Keywords: Rights Issue; Share Issuance; Shareholders' Dilution; Enforced Subscription; Managers' Liability To Investors.
In publicly traded companies, highly dilutive rights issues create market anomalies throughout the whole offer period, especially with respect to rights' prices, which quote considerably below their fair value. These anomalies could cause severe losses to non-subscribing shareholders, inducing them to take part in the operation even if financial perspectives of the company would have suggested otherwise (= enforced subscription mechanism). In order to strike a proper balance between enabling companies to raise new capital while simultaneously protecting investors, company law provides an array of regulatory strategies; the aim of this paper is to analyze the function and the contents of managers' liability to investors (art. 2395 Italian Civil Code) as a constraint to managers' discretionary power in setting the economic and regulatory conditions of share issuances.