For the second time in the past decade, Italian dairy producer Parmalat is in the crosshairs of criminal and regulatory investigations, and now must face angry minority shareholders at the annual meeting at the end of this week. Furious minority shareholders, some of whom have already called for the removal of the entire board, surely must believe the proverb that “all is not butter that comes from a cow.”

In the wake of the Company’s massive accounting fraud of 2003, one could hardly blame shareholders for questioning the validity and benefits of sizable transactions. Currently at issue is Parmalat’s acquisition of the US operations of its controlling shareholder, French Lactalis Groupe, in the summer of 2012. Minority investors have complained that the transaction, for which Parmalat paid an initial price of $957 million, was a misappropriation of funds to the benefit of Lactalis. Parmalat is now facing investigations from Consob, the Italian securities market regulator, as well as from public prosecutors in Parma. While the Court of Parma rejected the request made by public prosecutors to remove the whole board of directors, it nevertheless adopted quite stringent measures. Indeed, the Court appointed a commissioner ad acta to review the terms of the transaction alongside a committee of independent experts appointed by Parmalat itself and PricewaterhouseCoopers. The price adjustment procedure ultimately resulted in the board’s request for a $144 million reduction with Lactalis agreeing to pay back $130 million. The lower amount was recently accepted by Parmalat’s board with the dissenting votes of two directors.

The discount obtained by Parmalat is, however, unlikely to put its legal troubles to an end. Reportedly, public prosecutors in Parma are unsatisfied with such a measure. Moreover, criminal and administrative procedures involving members of the board of directors and board of statutory auditors are still pending. At this week’s general meeting of shareholders, Parmalat’s board will certainly face angry minority investors questioning the benefits of the deal as well as the board’s conduct. Despite recent regulations introduced in Italy on related-party transactions, which should ensure the protection of minority shareholders, the press has been reporting alleged pressures exercised on financial advisors by some board members representing Lactilis’ interests to obtain a more favorable valuation to the seller. Furthermore, the independence of one director serving on the board committee in charge of assessing intra-company contracts has been called into question. The Court of Parma has, in fact, ordered the replacement of director Reboa on the committee on related-party transactions and inhibited director Sala and statutory auditor Cravero from attending board meetings.

Upon request made by the Court of Parma, shareholders are asked to vote on resolutions concerning the removal of Messrs. Sala and Cravero on June 14th. Regretfully, the board has decided not to formulate any specific proposals on the matter and has invited shareholders to vote on the resolutions that will be put forward at the meeting. The board’s decision represents an issue for investors voting by proxy who are left wondering what the actual content of the proposals is going to be. It also raises questions on the level of transparency of the board. The disclosure by the board of substantial information on the contested transaction only after requests made by the regulator in the last few weeks appears to be debatable. Moreover, the complete text of the Court of Parma’s decision, which would allow shareholders to better know the rationale behind the judges’ decision, has not been made available to shareholders. An additional report by the commissioner ad acta regarding any other facts “entailing serious irregularities of which he may become aware in the performance of his assignment” is expected by June 15th. Timely and full disclosure of this document remains essential.