Appointment of Auditors

At the Date of the Report the Board of Statutory Auditors is composed of three Statutory Auditors and two Alternate Auditors.

The Shareholders’ Meeting convened to approve the Financial Statements referred to 2012 resolved to amend the Company Bylaws by increasing the number of Alternate Auditors from two to three, in order to enable compliance with the applicable legislation governing the balance between genders when Auditors are appointed and when they are substituted during the mandate, and so as to structure suitable succession mechanisms able to guarantee compliance with the balance between genders.

This amendment will become applicable from the first renewal of the control body after Law No. 120 dated July 12, 2011 enters into force, and therefore, from the forthcoming renewal of the Board of Statutory Auditors. In order to permit the minority shareholders to elect one Statutory Auditor and one Alternate Auditor the appointment is envisaged to be based on the so-called “voting slate”, according to which one Statutory Auditor (who will be Chairman of the Board) and one Alternate Auditor are taken from the list that obtained the second highest number of votes (so-called minority slate). If several slates obtained the same number of votes, then a new ballot vote will be conducted among these slates by all the persons entitled to vote and in attendance at the Shareholders’ Meeting and the candidates on the slate that obtains a simple majority of the votes will be elected.

The remaining members of the Board are taken instead from the slate that obtained the highest number of votes (so-called majority slate).

Again with the aim of foreseeing suitable supplementary criteria which make it possible to ensure compliance with the balance between genders within the Board of Statutory Auditors, the Company Bylaws also envisage (i) that the slates which indicate a number of candidates equal to or greater than three, considering both sections, must include candidates of different gender in the section of the slate that refers to Statutory Auditors and in the section of the slate that refers to Alternate Auditors and (ii) an automatic progressive substitution mechanism if the application of the voting slate mechanism does not assure the required minimum number of Statutory Auditors, or the required Alternate Auditors referred to the gender less represented.

Shareholders which, alone or together with other shareholders, represent at least 1 percent of shares with voting rights in the ordinary Shareholders’ Meeting or the smaller percentage required by the regulatory discipline issued by Consob57 are entitled to present slates.

The slates are to be registered at the Company’s registered office at least 25 days prior to the date foreseen for the Shareholders’ Meeting convened to resolve this point, unless extended, as envisaged by the applicable legislation. The Reader is referred to the current legislation, with regard to the latter point58, however, it is important to remember that if only one slate is presented, or if multiple slates are presented by shareholders who are related, then the slates may be presented up to the third day after the deadline for the presentation of the slates (25 days prior to the Shareholders’ Meeting), and the thresholds required for their presentation are reduced by half.

Each shareholder may present or participate in the presentation of only one slate.

The following are to be annexed to the slates, also in accordance with the current legislation:

  • information concerning the identity of the shareholders who presented the slates, with details of the percentage shareholding owned and a certificate that attests the ownership of the foregoing shareholding;
  • a declaration by shareholders other than the shareholders who hold a controlling, or relative majority shareholding, alone or jointly, to attest that they are unrelated;
  • the description of the professional curriculum of the designated persons and the declarations in which the individual candidates accept the candidacy and attest under their own responsibility that there are no grounds for their ineligibility or incompatibility and that they satisfy the requirements for the office, as prescribed by law or by the Company Bylaws.

Slates presented which fail to comply with the foregoing requirements are deemed not to have been presented. Each candidate may appear on only one slate, under penalty of ineligibility.

The slates are organised in two sections: one section for candidates to the position of Statutory Auditor and the other for candidates to the position of Alternate Auditor.

The first candidate of each section must be identified from among the persons enrolled in the Register of Statutory Auditors who have worked as statutory auditors for a period of no less than three years.

Each person entitled to vote may vote for only one slate.

In the case of death, waiver or forfeiture of a Statutory Auditor, then the position shall be filled by the Alternate Auditor chosen from the same slate as the former auditor no longer in office. If the succession does not enable a Board of Statutory Auditors to be reconstituted in compliance with the applicable legislation, also in relation to the balance between genders, then the position shall be filled by the second Alternate Auditor drawn from the same slate. If it is subsequently necessary to substitute another Auditor drawn from the slate that obtained the highest number of votes, then in any event the position shall be filled by the additional Alternate Auditor drawn from the same slate. If the Chairman of the Board of Statutory Auditors is to be substituted, then the position as Chairman is assumed by the Auditor included in the same slate as the former Chairman, in accordance with the order of the slate concerned, in any event, without prejudice to satisfying the requirements for the office, as prescribed by law or by the Company Bylaws and complying with the balance between genders envisaged by the applicable pro tempore legal and/ or regulatory provisions; if it is not possible to proceed with the substitutions in accordance with above-mentioned criteria, a Shareholders’ Meeting will be convened to supplement the Board of Statutory Auditors and the Meeting shall resolve by relative majority vote.

When the Shareholders’ Meeting is required to appoint the Statutory Auditors and/or Alternate Auditors necessary to supplement the Board of Statutory Auditors then the Meeting shall proceed as follows: if auditors elected from the majority slate are to be substituted, the appointment shall be made by relative majority, without slate constraints, in any event, without prejudice to complying with the balance between genders envisaged by the applicable pro tempore legal and/or regulatory provisions; whereas, if auditors elected from the minority slate are to be substituted, the Shareholders’ Meeting shall substitute them by relative majority vote, selecting them, where possible, from among the candidates on the slate that included the Auditor to be substituted, and however, complying with the principle of the necessary representation of minorities for which the Company Bylaws assure the right to participate in the appointment of the Board of Statutory Auditors, in any event, without prejudice to complying with the balance between genders envisaged by the applicable pro tempore legal and/or regulatory provisions. The principle of necessary representation of minorities shall be deemed to be complied with in the event of appointing Statutory Auditors who were candidates in the minority slate, at the time, or on other slates differing from the slate that had obtained the highest number of votes when the Board of Statutory Auditors was duly appointed.

If only one slate has been presented, the Shareholders’ Meeting shall vote on that slate; if the slate obtains the relative majority then the candidates indicated in the respective section of the slate shall be appointed as the Statutory Auditors and Alternate Auditors; the person indicated in first place in the cited slate shall be appointed as the Chairman of the Board of Statutory Auditors.

The Shareholders’ Meeting shall resolve with the majorities required by law when appointing the Auditors, who, for whatever reason, were not appointed in accordance with the procedure described, in any event, without prejudice to complying with the balance between genders envisaged by the applicable pro tempore legal and/or regulatory provisions.

Outgoing Auditors may be re-elected.

The meetings of the Board of Statutory Auditors may be attended – if the Chairman or whoever acts on his/ her behalf establishes the need – by means of telecommunications media, which permit all the persons in attendance to participate in the discussion and obtain information on an equal basis.

57 Refer to Consob Resolution No. 18775 dated January 29, 2014 that established that the percentage shareholding required for shareholders to present the lists of candidates to be elected to the administrative and control bodies of Pirelli & C. corresponds to 1% of the share capital with voting rights in the ordinary Shareholders’ Meeting referred to the 2014 financial year.
58 Issuers’ Regulation: Article 144-quinquies and following articles. Moreover, CONSOB disseminated “Communication No. DEM/9017893 dated 26.02.2009” containing the recommendations regarding the “Appointment of members of administration and control bodies”.