promptly apply the Procedure and relative operating instructions. In any case, compliance with the Procedure when performing transactions with related parties does not dispense from the need to observe the Group s Code of Ethics and set of rules, procedures and controls - even of an administrative or accounting nature - which the Company has set itself in the form of self-regulation, as well as any applicable legal disposition or regulation. Without prejudice either to the Procedure for observance of the Anatel resolutions no dated 31 October 2007 and no dated 7 July 2009, the Procedure for implementing the agreement dated 28 April 2010 with the Conselho Administrativo de Defesa Econômica, the Procedure for fulfilling the commitments made as from 13 October 2010 with the Comisión Nacional de Defensa de la Competencia and the Procedure for managing extraordinary transactions relating to the Group's investments in Brazil, adopted by the Company's Board of Directors on 6 February Internal control system and organisational model ex legislative decree no.231/

12 50. The Procedure is an essential component of the internal control system of the Telecom Italia Group. Without prejudice to application of the control schemes as per Model 231 with the connected information flows. 12

13 TRANSACTIONS CARRIED OUT BY TELECOM ITALIA - up to 100,000 Management with non-qualified subsidiaries or associated companies regardless of the amount Management from 100,001 to 2,000,000 regular transaction NOT at or transactions the value of Managerial Committee market or standard equivalent which cannot be assessed terms more than 2,000,000 Directors Committee (*) from 100,001 to 2,000,000 or transactions the value of Managerial Committee NON regular transaction which cannot be assessed more than 2,000,000 Directors Committee (*) from 100,001 to 5,000,000 Management from 5,000,001 to 10,000,000 regular transaction at market or transactions the value of or standard equivalent terms which cannot be assessed Managerial Committee regular transaction with no modifiable conditions or with conditions defined as a result of a competitive procedure more than 10,000,000 Directors Committee (*) regardless of the amount Management transactions which, pursuant to the law, the company bylaws or the corporate governance code of the Company, require approval by the Board of Directors of Telecom Italia Transaction regardless of the amount Directors Committee (*) (*) With managerial committee preliminary inquiry 13

14 TRANSACTIONS CARRIED OUT BY TELECOM ITALIA S SUBSIDIARIES - up to 100,000 subsidiaries management with other non-qualified subsidiary or associated regardless of the amount subsidiaries management company of Telecom Italia regular transaction NOT at market or standard equivalent terms over 100,000 or transactions the value of which cannot be assessed Telecom Italia s Managerial Committee NON regular transaction over 100,000 or transactions the value of which cannot be assessed Telecom Italia s Managerial Committee regular transaction at market or standard equivalent terms regular transaction with no modifiable conditions or with conditions defined as a result of a competitive procedure from 100,001 to 5,000,000 over 5,000,000 or transactions the value of which cannot be assessed regardless of the amount subsidiaries management or subsidiaries corporate bodies Telecom Italia s Managerial Committee subsidiaries management or subsidiaries corporate bodies transactions which, pursuant to the law, the company bylaws or the corporate governance code of the Company, require approval by the Board of Directors of Telecom Italia regardless of the amount Telecom Italia s Directors Committee Telecom Italia S.p.A. Registered office, Via Gaetano Negri Milan Head office and secondary branch in Corso d Italia, Rome Share capital euro 10,723,391, Tax-code /VAT and Company Register enrolment no Registration in the Index of Manufacturers of Electric and Electronic Equipment IT