WTI Magazine #77    2016 March 18
Author : Italian Notariat      Translation by:

The Guide entitled "Living and Doing Business in Italy" was created by the Italian Notariat to meet the needs of Italy's new economic scenarios and to inform foreign citizens about operations that in Italy by law require the intervention of a notary, who is a public official of the Italian Republic. To learn more, download the guide from www.notariato.it This is part 3 of 3

STARTING A BUSINESS IN ITALY
In Italy, especially in recent years, it has become much easier and faster to start a business. This is made possible thanks to the simple, fast, consistent and effective procedures that can be completed by a notary acting as a "one-stop-shop", providing all the checks dictated by law for the establishment of companies and then forwarding all necessary documentation to the Registrar of Companies online.

Italy has recently made starting a business easier and quicker, both by reducing the minimum capital requirement and by streamlining the registration procedures. A corporation, which until 2000 required a time estimated at about 150 days from its setting up in the presence of a notary until its effective operation, can now be operational on the day of the deed if it is urgent or, in normal cases, within 3-4 days. In addition, the overall system provides a high level of security as a result of the notary's prior check on legality and the consequent reliability of the data, all being managed using efficient high-tech infrastructure.

In Italy a business can be conducted as a sole proprietorship or, if it is larger, as a company. Both forms are governed by the Italian Civil Code.

The Individual Entrepreneur
Sole proprietorship is the simplest and least costly legal form for starting a commercial or agricultural business. The sole proprietorship is suitable for those who wish to pursue agricultural or commercial activities of modest dimensions and a relatively low turnover.

The individual entrepreneur personally assumes the business risk with the possibility of bankruptcy but also has the freedom to make any management or administrative decisions for the business with complete autonomy, making the most of his business skills.

The entrepreneur is free to make simple money transfers from the company for his personal needs. The entrepreneur is someone who carries out a non-occasional economic activity using means of production (capital, labour), either his own or someone else's, as necessary.

Shareholder equity consists of all assets held by the entrepreneur for carrying on the activity and is called a company ["azienda"]. The company, once started up, can be sold by the entrepreneur who no longer intends to carry on the business and wants to monetise its value.

In terms of liability, the entrepreneur is required to cover the debts of the company with the entirety of his personal assets.

The individual entrepreneur cannot have "partners", but may make use of employees. If the employees are family members of the entrepreneur we talk, instead, about a family business and this is subject to beneficial rules.

Starting up a sole proprietorship is simple and requires the completion of limited formalities. It is sufficient to obtain a VAT number and register the company with the Chamber of Commerce in whose jurisdiction it has its headquarters. The carrying on of business activities also means obtaining the licences or administrative authorisations required, depending on the type of activity.

The starting up of the company does not require a minimum capital. The capital the entrepreneur needs in order to carry on the business is paid into a bank account specifically dedicated to the business of the company.

A different option may be the purchase of an already existing company. The object of the acquisition may be, for example, a company or a branch of a company involving a set of assets (moveable and immoveable property, equipment, trademarks, patents, etc.) that is functionally intended for the carrying on of business activities. By law, the purchase of a company may be stipulated only by a notary using a public deed or authenticated private deed.

Establishment of a Company
Italy offers a wide range of legal forms for the setting up of a business. It is therefore necessary, preferably with the help of a notary, to identify the most suitable type of company organisation; this also involves the objectives to be pursued, the capital to be committed, the level of legal responsibility any form entails, the various tax implications and, finally, the complexity of accounting and compliance requirements. Partnerships and corporations are treated differently.

Corporations in General
Corporations consist of organisations of people and resources for the joint operation of productive activities, with full economic independence. This means that the company's obligations are to be met by the company's assets alone. Corporations have legal personality; that is, they are entities capable of assuming the rights and obligations arising from the economic activity carried out and enjoy perfect patrimonial autonomy, i.e. their assets are totally independent from those of the shareholders, and creditors have a claim only on the corporation's assets.

There are:
• the joint stock company (società per azioni or S.p.A)
• the publicly traded partnership (società in accomandita per azioni or S.a.p.a)
• the private company limited by shares (società a responsabilità limitata or S.r.l.)
• the simplified private limited company (società a responsabilità limitata semplificata or S.r.l.s.)

La società a responsabilità limitata (S.r.l.) or Proprietary Limited Company
The Srl is certainly the company type most widely used in Italy. The main reason is the combination of high organisational flexibility and limited liability. Although in the past it was used for small companies, it is now also used for companies of considerable size, since it offers greater organisational flexibility and may also take on a "personalised" character.

The shareholders are not personally liable for the company's debts, even if they have acted in the name and on behalf of the company.

To make the most of the flexibility that characterises an "s.r.l." and so allow the shareholders to mould the company for the achievement of their own specific objectives, it is fundamental to prepare the correct memorandum and articles of association, with the constant help of the notary.

In a limited liability company the articles of association must be drawn up by a notary who lodges them with the Registrar of Companies: only following only following registration with the competent Company Registry can the limited liability company be said to have actually come into existence.

Extreme flexibility also marks the rules on corporate governance: an "s.r.l." may have a sole director, a board of directors, or even forms of joint administration (where the directors must act, in fact, jointly) or separate administration (where any director can operate on his own) or mixed forms of administration where certain actions and/or categories of actions must be undertaken jointly while the rest may be done separately (along the lines of a partnership).

A very useful tool is that of so-called special rights whereby individual shareholders may be assigned special rights in the administration of the company and the distribution of profits. The minimum share capital of an "s.r.l." is Euro 1.

In an "s.r.l." with share capital equal to or greater than Euro 10,000, at the signing of the articles of association at least 25% of the consideration must be paid in cash (the rest of the capital can be paid up later) as well as the full amount of contributions in kind.

When the amount of capital is, however, set at less than €10,000, but not less than one euro, contributions may be in cash only and must be fully paid upon subscription. In the event that the company is formed with only one partner the full amount of the share capital must be paid up.

The simplified limited liability company (S.r.l.s.) has capital of less than EUR 10,000 and the content of the memorandum is fixed by law: this form does not, therefore, allow for any flexibility in corporate governance.

Joint-Stock Company (Società per azioni or S.p.A.)
The joint-stock company (S.p.A. or Società per Azioni) is certainly the prototype of limited liability companies and is the main trading company model most suitable for large investments.

The two key features are the limited liability of all shareholders and the division of the capital into shares.
The corporation is necessarily subject to the supervision of the Board of Auditors: this has the task of controlling the management of the company and ensuring compliance with the law and the articles of association.

The S.p.A. is set up by public deed before a notary, who records the deed and registers the company in the Companies Register for the area (the one in which the head office is located).

The capital is divided into shares whose value may be as low as one euro each ("face value"). The shares are freely transferable units. For its constitution the company requires a minimum capital of €50,000, of which at least 25% of the share capital (equivalent to €12,500) must be paid into the hands of the directors and that must be documented in the articles of association. In the event that the company is created with only one partner, the full amount of the share capital must be paid in.

Limited partnership company (Società in accomandita per azioni, or S.a.p.a.)
The società in accomandita per azioni (S.a.p.a) is a company in which two different groups of shareholders coexist: limited partners (soci accomandanti), excluded from directorships and liable only to the extent of their contribution, and general partners (soci accomandatari), directors by right, who are personally and fully liable.

As in the joint-stock company, participation in equity is represented by shares, and, as in the limited partnership, management authority is vested in directors having unlimited liability, even if subsidiarily, for the company's debts.

Partnerships
Partnerships do not have legal personality: the partners are liable for the obligations taken on by the partnership; so the partners pay the partnership's debts (except for a few exceptions regulated by law).

There are the:
• Non-Commercial General Partnership (Società semplice or S.s.)
A società semplice may be used only for the exercise of a non-commercial economic activity and, therefore, mainly farming. The articles of association must be in writing. There is no minimum amount of capital and the partners are fully liable for the debts of the partnership, unless otherwise agreed. This type of partnership is not subject to bankruptcy. The management and representation of the partnership are generally vested in each partner separately from the others, unless otherwise agreed upon by the partners.

• Commercial General Partnership (Società in nome collettivo or S.n.c.);
The articles of association of this general partnership must be drawn up by public deed or notarised private deed and must be lodged with the Registrar of Companies. The company name (business name) must contain the name of at least one of the partners and an indication that it is an S.n.c. There is no minimum capital. The partners are fully and severally liable for the partnership's debts and there can be no agreement to the contrary. In any case, a creditor of the partnership cannot demand payment of a debt of the partnership directly of a partner, but must first attach the partnership's assets. The general partnership is subject to bankruptcy which also involves the bankruptcy of all partners. Management and representation are generally vested in each member separately from the others. Different arrangements are however allowed and management may be limited to only some of the partners.

• Limited Partnership (Società in accomandita semplice or S.a.s.).
The limited partnership is characterised by the presence of two categories of partners:
- general partners (accomandatari), who are solely responsible for the administration and management of the partnership. They have unlimited joint and several liability for the partnership's debts;
- limited partners (accomandanti), who are not directors and who are responsible for the partnership's debts only to the extent of their investment, except for certain exceptions regulated by law.

The partnership (business) name must contain the name of at least one general partner and an indication that it is an S.a.s. If a limited partner agrees that his name be included in the partnership name he becomes, along with the general partners, jointly and severally responsible without limit for the partnership's obligations.

Limited partners cannot carry out administrative acts, nor deal or transact business on behalf of the partnership, except by virtue of a special power of attorney for each business matter. The limited partner who contravenes this prohibition assumes unlimited joint and several liability towards third parties for all the partnership's obligations and may be excluded from the partnership.