Italy Company Formation
Incorporation of an S.R.L.
Italy is strategically located at the centre of Europe and has a long tradition of trading profiting of its market economy, and of its skilled workforce. Italians have a particular gift for design and this talent is applied to produce items of everyday life. In addition they have a special ability in mechanics and in solving new problems. As a founding member of the European Union, based on the free movement of goods, workers, services and capital, Italy offers access to a wider market of approximately 500 million consumers.
The structure of business, which welcomes foreign investments, has produced encouraging results in the last decade. Furthermore, the present government policy which favours privatization of state-owned enterprises, offers foreign investors the opportunity of setting up a business in Italy through the acquisition of privatized enterprises. The reduction of state intervention compounded by privatization offers foreign investors some attractive opportunities of setting up business in Italy.
The Legal System
The sources of law and the principles of the legislative process are enshrined in the Constitution. The law is consolidated in four main Codes: the Civil Code, the Code of Civil Procedure, the Criminal Code and the Code of Criminal Procedure.
In addition to the Civil Code, there are special Acts regulating business and commerce: the Bankruptcy Act, the Banking Acts, the Trademark Act, the Patent Act, the Copyright Act, the Anti-Trust Act, etc. Some provisions relating to business activity are also laid down in ministerial decrees.
Foreign investors must be aware of the applicable EU Laws.
Incentives are provided to businesses which enhance the country’s economic activity and this is related to government-designated priority sectors and areas. Incentives are provided for investments to be made in less favoured areas of the country.
Subsidies are also available to businessmen for the recruitment of personnel, with particular emphasis on the training and employment of junior staff. Moreover, social security exemptions and rebates are available to increase employment in depressed areas.
Business Choice For Investors
Foreign investors are free to adopt any form of business investment. Business choice will largely depend on the strategy to be adopted, as well as on management, financial and tax considerations.
Foreign investors may acquire a stake in or control of a company which has already been set up, of a listed company, or they may set up a company or branch or appoint an agent in Italy.
Foreign investors are subject to the “reciprocity clause”. This means that their own country must recognize and provide the same rights to Italian investors operating on its territory. The main types of business are regulated by the fifth book of the Civil Code, which gives a general definition of enterprise and lists the necessary elements for each kind of Business Company. Acquisitions and asset sales in Italy are unrestrained. They are supervised by the National Commission for Companies and Securities Exchange (CONSOB) only in case of major acquisitions or operations concerning listed companies.
The purchase of significant shares of capital must be authorized by the Bank of Italy, which has to be notified of significant movements in the capital of financial institutions. Cartels are prohibited. Besides national anti-trust law, foreign investors must also be aware of Articles 85 and 86 on competition law set forth in the Treaty of Rome and other EU regulations. Agents are entitled to commissions only if duly registered.
Repatriation of Capital and Profits
Non-residents are free to invest in Italy in foreign currencies and Euro and to repatriate their Italian earnings, as well as their original investments through:
Repayment of capital;
Royalties, management and service fees;
No authorization of foreign exchange transactions is required.
The main types of Italian company (società di capitali) are the:
Joint stock company (Società per azioni) (SpA)
The minimum corporate capital was recently reduced from EUR120,000 to EUR50,000, subject to higher capital requirements for “regulated” companies (for example, banks, insurance companies, among others). The corporate capital is divided into shares, which are commonly embodied in share certificates and are assignable through endorsement. Share certificates can also be “dematerialised” (that is, consist only of an electronic entry in an electronic register, as is the case for listed shares) and Italian law allows for “non-issued” shares (not embodied in a paper certificate nor in an electronic entry). Only SpA can be listed and issue bonds and/or hybrid financial instruments. Different rules apply depending on whether the shares are listed, widely held by the public, or held by few shareholders. Three different corporate governance systems can be selected by the shareholders: the traditional Latin system, the two-tier system and the one-tier system (see Question 24).
Limited liability company (Società a responsabilità limitata) (Srl)
The minimum corporate capital can be as low as EUR1 but when the capital is below EUR10,000 special rules and restrictions apply. The capital is divided into quotas, which are not embodied in certificates and can be assigned only through a notarised deed. The Srl has a more streamlined (and flexible) corporate structure than the SpA. However, there are limitations which are peculiar to the Srl (including minority quotaholders’ special withdrawal rights and majority quotaholders’ potential joint liability with directors). The Srl cannot issue bonds, although it can issue debentures, under certain limitations. Italian law also allows for a simplified form of Srl (società a responsabilità limitata semplificata) (Srls), whose quotaholders can only be natural persons.
Company limited by shares (Società in accomandita per azioni)(SapA)
This is a less common corporate type which is characterised by a hybrid nature; SapAs have both limited liability shareholders and unlimited liability shareholders
Since January 1, 2002 the Euro is the official currency of Italy, as well as of other eleven countries of the Union. All values of commercial contracts previously denominated in lira are automatically converted in Euro (€), at the fixed rate of 1,936.27 lira for 1 Euro.
Foreigners are free to invest in Italian businesses. The equity capital of an Italian enterprise may be totally owned by foreigners. The Italian Government favours foreign investments.