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How the Council of State's December 2025 ruling and Law 4/2026 change the enforcement mechanics — and why your intercreditor agreement probably does not reflect either
The financing closed on time. The pledge over the target's shares was registered. Your legal opinion confirmed no golden power filing was needed at creation. That opinion was probably correct — but it left out the harder half of the problem. When the borrower defaults, the security agent cannot simply enforce the pledge and acquire control. A full golden power notification is required before enforcement. And if the collateral is a stake in an Italian bank or insurer, domestic review does not even begin until after the ECB and the European Commission have completed their own prudential and competition assessments. The credit agreement almost certainly does not mention any of this.
The Council of State (Consiglio di Stato), the senior administrative court for Italian executive action, answered this question directly in Section IV, Decision No. 9619, published 5 December 2025 (Cons. Stato, Sez. IV, 5 dicembre 2025, n. 9619). The court held that granting a pledge over shares in a company operating in a strategic sector does not itself require a golden power notification, provided two conditions are met: voting rights remain with the pledgor until actual default, and economic rights (dividends, liquidation proceeds) remain similarly kept separate / held separately. As long as those conditions hold, no change of control occurs at creation, and the golden power framework under Law Decree No. 21/2012 (D.L. 21/2012), converted into law and repeatedly extended as Italy's primary foreign direct investment screening regime, is not engaged.
That is the narrow good news. The broader picture is more demanding. The moment of enforcement — when the pledgee seeks to exercise voting rights, step in as a shareholder, or sell the shares to a third party — constitutes a notifiable transaction. A filing must be made. The Italian government then has sixty days to exercise its golden power, which may include imposing conditions, imposing obligations, or outright vetoing the transfer.
Unlike in most common-law jurisdictions, where a secured creditor who has properly perfected a share pledge can enforce it as a matter of contract and property law without regulatory pre-clearance, Italy treats enforcement as a fresh foreign investment event. An English lender accustomed to enforcing share security under a deed governed by English law will find that the Italian regulatory layer is not a formality: it is a substantive hurdle that can delay or prevent enforcement altogether.
Law No. 4 of 15 January 2026 (Legge n. 4/2026) amended the golden power framework in two ways that directly affect lenders. First, it added "economic and financial security" as a protected national interest alongside the existing categories of defence, energy, transport, communications and critical infrastructure. The practical effect is that a broader range of financial sector targets — not only systemically important banks — may now fall within the screening perimeter.
Second, and more consequentially for enforcement timelines, Law 4/2026 introduced a sequencing rule for transactions involving the banking and financial sector. Italian domestic golden power review now suspends pending completion of ECB prudential assessments and, where applicable, European Commission competition or merger review. Only after those EU-level processes conclude does the Italian sixty-day clock begin to run.
In practice, an ECB prudential assessment of a significant institution routinely takes six to twelve months. Add the Italian sixty-day review period, plus any extension the government may invoke, and a security agent expecting to complete an enforcement in a matter of weeks is looking at a timeline closer to nine to fifteen months. Most leveraged finance credit agreements include enforcement longstop dates, acceleration mechanics and margin ratchets calibrated to nothing like this.
Salus reipublicae suprema lex — the welfare of the state is the supreme law. It is the principle behind golden power regimes everywhere, but its procedural expression in Italy after Law 4/2026 creates a specific problem that intercreditor agreements in leveraged finance transactions have not yet caught up with.
The security agent in a syndicated deal owes duties to the lender group as a whole. It can enforce only when instructed by the requisite majority and only in accordance with the intercreditor agreement. That agreement typically lists the steps the security agent may take on enforcement: appointing a receiver, exercising voting rights, selling the shares. None of those steps can be taken over an Italian strategic-sector target until the golden power filing is made and the review period expires. The security agent is, in effect, in regulatory standstill.
As the American economist Albert O. Hirschman observed in his analysis of institutional response to decline, organisations under stress tend to default to their existing procedures rather than adapt — with often costly results. The same dynamic appears in cross-border security enforcement: documentation drafted for one regulatory environment is applied to another without adjustment, and the gap becomes visible only at the worst possible moment.
The practical consequences cascade. A lender who has enforced a pledge without completing the golden power process faces potential invalidity of the enforcement. The Italian government can seek to unwind a completed transfer. Fines of up to 150 per cent of the value of the transaction may be imposed under the governing decree. These are not theoretical outcomes: the Italian Presidency of the Council of Ministers has used golden power powers actively, with dozens of interventions recorded in each of the past three years.
Yes — and most existing agreements do not. There are four concrete things a lender group or security agent should address before the next event of default.
The pledge document itself should record that enforcement constitutes a notifiable transaction and that the security agent is authorised — indeed, obliged — to make the golden power filing on behalf of the lender group before taking any enforcement step that transfers voting control. Without this, there is a real question whether the security agent has authority to incur the cost and delay of a regulatory process not expressly contemplated by the facility agreement.
The intercreditor agreement should include a regulatory standstill mechanism: a defined period during which enforcement steps are suspended while a golden power (or equivalent) filing is pending, without that suspension constituting a breach by the security agent of its enforcement obligations. Some intercreditor agreements contain a general "regulatory approvals" carve-out, but this is typically drafted with merger control in mind, not golden power review, and it rarely extends the longstop date or adjusts default interest mechanics accordingly.
The credit agreement itself should address the sequencing rule for banking targets. If the collateral includes shares in an Italian bank or insurer, the enforcement timeline in the definition of "longstop date" and in any financial covenant cure period should be extended to reflect the nine-to-fifteen-month window described above. An approximation of twelve months as a buffer is reasonable for a significant ECB-supervised institution, though this is a planning figure and the actual timeline depends on the specific transaction.
Finally, the facility agreement's representations should include a warranty that the pledgor's shares in any strategic-sector target do not carry structural features — such as special voting rights, tag-along or drag-along entitlements, or anti-dilution ratchets — that could convert a non-notifiable pledge into a notifiable one before default. The Council of State's ruling in Decision No. 9619/2025 rests precisely on the voting rights staying with the pledgor; documentation that erodes this condition at creation moves the entire structure from the permissible to the notifiable category.
Under the base rules of Law Decree No. 21/2012, the government has sixty days from a complete notification to exercise golden power rights. The Italian Presidency of the Council of Ministers may extend that period by a further fifteen days in complex cases.
For banking and financial sector transactions, Law 4/2026 suspends the Italian sixty-day clock until after ECB prudential review and any relevant EU merger or state aid assessment is finalised. The ECB's fit-and-proper and prudential processes for qualifying holdings in significant institutions — those directly supervised under the Single Supervisory Mechanism — typically take between six and twelve months from submission of a complete application, though the ECB has issued guidance emphasising its target of completing assessments within the statutory maximum period. Commission merger proceedings at Phase I run forty-five working days; Phase II proceedings extend to ninety working days, with possible extensions.
A realistic worst-case timeline for enforcement over shares in a significant Italian bank is therefore: ECB assessment (up to twelve months) plus Italian review (up to seventy-five days) plus any practical delay in filing — a total of thirteen to fifteen months from the enforcement trigger. For a non-bank strategic target outside the financial sector, the sixty-to-seventy-five-day Italian review window applies without the sequencing layer.
In files involving pledges over Italian strategic-sector stakes, the most common problem is not the absence of a golden power clause but its incomplete scope. The pledge agreement states that the pledgee will make any "required" regulatory filings before enforcement, but the facility agreement defines enforcement as a mechanical process triggered by an event of default and does not classify the filing as a condition precedent to enforcement action. The two provisions conflict at precisely the moment they need to align. We see this most frequently in transactions where the Italian target was acquired mid-deal and the pledge was added by way of amendment rather than reflected in original documentation — a drafting shortcut that saves time at signing and costs considerably more at default.
If our pledge is governed by English law, does Italian golden power apply on enforcement?
Yes. The governing law of the security document is irrelevant to Italian public law requirements. Golden power rules are mandatory provisions of Italian administrative law and apply to any transfer of control — including enforcement — over shares in an Italian strategic-sector company, regardless of where the pledge was documented or which courts have jurisdiction over the facility agreement.
Can we structure the pledge so enforcement never requires a filing?
No structure reliably eliminates the filing requirement on enforcement of voting control. The Council of State's Decision No. 9619/2025 permits a pledge at creation without a filing, but only because voting rights stay with the pledgor. Once enforcement transfers those rights — even temporarily, even to a nominee — a notifiable event arises. Some sponsors have explored depositary or trustee structures to defer the transfer of voting control, but these add complexity, cost and their own regulatory risk and should be assessed on the specific facts of each transaction.
What is the next concrete step we should take before the next drawdown?
Before the next drawdown over an Italian strategic-sector target, the security agent and counsel should map which pledged companies fall within the golden power perimeter under Law Decree No. 21/2012 as amended by Law 4/2026, confirm that the pledge documentation preserves voting rights with the pledgor until default, and review the intercreditor agreement to confirm it contains a regulatory standstill mechanism with a longstop date calibrated to the sequenced timeline. For banking collateral, a separate assessment of the ECB supervisory pathway and its duration should be prepared and shared with the lender group before the deal is signed.
HREFLANG BLOCK:
Editorial Team — Panato Law Firm Staff
