Italian Company Law: Limited Liability Company

in Giuricivile, 2019, 6 (ISSN 2532-201X)

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1.Introductory notes

1.1Historical Developments of the Relevant Regulations.

Italy has a legal system of Roman-Justinean derivation and statutes are expected to play a dominant role in ruling commercial issues. The most important instrument regulating commercial issues is the 1942 Civil Code, as amended in 1991 by the adoption of the Fourth and Seventh European Directives.

The key points are the following: Italian commercial regulation has its roots in the French Commercial Code of 1807, which was introduced into the Italian Kingdom during the period of Napoleon’s domination. These rules were basically maintained in the 1865 and 1882 Italian Codes (Italy as a unitary state came into existence in 1861).

Companies limited by shares were not sufficiently regulated until the enactment of the commercial code of 1882.

The freedom to incorporate anonymous companies liberated the promoters from the burden of the previous authorization of the State, but it was counterbalanced by the imposition of the board of statutory auditors. Such freedom was conquered by the commercial code of 1882, which was the first attempt to regulate companies limited by shares in a structured way.

In fact, in that code we find rules on the functioning of the shareholders’ meeting, on the duties and liabilities of the directors, on the minority shareholders and their protection, on the balance sheets, on liquidation and merger.

The Civil Code of 1942 represents, from one side, a turning point and a model, from another side the mark of continuity. It mergers, all within one code, the matters that in previous European models were split into two parts: Civil Code and Commercial Code.

On January 2003, Italy’s centre-right government approved a reform of Title V of the Civil Code which regulates stock companies and cooperatives. The reform came into force on 1 January 2004 and redefined the characteristics of cooperatives and of the two main types of company – Limited Liability Companies/Limited Partnership By Shares (Società a responsabilità limitata, Srl) and joint stock companies (Società per azioni, SpA).

2.The Types of Companies in the Italian Legal System.

2.1. General considerations.

The Company Law, for a long scholars also called Commercial Law, is governed by private law mainly by the Civil Code containing the set of legal rules and principles governing the organization of firms in the market.

Entrepreneur (imprenditore) is defined by Article 2082 of civil code as one who undertakes professionally an economic activity, organized to produce or to exchange goods or services.

The Italian Civil Code of 1942 (hereinafter also ICC) is the principal source of legislation on companies and partnership. Companies are regulated by Title V of Book V of the Civil Code. Civil Code opens with three articles which provide for general rules.

Pursuant to article 2247 a company is formed by an agreement (contratto di società) by which “two or more persons confer goods or services[1] for the mutual performance of an economic activity with the purpose of sharing the profits”.

Article 2248 establishes: “Common ownership established or maintained for the sole purpose of enjoying one or more things is regulated by the provisions of the seventh title of the third book”. The third book refers to the property and the seventh title to the common ownership; this one is not, therefore, regulated together with enterprises and companies (fifth book), but it is stressed its “property” element.

Pursuant to article 2249 (types of companies) the companies which have as their purpose a commercial activity must be formed according to one of the following types: General partnership, Limited Partnership, Joint Stock Companies, Limited Partnership by Shares and Limited Liability Companies.

The legal address of the company and the office of the register of enterprises with which the company is registered and the registration number shall be stated in the records and correspondence of companies which are subject to the duty of registration in the register of enterprises (article 2250 1° paragraph of the Civil Code).

Article 2250 paragraph 4 of the Civil Code relating to the disclosure obligations of single-member private limited liability companies requires each such company to disclose its status as a single-member private limited company in its acts and letterheads[2].

Generally speaking, the main practical difference between a company and a partnership is this, that the formation and existence of a partnership depends upon the mutual trust in, and personal relationship of, the members to each other, whereas the formation and existence of a company does not depend to any extent on this.

In Italian law the essential difference is that a company is regarded as being a separate entity from its members, while a partnership is not, although, as a matter of procedure, many things can be done in the name of the firm.

2.2 Partnerships.

Società semplice (the Informal/Simple Partnership).

The partnership which have as their purpose the exercise of a non-commercial activity are governed by the provisions on the simple company (articles 2251-2290 of the Italian Civil Code).

Società in nome collettivo (General Partnership, Articles 2291 to 2312).

It is comparable to the conventional partnership under English law in which all the members are liable without limitation for the company’s obligations.

Società in accomandita semplice (Limited Partnership, Articles 2313 to 2324).

The members who manage the business (accomandatari) are jointly liable with no limitation for the company’s obligations, whereas the non-managing members (accomandanti) are liable only within the subscribed share.

Società in nome collettivo and Società in accomandita semplice are classified as “associations of persons”, to underline the fact that the provisions that regulate them are based more on a personal relationship, founded on trust and cooperation among the partners, than on the share of ownership of the capital.

2.3 Companies.

The following types of company may be established.

Società a responsabilità limitata – S.r.l. – corresponding to an English private company, (articles 2462 to 2483), which we call a Limited Liability Company.

The general model of this company has now became a business association combining the characteristics of a Company Limited by Shares (limited liability of members) with those of a Partnership (flexibility of structure).

Società per azioni – S.p.a. – (Joint Stock Companies) similar to an English public company, which we call company limited by shares (articles 2325 to 2451)[3].

Società in accomandita per azioni, (Limited Partnership by Shares, articles 2452 to 2461 CC), in which the capital is represented by shares, the managing members (accomandatari) are jointly liable with no limitation and the non-managing members (accomandanti) are liable only within the limits of their own shares of the capital.

The above companies are classified as “capital companies”, because the capital invested by each member is more relevant than the quality of the other members.

While the associations of persons have no legal personality, the capital companies have a legal identity separate from that of each member, with the consequent limitation of liability and total separation of the personal assets of each member from the fate of those belonging to the company.

Legal personality generally means that the legal entity is different from its members: it has separate legal existence and it is distinct from its members. It follows that the legal entity’s assets are completely segregated from those of its members. The company’s creditors cannot seek satisfaction of their claims on the assets of the company’s members, as they can rely on the company’s assets only.

However, partnership‘s creditors cannot satisfy their claims on the individual partners’ assets before having first tried to satisfy them on the partnership’s assets: only in the event the partnership’s assets were not enough to pay the partnership’s creditors, would the partners be held personally liable for the non-fulfilled obligations.

The incorporation of a company which does not fit in one of the legal schemes described so far (società atipiche-atypica partnership) is not allowed under applicable law.

2.4. Innovative start up.

The Decree-Law 179/2012 on “Further urgent measures for Italy’s economic growth” converted into Law 221/2012, which can appropriately be called “Italy’s Startup Act”, has introduced into the Italian legal system a definition of a new innovative enterprise of high technological value, the “innovative startup”.

One can define an innovative startup any company with shared capital (i.e. limited companies, “società di capitali”), including cooperatives, whose capital shares – or equivalent – are neither listed on a regulated market nor on a multilateral negotiation system.

These enterprises must also comply, inter alia, with the following requirements: be newly incorporated or have been operational for less than 5 years (in any case, not before 18 December 2012); have their headquarters in Italy or in another EU country, but with at least a production site branch in Italy; have a yearly turnover lower than €5 million; do not distribute profits; have as exclusive or prevalent company object – as stated in the deeds of incorporation – the production, development and commercialisation of innovative goods or services of high technological value; are not the result of a merger, split-up or selling-off of a company or branch.

2.5. Cooperative companies.

Cooperative companies (governed by articles 2511 to 2545-octiesdecies ICC) are driven by a mutual benefit purpose, which consists of the supply, in favour of the company’s members, of goods, services, and working opportunities under more convenient conditions compared to those that the members would have obtained in the market.

Article 2519 ICC provides that the rules established for companies limited by shares apply to cooperatives, whenever there is no special regulation. However, under certain conditions set by Article 2519 second paragraph ICC the articles of associations may stipulate that the laws for limited liability companies should apply.

2.6 Professionals

Professional can organize themselves as companies according to Law 12 November 2011 N. 183.

  1. Limited liability company.

3.1 Introduction

The Limited Liability Company (the Italian Società a Responsabilità Limitata – S.r.l.) is the most commonly used corporate form in Italy, although the Joint Stock Company is the corporate form used by major public corporations listed on the Italian stock exchange and preferred by large private enterprises. It is equivalent to the German G.m.b.H. (Gesellschaft mit beschränkter Haftung).

The Limited Liability Company may be constituted for a given period or be established for an indefinite time.

3.2 Liability

In the Limited Liability Company only the company with its assets is liable for the corporate obligations (article 2462, paragraph 1 ICC). Article 2462, paragraph 2 ICC states that – in the event that there is a sole quota holder – he will not have an unlimited liability for the debts arising in such a period, provided that: a) the capital is fully paid up (article 2464 last paragraph ICC); b) the directors have filed in the Companies’ Register a declaration containing the identifying data of the sole quota holder (article 2470, paragraph 4 ICC).

3.3 Establishment

The Limited Liability Company may be established by one (incorporation made by unilateral act) or more founders (incorporation made by contract) (Article 2463, first paragraph ICC).

According to Article 2463, second paragraph ICC, the Company must be incorporated/established by public deed.

The “atto costitutivo” (deed of incorporation/articles of association) shall indicate:

1) the surname and name or corporate name, the date and place of birth or the State of incorporation, the domicile or the registered office, the citizenship of each quota holder;

2) the corporate name containing the reference to limited liability company, and the municipality of the registered office of the company and branches of the company, if any;

3) the activity which constitutes the company’s purpose;

4) the amount of quota capital, not lower than ten thousand euro, subscribed and the amount of quota capital paid-in;

5 ) the contribution of each quota holder and the value of receivables and assets contributed in kind;

6) the quota holding interest of each quota holder;

7) the rules governing the functioning of the company, indicating those relating to the management and powers to represent the company;

8) the persons entrusted with the management of the company and the person, if any, entrusted with the statutory accounting audit;

9) the aggregate amount, at least approximate, of expenditure for the incorporation chargeable company.

The provisions of Articles 2329 (requisites of formation), 2330 (deposit of articles of association), 2331 (effects of registration[4]), 2332 (nullity of company[5]) and 2341 (founding members) which concern joint stock companies apply to limited liability companies.

The amount of share capital can be lower than ten thousand Euro, par at least one Euro. In this case, contributions shall be cash and must be fully paid to the directors (paragraph added by law decree 28/6/2013 nr. 76, article 9, paragraph 15ter, converted in law with amendments by law 9/8/2013 nr. 99).

The amount to be deducted from net profits according to approved balance sheets, in order to create the statutory tied-up reserve (to be established according to Article 2430 “legal reserve”), must be at least par to one fifth of the net profits, as long as such a reserve, added to the share capital, is not par at least to ten thousand euro. This reserve only can be used for share capital raising and for possible losses’ overlay. It must be replenished according to this paragraph if for any reason diminished.

3.4 The “simplified” Limited Liability Company: Article 2463 bis ICC[6]

The simplified limited company may be incorporated by contract or unilateral act by natural persons[7].

The articles of association must be established by public deed according to the standard model set forth by the Ministry of Justice, together with the Ministry of Economical and Financial Affairs and with the Ministry of the Economic Development and shall indicate:

  1. the surname, name, date, place of birth, domicile, citizenship of each of the  quota holders;
  2. the corporate name containing the reference to simplified limited company, municipality of the registered office of the company, and branches of the company, if any;
  3. the amount of quota capital, equal to at least 1 euro and less than 10,000 euro in compliance with the article 2463, number 4), paragraph two, subscribed and entirely paid in within the date of incorporation. The quota capital must be paid in cash to the company board;
  4. the requirement s set forth under article 2463, second paragraph, numbers 3), 6), 7) and 8);
  5. place and date of subscription;
  6. the company’s directors[8]

Clauses contained in standard model articles are mandatory (i.e. cannot be changed)[9].

The corporate name as simplified limited liability company (società a responsabilità limitata semplificata – s.r.l.s.), the amount of subscribed and paid-in share capital, company’s registered office and reference to Trade Registry’s territorial office where company was registered shall be indicated in every company’s document, in company’s mail and letterhead and in company’s website[10].

Rules contained in Chapter VII, Title V, Book V, of Italian Civil Code entitled “Della società a responsabilità limitata”/“Of Limited Liability Company” are applicable, as far as they are compatible, to simplified s.r.l. as well, if not otherwise established by Article 2463bis ICC.

3.5. Contributions.

According to Article 2464 ICC: [1] The value of contributions cannot be lower in aggregate to the overall amount of the quota capital. [2] All items of the assets which have an economic evaluation may be contributed. [3] If the articles of association do not differently provide, the contribution must be made in cash. [4] At the time of execution of the articles of association an amount corresponding to at least the twenty-five per cent of the contributions in cash and to the entire quota premium – or, in case of incorporation by unilateral deed, the whole amount – must be paid-in to directors appointed in the articles of association[11]. Means of payment are to be mentioned in the deed[12]. The payment may be replaced by an insurance policy or a bank guarantee having at least the same amount with the characteristic set forth by decree of the Prime Minister; in such a case, the quota holder may at any time replace the policy or guarantee with the payment of the corresponding amount cash. [5] For the contributions in kind of assets and of receivables the provisions of articles 2254[13] and 2255[14] shall apply. The quotas corresponding to such contributions must be fully paid-in at the time of their subscription. [6] Contribution can be made by providing an insurance policy or a bank guarantee by means of which obligations of work or service in favour to the company undertaken by quota holders are guaranteed, up to their entire value. In such a case, if established by the articles of associations, the policy or the guarantee may be replaced by the quota holder with the down payment cash of the corresponding amount to the company. [7] If the plurality of quota holders ceases to exist, payments still due shall be made within ninety days.

3.6. Evaluation of goods and credits (receivables) granted.

Article 2465 ICC, first paragraph, establishes an obligation for those who give in kind or credits, to submit a sworn report. The report must be prepared by an expert or by an auditing firm entered in the register of auditors. The report must be attached to the articles of association and must contain: the description of the goods or credits granted; an indication of evaluation criteria used; the certification that their value is at least equal to that attributed to them for the purpose of determining the share capital and the share premium.

Pursuant to Article 2465 ICC, second paragraph, the report is required in the case of purchase from the company, at a price not less than the tenth of the capital, assets or receivables of the founding partners, quota holders and directors, in the two years after the registration of the company in the business register. In this case, the purchase must be approved by decision of the partners approved at the meeting, unless otherwise provided for in the articles of association, according to Article 2479 ICC.

The expert report and the shareholder approval is not required in the case of purchases of goods and credits to normal conditions in the ordinary transactions of the company.

3.7 Failure to execute contributions.

The Italian Civil Code (Article 2466) provides for the automatic notice to the defaulting member if the member does not perform the assignment within the prescribed period. The warning is to urge the member to execute the transfers within thirty days.

The directors, unnecessarily spent the term of thirty days, if they believe not successful the promotion of an action for the execution of contributions, can sell to the other members, in proportion to their participation, the defaulting partner’s quota. The sale is carried out at the risk of the defaulting partner to the value resulting from the last approved balance. In absence of bids for the purchase, the quota is sold at auction, if so provided by the articles of association.

If, for lack of buyers, the sale cannot take place, administrators exclude the member, holding back the sums already collected, and shall ensure the reduction of capital by that amount.

A defaulting member cannot participate in the decisions of the members.

The discipline of non-performance of duty is applied even in cases where, for whatever reason, have expired or become ineffective the insurance policy or the bank guarantee provided as per Article 2464 ICC. In that case, the member may replace the battery by running the assignment with the corresponding amount of money.

3.8 Quota holders’ loan.

Article 2467 of ICC sets forth that the reimbursement of the quota holders’ loans shall be made only after all other creditors of the company have been satisfied and, if such reimbursement is made during the year before the company is declared insolvent, the money reimbursed shall be returned to the company.

The second paragraph of Article 2467 ICC provides that any type of funds injected into the company, regardless of the form of such injection, shall be re-characterized as a quota holders’ loan, and therefore, subjected to the regime described above, when certain circumstances apply, such as (i) the disparity – also in consideration of the corporate purpose of the company – of the company’s indebtedness compared to its net worth or (ii) a financial situation where an equity contribution would have been reasonable.

3.9 Participation quotas.

According to Article 2468, first paragraph of the Italian Civil Code, in the limited liability company the participation quotas (quota holders’ quotas) of the members cannot be represented by shares nor be offered to the public as financial products[15]. The rights of quota holders are allocated in proportion to their respective participation[16].

Without prejudice with what is set forth in the third paragraph on of article 2468, company’s rights pertain to the quota holders proportionally to the quotas possessed by each quota holder. If the articles of association do not set forth otherwise, quota holders’ quotas are determined proportionally on the basis of the respective contributions (Article 2468, second paragraph ICC).

The articles of association remain at liberty to grant to certain quota holders, individually, special rights regarding the administration of the company or profits distribution (Article 2468, third paragraph).

Unless otherwise set forth by the articles of association and in any case without prejudice to what is set forth by the first paragraph of article 2473, the rights indicated by the paragraph three of Article 2468 may be modified only with unanimity of all quota holders (Article 2468, paragraph four).

In case of joint ownership of a quota, the rights of the joint owners must be exercised by a common representative appointed pursuant to the procedures set forth by articles 1105 (Administration) and 1106 (Regulation of co-ownership and appointment of an administrator) ICC as far as common ownership in general is concerned (Article 2468, fifth paragraph).

3.10 Transfer of quotas.

Quotas can be transferred without limitation by acts inter vivos and by succession by death unless otherwise provided in the articles of association (Article 2469, first paragraph ICC).

If the articles of association provides that participations cannot be transferred, or is subject to the consent of organs of the company, the members or third parties, no conditions or limits being placed on the discretion of such persons or bodies, or if the deed imposes limitations or conditions which impede the transmission of shares on death, Article 2469 (second paragraph) provides that the member or his heirs may withdraw from the company. In those cases the articles of association may set forth a deadline, not later than two years from the date of incorporation of the company or from the contribution of the quota, before which the withdrawal cannot be exercised.

3.11 Effectiveness of transfer of quotas.

A transfer of quotas is effective against the company from the date of its deposit before the competent Companies Register (Article 2470 paragraph 1 ICC).

The deed of the transfer, with authenticated signature, must be filed, within 30 days, by the notary public in the Business Register of the district where the registered office of the company is located.

In case of transfer for death, the registration is made at the request of the heir or of the legatee towards the exhibition of the documents requested for the registration in the quota holders’ book of the corresponding transfer made as for the Joint Stock Companies (Article 2470 paragraph 2 ICC).

In the event the quota is sold by means of subsequent contracts to more than one person, the first one making the registration in the Business Register in good faith is preferred to the others, even if the title has a later date (Article 2470 paragraph 3 ICC).

When the entire company quota belongs to only one quota holder or there is a change of the sole quota holder, the directors must file for the registration in the registry of enterprises a declaration containing the references of the surname and name or of the company name, of the date and of the place of birth or the State where the company has been constituted, of the domicile or the place of the registered office and the citizenship place of the sole quota holders (Article 2470 paragraph four ICC).

When the plurality of the quota holders is created or recreated, the directors must file the related declaration in the Company Register (Article 2470 paragraph 5 ICC).

3.12 Liability of the seller for the payments still due.

According to Article 2472 ICC in the event that the quota is sold, the seller is jointly and severally liable with the purchaser, for the payments still due, for three years after the registration in the Business Register. The payment cannot be asked to the seller unless the request made to the defaulting quota holder has been not satisfied.

3.13 The withdrawal and exclusion of the partner.

According to Article 2473 ICC (withdrawal of the quota holder), the articles of association establish when the quota holder can withdraw from the company and the related requirements.

The right to withdraw applies in any case to those quota holders who did not approve the change of the company purpose or of the company type, the merger or spin-off of the company, the revoke of the liquidation of the company, the transfer abroad of the registered office, the deletion of one or more causes permitting the withdrawal, and the implementation of transactions that imply a substantial change in the company purpose as stated by the articles of association or a substantial change of the rights granted to the quota holders in accordance with article 2468, fourth paragraph (Article 2473 first paragraph).

For a company constituted on a permanent basis the right to withdraw can be exercised by the quota holder at any time with a notice period of at least one hundred and eighty days; the articles of association can state a longer period that cannot exceed in any case one year (Article 2473 second paragraph).

Quota holders who withdraw from the company are entitled to obtain the reimbursement of their quota proportioned to the equity. The equity is determined by taking into account its market value at the time the resignation is communicated; in the event of disagreement the value is determined by the sworn appraisal of an expert appointed by the Court, who decides also on the expenses, upon request of the most diligent party (Article 2473 third paragraph).

The reimbursement of the quota for which the withdrawal right has been exercised must be made within one hundred and eighty days from the communication of the quota holder to the company. The reimbursement can be made also by acquiring the withdrawn quota by the other quota holders proportionally to their quotas or by any third party jointly identified by the quota holders. If the above does not occur, the reimbursement is made by using the available reserve, or in case of lack of reserve, by reducing corporate capital for the equivalent; in this last case article 2482 applies and if based on such article the reimbursement of the quota of the member who withdraws is not feasible, the company is put into liquidation (Article 2473 forth paragraph).

The withdrawal cannot be exercised, and if already exercised does not have effects, if the company revokes the resolution by which the quota holder is legitimated to withdraw or in the event of liquidation of the company is declared (Article 2473 fifth paragraph ICC).

The articles of association may also provide for specific hypotheses of quota holder exclusion (Article 2473 bis ICC). The exclusions must be motivated by just cause. In such a case of exclusion, the company should refer to the same provisions dictated for withdrawal. In particular, the company will comply with all the rules governing the reimbursement of the investment, except for the possibility of repayment through the reduction of capital.

3.14 Company management.

Article 2475 paragraph 1 of the Italian Civil Code establishes that, unless otherwise provided for in the company’s articles of association, the management of a limited liability company shall be entrusted to one or more of its members.

According to Article 2475, paragraph 3, when the administration of a company is entrusted to more than one person, they form the board of directors. The articles of association may provide that the directors shall act individually or jointly, in which case the special rules contained in Articles 2257 (several management) and 2258 (joint management) which are applicable to informal partnerships, apply to the decision making process.

According to Article 2475, paragraph 4 when a board of directors is established, the articles of association may provide that decisions shall be adopted by means of a written consultation or on the basis of a written consensus. The documents signed by the directors must clearly state the matters decided on and the consensus reached.

However, they cannot act individually in relation to the preparation of the balance sheet and proposals for merger or division, as well as the increase of capital (Article 2475, paragraph 5).

3.15 Company representation.

The directors in accordance with paragraph one of Article 2475 bis ICC, have the power of general representation of the company.

The limits to directors’ powers that are indicated in the articles of association or in the act of appointment, even if published, cannot be opposed by third parties unless it can be demonstrated that they have deliberately acted for the company’s damages Article 2475 bis second paragraph.

3.16 Conflict of interests.

The contracts entered into by the directors having the legal representation of the company in conflict of interest, on their own or on behalf of a third party, can be cancelled upon the company’s request, if the conflict was known or could be known by the third party (Article 2475-ter first paragraph ICC).

The decisions taken by the Board of Directors with the decisive vote of a director in conflict of interest with the company, if they cause economic damage, can be opposed within ninety days by the directors or, if existing, by the person indicated in article 2477. In any case, the rights acquired in good faith by a third party on the basis of an act performed executing the decisions are not prejudiced (Article 2475-ter second paragraph).

3.17 Liabilities of directors and quota holders rights.

Article 2476 of the Civil Code governs the liabilities of directors. Paragraph 1 provides for a derivative action against them by individual members when they have been guilty of grave faults.

The directors are jointly and severally liable towards the company for damages arising from their failure to comply with the duties imposed on them by the law and by the articles of association in relation to the management of the company. However, the liability is not extended to those who can show they are without fault and, being aware of the fact that the act was to be performed, have expressed their disagreement (Article 2476 first paragraph).

The Law allows members not involved in the administration, to carry out a control over the administration of the company. Paragraph 2 of Article 2476 allows to have news by the administrators on the conduct of social affairs and to consult, even by professionals of their trust, the company’s books and documents relating to the management (Article 2476 second paragraph).

According to paragraph 3 of Article 2476 ICC each quota holder can individually exercise the liability action against the directors. The member who proposed it may also request the competent Court, if there are serious irregularities in the management of the company, the adoption of a precautionary revocation order of the directors.

Furthermore, Article 2476 (fifth paragraph) provides that unless the articles of association stipulate otherwise, actions against the directors may be settled or renounced by the company if such a procedure is supported by the holders of two-thirds of the capital, and is not opposed by quota holders holding one-tenth of the capital.

The provisions set forth in the paragraphs above do not jeopardize the right of the quota holder or a third party who have been damaged by acts of gross negligence or misconduct carried out by the directors to obtain the compensation for damages (Article 2476 paragraph six).

Quota holders who intentionally have decided or authorised the carrying out of acts detrimental for the company, the quota holders and third parties, are jointly and severally liable with the directors (Article 2476 paragraph seven).

The approval of the balance sheet by the quota holders does not imply the waiver of director and of statutory auditors for liabilities related to the management of the company (Article 2476 eighth paragraph).

3.18 Board of Statutory Auditors and statutory audit of the accounts.

Pursuant to article 2477 1st paragraph of the Civil Code the articles of association may provide for determining the competences and powers and appointment of a Board of Statutory Auditors or of an auditor.

According to Article 2477, 3rd paragraph ICC, the appointment of the Board of Statutory Auditors or of an auditor is also required if the company: a) is responsible for preparing the consolidated financial statements; b) controls a company required to perform statutory audits; c) for two consecutive financial years it has exceeded two of the three limits indicated by the first section of Article 2435-bis (1 – total assets of the balance-sheet: 4,400,000 Euros; 2 – turnover from sales and services supply: 8,800000 Euros; 3 – average number of employees during the financial year: 50 units).

The obligation to appoint the Board of Statutory Auditors or an auditor referred to in the above paragraph c) of the third section of Article 2477 shall cease if for two consecutive financial years, these limits are not exceeded (Article 2477, paragraph four).

Pursuant to article 2477 sixth paragraph of the Civil Code the quota holders’ meeting approving the financial statements where the limits are exceeded indicated in the third sections must proceed, within thirty days, to the appointment of the Board of Statutory Auditors or of an auditor. If the quota holders’ meeting does not do so, the court will appoint one at the request of any interested subject.

3.19 Mandatory books of company.

According to Article 2478 of the Italian Civil Code, in addition to the books and other accounting records prescribed in article 2214 (inter alia the journal and inventory book, the accounting records required by the nature and size of the enterprise) the company shall keep: the book of quota holders decisions; the book of the resolutions of the directors; the books of the decisions of the supervisory bodies according to Article 2477 ICC.

The contracts of the company with the sole quota holder or the transactions in favour of the sole quota holder are effective vis-à-vis  the creditors of the company  if are present in the book of the resolutions of the directors or in a written deed having certified date preceding the date of the distraint (Article 2478 paragraph 3 ICC).

3.20 The financial statements and the distribution of profits.

According to Article 2478-bis ICC the financial statement must be drawn up following the typical dictated by the budget of the joint stock company. It must be drawn up in compliance with the principles on the financial statements of clarity and true and fair presentation. The directors should ensure to submit the financial statements to quota holders within the period specified by the articles of association and not exceeding one hundred and twenty days of the closure, except for the possibility of a longer term within the limitations and the conditions provided under the second paragraph of article 2364 ICC[17].

Within thirty days of the decision of the quota holders approval of the balance sheet, a copy of the approved balance has to be filed in the Business register (Article 2478 bis, paragraph 2 of the Civil Code.).

The quota holders decide, in that same seat, also on the distribution of profits (Article 2478 bis, paragraph 3 of the Civil Code).

The quota holders may decide to distribute only the profits actually achieved and resulting from the regularly approved financial statements (Article 2478 bis, paragraph 4 of the Civil Code).

The paragraph 5 of Article 2478 bis  states the impossibility of the distribution of profits in the presence of a loss of social capital, until the capital is nor reinstated or correspondingly reduced.

The profits distributed in violation of the above provisions are not recoverable where the quota holders have received them in good faith based on an approved financial statements in which there are the net profits.

3.21 Decisions of the members.

The provisions of Article 2479 of the Italian Civil Code display the influence of the concept of private autonomy according to which the members are free to make the rules they find appropriate.

Article 2479 first paragraph provides that members decide on matters reserved for their competence by the article of associations, and also on matters referred to them by one or more directors or members holding at least one third of the company capital.

Certain matters are exclusively within the competence of the members. By Article 2479, second paragraph, these include: 1) the approval of the financial statements and the distribution of dividends; 2) the appointment, if provided for in the articles of association, of the directors; 3) the appointment in the cases provided for under Article 2477 of the statutory auditors and of the president of the board of statutory auditors or of the person entrusted with the statutory accounting audit; 4) the amendment of the articles of association; 5) decisions to carry out activities which would involve substantial changes in the objects of the company set out in the articles of association or substantial changes in the rights of quota holders.

The articles of association may provide that the decisions of the quota holders shall be adopted on the basis of a written consultation or consents expressed in writing (Article 2479 paragraph three ICC).

Each quota holder is entitled to participate in decisions referred to in Article 2479 ICC and its vote is valid in proportion to its participation in the capital (Article 2479 paragraph five ICC)

Unless otherwise specified in the articles of association the members’ decision are taken with the favourable vote of a majority which represents at least half of the capital (Article 2479 paragraph six ICC).

3.22 Quota holders’ meeting

Pursuant to Article 2479-bis paragraph one of the civil code the articles of association determine the mode for convening the meeting of quota holders capable to ensure the ability to know the reception of the convocation. In the absence of specific regulations the summons signed by all directors shall be given by registered letter sent to members at least eight days before the meeting in the domicile shown in the commercial register.

Except otherwise provided in the article of association, the quota holders’ meeting will convene at the registered office and is validly held with a number of quota holders representing at least the half of the corporate capital and resolves with the absolute majority and, in the cases provided for number 4) and 5) of the second comma of article 2479, with the favourable vote of quota holders representing at least half of the corporate capital (Article 2479-bis paragraph three)

The quota holders’ meeting is chaired by the person indicated in the articles of association or, in his/her absence, by the person indicated by those present. The chairman of the meeting checks the validity of the constitution, ascertains the identity and the empowerment of those present, governs its execution and ascertains the results of the voting; the outcomes  of  such verification must be contained in the minutes (Article 2479-bis paragraph four).

In any event the resolution is intended as adopted when it is attended by the entire corporate capital and all the directors and the statutory auditors are present or informed of the meeting and nobody opposes the discussion of the topic (Article 2479-bis paragraph five).

3.23 Invalidity of members’ decisions.

The invalidity of members’ decisions is governed by Article 2479-ter of the Italian civil code.

The decisions of the quota holders which are not adopted in compliance with the law or with the article of association can be opposed by the quota holders who did not consent to them, by each director and by the board of statutory auditors within 90 days of their registration in the books of the quota holders’ decisions. The court, if it deems it opportune and a request is made by the company or by anyone who has proposed the act of opposition, can fix a term not higher than 180 days for the adoption of a new decision appropriate to eliminate the cause of invalidity (Article 2479-ter first paragraph).

According to Article 2479-ter second paragraph, where there is a possibility of their harming the company, decisions taken by the determining vote of a person having an interest of his own or on behalf of another party, which conflicts with that of the company, may be challenged in accordance with the rules set out in Article 2479-ter first paragraph.

Decisions having objects which are illegal or impossible and decisions taken in the absolute absence of information, may be challenged by an interested party within three years of being entered in the company’s register of decisions. Resolutions regarding changes of the company objects providing for impossible or illegal activities may be challenged without any time limits (Article 2479-ter third paragraph).

3.24 Amendments to articles of associations.

Article of associations amendments are resolved by the members’ meeting according to Article 2479-bis ICC (members’ meeting). The minutes are drawn up by an Notary.

3.25 Capital increase

Pursuant to Article 2481 ICC, articles of association may assign to the Directors the power to increase the corporate capital establishing limits and conditions of exercise. The decision to increase the capital cannot be adopted until capital contributions still due have not been paid in.

Quota holders have the right to subscribe newly issued stock (quota newly issued) in proportion to the quotas owned. If permitted by the article of association, newly-issued stock can be offered to third parties. However, in such a case the quota holders who dissent with such a decision have the right to withdraw from the company (Article 2481 bis, first paragraph of the civil code).

The resolution upon the capital increase establishes the quota premium, if any, and the modalities and terms within which the right of subscription may be exercised. Such terms cannot be less than thirty days from the date in which it is communicated to the quota holders that the capital increase may be subscribed. The resolution may also allow, regulating the modalities, that the portion of capital increase which is not subscribed by one or more quota holders is subscribed by other quota holders or by third parties (Article 2481 bis, second paragraph).

If the capital increase is not subscribed in full within the term established by the resolution, the corporate capital is increased by an amount equal to the actual subscriptions only in case the relevant resolution expressly established it (Article 2481 bis, third paragraph).

Except for the provision established by the second sentence of the fourth and sixth paragraphs of article 2464, the underwriters of the capital increase, while subscribing it, must pay to the company at least twenty five per cent of the portion of quota capital subscribed and, if provided, the entire quota premium (in Italian “sopraprezzo”). To the contributions in kind of assets or contributions in kind of receivables apply the provisions of the fifth paragraph of article 2464 (Article 2481 bis, fourth paragraph of the civil code),

If the capital increase is subscribed by the sole quota holder, the contribution is to be entirely paid at the time of subscription (Article 2481 bis, fifth paragraph of the civil code).

Within thirty days from the subscription the directors must enter a certification that the capital increase has taken place in the Business Register (Article 2481 bis, sixth paragraph of the civil code).

3.26 Transfer of reserves to corporate capital.

According to Article 2481-ter ICC the company may increase the corporate capital by counting to it reserves and other funds registered in the balance sheet to the extent they are available. In the above case the quota of each quota holder remains unchanged.

3.27 Reduction of corporate capital

Pursuant to Article 2482 first paragraph ICC the reduction of corporate capital may take place, within the limits set forth in number 4) of article 2463, by reimbursement to the quota holders of the paid quotas or by releasing the quota holders from the obligation of payments still due.

The quota holders’ decision to decrease company’s corporate capital may take place not earlier than ninety days from the date of registration in the Business Register of such decision, provided that within such deadline no company creditor, with credits existing prior to the registration, had filed a claim (Article 2482 second paragraph).

The Court, if it considers unlikely the risk of prejudice for creditors or if the company has given sufficient guarantee, orders that the quota-holders’ decision is carried out notwithstanding the claim (Article 2482 third paragraph).

3.28 Reduction of the corporate capital for losses.

According to Article 2482-bis first paragraph ICC in case it appears that the corporate capital is reduced by more than one third as a consequence of losses, the directors shall without delay call the quota holders’ meeting for the appropriate decisions.

A report of the directors on the financial situation of the company must be submitted to the quota holders’ meeting, with the comments, in the cases provided for article 2477, of the board of statutory auditors or of the person entrusted with the statutory accounting audit. If the articles of association do not otherwise provide, a copy of the report and of the comments must be filed at the registered office of the company at least eight days before the quota holders’ meeting, so that the quota holders can revise it (Article 2482-bis second paragraph).

In the quota-holders’ meeting the directors must report the important facts occurring after the drafting of the report provided for under the preceding paragraph (Article 2482-bis third paragraph).

If within the following financial year the loss is not reduced to less than one third, the quota holders’ meeting that approves the financial statements shall reduce the corporate capital proportionally to the losses ascertained. In the absence of the foregoing the directors and the statutory auditors or the person entrusted with the statutory audit appointed pursuant to article 2477 shall request to the court to order the reduction of the corporate capital on the basis of the losses resulting from the financial statements (Article 2482-bis fourth paragraph).

The court, even upon request of any interested party, provides by decree subject to appeal, that has to be registered in the Business Register by the directors (Article 2482-bis fifth paragraph). The last paragraph of article 2446 applies, as far as compatible.

3.29 Reduction of the corporate capital below the lawful minimum

Pursuant to Article 2482-ter ICC if, as a consequence of the loss of the corporate capital, the latter goes below the minimum indicated in n. 4) of article 2463, the directors should without delay call a quota holders meeting in order to resolve the reduction of the corporate capital and the simultaneous increase of it to an amount not lower than this minimum. However, resolving the transformation of the company remains an option.

3.30 Reduction of capital for losess and quota-holders’ rights.

According to Article 2482-quater ICC in all cases of reduction of capital for losess any modification of the quotaholding and of the rights of quota holders are excluded.

3.31 Issuance of the debt securities

According to Article 2483 ICC, the articles of association may envisage issuing instruments of debt and, if they do, they will establish the responsibilities of members and directors, as well as the limits, formalities, and quorum required for such decisions.

The debt instruments issued in compliance of the preceding can be subscribed only by professional investors subject to cautionary control in accordance with special laws. In case of subsequent trading of the debt instruments, the one who transfers them is liable for the solvency of the company towards the purchasers who are not professional investors or quota holders of the company themselves (Article 2483 second paragraph ICC).

In other words, only professional investors subject to prudential control under special regulations, such as banks or companies of authorized security dealers (SIMs) may subscribe securities issued by an Italian Limited Liability Company. If they transfer the securities to third parties who are not professional investors or members of the same company, they will be held to account for the company’s solvency.

According to Article 2483 third paragraph ICC, the resolution to issue debt instruments states the terms of the loan and the requirements of the reimbursement and it is registered by the directors in the Business Register. The resolution can also establish that, subject to the approval of the majority of the owners of the debt instruments, the company can amend such terms and requirements.


Bibliography:

2017 Compendio di diritto commerciale AAVV. Ed. SIMONE

2017 Manuale di diritto commerciale XIV Carlo AmatucciAmedeo BassiGiovanni CapoRenzo CostiGiuseppe FaucegliaAngelo LuminosoFederico MartoranoGabriele RacugnoRoberto Rosapepe (a cura di)  Vincenzo Buonocore. GIAPPICHELLI EDITORE

2017 Manuale di diritto privato di Piero Schlesinger, Andrea Torrente

2017 Diritto commerciale. A cura di L. De Angelis. CEDAM

2017 Manuale di diritto commerciale di Gian Franco Campobasso (Autore),‎ M. Campobasso (a cura di). UTET

2016 “Società a responsabilità limitata semplificata” Italian simplified Private Limited Company. Basic Legal Sources in Italian with English Translation by Alessio Bartolacelli

2014 Italian Company Law 1. Company limited By Shares. Alessandro De Nicola, Marco Carone. EGEA

2014 Italian Civil Code translated in English. Italian Company Law. Edited by Valerio Piacentini. WOLTERS KLUWER ITALIA SRL.

2005 Corporate Business Forms in Europe: A Compendium of Public and Private Limited Company in Europe. Frank Dornseifer (Ed)

2009 European Comparative Company Law. Mads Andenas, Frank Wooldridge. Cambridge University press.

1992 Italian Company Law (International Corporate Law) by Aldo Frignani  and G. Elia. KLUWER LAW INTERNATIONAL.

[1] Thus including not only cash, tangible and intangible assets but also work and services.

[2] According to Article 2362 CC – Sole shareholder 1.When all shares result as owned by a single person or when the sole shareholder changes, the directors must deposit for the entry in the Business Register a declaration stating the name and surname or denomination, date and place of birth or country of incorporation, domicile or registered office and nationality of the sole shareholder. 2. Once the plurality of shareholders is created or re-created, the directors must deposit an ad-hoc declaration for entry in the Business Register.3 The sole shareholder or the person ceasing to be so may directly carry out the disclosure provided for in the preceding paragraphs. 4. The directors’ declarations referred to in the preceding paragraphs must be deposited within thirty days from the entry in the shareholders’ register, and must indicate the entry date. 5. The company’s contracts with a sole shareholder or the transactions in the interests of the sole shareholder are valid towards the company’s creditors only if they have been mentioned in the board of directors’ register of the meeting and the resolutions or if they result from a written deed having certified date preceding the date of the distraint.

[3] Limited Liability Company and Joint Stock Companies have common rules in the field of the financial statement (Articles 2478 bis of the Italian Civil Code) and of winding and dissolution of companies (Article 2484/2498 of the Italian Civil Code).

[4] According to Article 2331 of Civil Code the company becomes a legal person – and acquires a legal personality – once registered in the Register of Companies. It is only from that moment that the company comes into existence and is recognized as a legal person within the Italian legal system.

[5] According to Article 2332 CC once the registration in the Business Register is completed, a declaration of nullity of the company can be rendered only in the following cases: 1) failure to stipulate the Articles of Association in the form of a public deed; 2) illegality of the company’s purpose; 3) the lack in the Articles of Association of any indication relating to the name of the company, or the contributions, or the amount of capital subscribed or the company’s purpose.

The declaration of nullity does not impair the effect of the transactions carried out in the name of the company after the registration in the Company Register.

The shareholders are not discharged from their obligation to pay their contributions until the creditors of the company have been satisfied.

The court decision which declares the nullity of the company, appoints the liquidators.

Nullity cannot be declared if the cause of action of the same has been eliminated, and such elimination has been rendered public through the filing of the same with the Company Register.

The final statements of the decision which declares the nullity, must be registered with the Business Register by the directors or the liquidators nominated.

[6] Article added by law decree 24/1/2012, nr. 1, art. 3, and modified as converted into law by l. 24/3/2013, nr. 27.

[7] Law Decree 28/6/2013 nr. 76, art. 9, para. 13, converted in law with amendments by law 9/8/2013 nr. 99 repealed the words “which shall be under 35 years old as of company’s constitution”.

[8] Law Decree 28/6/2013 nr. 76, art. 9, para. 13, converted in law with amendments by law 9/8/2013 nr. 99 repealed the words “which must be chosen among shareholders”.

[9] Paragraph added by law decree 28/6/2013 nr. 76, art. 9, para. 13, converted in law with amendments by law 9/8/2013 nr. 99.

[10] An additional paragraph, repealed by Law Decree 28/6/2013 nr. 76, art. 9, para. 13, converted in law with amendments by law 9/8/2013 nr. 99, followed with this wording: “Any quote transferal to quota holders not compliant with age requirements according to para. 1 is prohibited and such an agreement is null and void”.

[11] Law Decree 28/6/2013 nr. 76, art. 9, para. 15bis, converted in law with amendments by law 9/8/2013 nr. 99 replaced the words “deposited with a bank” with “to directors appointed in the articles of association”.

[12] D.l. 28/6/2013 nr. 76, art. 9, para. 15bis, converted in law with amendments by law 9/8/2013 nr. 99 added the sentence “Means of payment are to be mentioned in the deed.”.

[13] Art. 2254 – Guarantee and risks of contributions. [1] For items contributed under property the guarantee due to the partner and the transfer of risks are ruled by the provisions on the sale of goods. [2] The risk of items contributed for use remains on the partner who has contributed them. The guarantee for the use is ruled by the provisions on the lease.

[14] Art. 2255 – Contribution of receivables. [1] The partner who has contributed receivables is responsible for the insolvency of the debtor within the limits set forth under article 1267 in case the partner accepted to guarantee such receivables.

[15] Under Article 2474 of the ICC, limited liability companies may not grant loans or give guarantees for the purchase or subscription of their own quotas, with no exceptions.

[16] According to Article 2471 ICC, the quota can be seized. The attachment of the quota is executed by notifying the order to the debtor and to the company and by subsequent registration in the Business Register. Moreover, according to Article 2471-bis ICC the quota can be pledged, put under seizure or hold in usufruct.

[17] The ordinary meeting must be called at least once a year, within the set term established by the articles of association and in any case no later than one hundred and twenty days from the end of the financial year. The articles of association can provide for a longer time limit, in any case not exceeding one hundred and eighty days, in the event of companies required to prepared consolidated financial statements or when there are special needs related to the structure and purpose of the company; in these cases, the directors will indicate the reasons for the delay in the report stipulated by Article 2428.

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