In early 2003 the Italian legislator issued a law decree (n° 6 of 17 January 2003) which thoroughly reformed companies limited by shares. The declared aim was to simplify, where appropriate, and enrich, wherever possible, the rules governing such companies, with a view to increasing their competitiveness on both domestic and international markets.
Many changes were made and the following results have been achieved: a better, though still not complete, co-ordination between the rules governing listed and non-listed companies (with explicit references also to the joint-stock companies with floating shares held mainly by the public at large); improvements in the instruments that protect minority interests; and some power has been granted to private individuals (in particular to limited liability companies) so that they can take care of their interests in a way that had hitherto been impossible.
As a result of such changes and of the emphasis on the autonomy of the individual, the Memorandum of Association and the Company By-laws have taken on an extremely important role in the current and future life of the company: these two documents regulate the formation of the company and the way its business is carried out. As a consequence it is essential that the shareholders’ agreements be drawn up carefully so that they may allow to seize the many opportunities granted by the law and avoid inappropriate or illicit actions. A fundamental role is played by the notary public, called upon to establish the company, and who will draw up these documents and suggest solutions that are not only licit but also the best suited to the concrete needs of the parties and in their best interest. A Memorandum of Association and By-laws that are properly drafted will ensure that the company is based on sound and lasting rules thus avoiding contrasts and conflicts between partners and corporate bodies.
Memorandum of Association and By-laws that are well drawn up ultimately reduces costs and ensures that the business of the company will unfold in the best of ways.
Accompanied by a (not very clear) provision that regulated the transitional phase, the new law finally entered into force on 1 January 2004.
Companies with share capital may be of three types: joint-stock companies (s.p.a.), limited liability companies (s.r.l.) and limited partnerships with share capital (s.a.p.a.).
These companies are organisations of persons and means for carrying out a productive activity in common, and they are endowed with assets that make them fully autonomous. This means that the company alone answers for social security liabilities with its assets.
Hence the liability of the partners is limited to the capital he/she has contributed, there is no personal liability, not even contingent liability, for the social security liabilities (with the exception of the unlimited partners of limited partnerships with share capital who, on the other hand, answer unlimitedly and jointly for the social security liabilities, and with the exception of the single partner of a proprietorship).
In order to offset this benefit of limited liability, the legislator has envisaged that the partner of companies with share capital shall not have direct powers of administration and control of the company, but they can only contribute to the latter by voting at the Shareholders’ Meeting for the appointment of the directors and statutory auditors: in order to confirm this principle, the unlimited partners of an s.a.p.a. (who have unlimited liability) are assigned the capacity of directors by law by the legislator. Partners can, however, be appointed directors, and hence take on the relevant responsibilities.
In fact, companies with share capital have a corporate structure, that is, they are based on the necessary presence of three bodies: the Shareholders’ Meeting, that decides on issues of great importance for the corporate body, the directors, who run the company and implement the corporate purpose of the company, and the statutory auditors, a body that controls and monitors the activity of the directors (the foregoing holds for what the law considers to be the traditional management and control system: there is a chapter on the other two systems, the so-called two-tier and the monistic system that do not apply to the limited liability company). As regards the need for an auditor or for an auditing firm to control the accounting work of the company (leaving aside the issue according to which it is unlikely that they can be called a “body” that controls the company), please refer to the rules that govern the various types of companies with share capital.
The weight of a partner in the Shareholders’ Meeting (and of the partners of limited liability companies in decisions not taken at the shareholders’ meeting) is determined by the capital share he has underwritten, since decisions are taken on the basis of the majority principle. The rules that govern the Shareholders’ Meeting are designed to protect the need to take well-pondered decisions, to ensure that decisions are adopted rapidly and to protect absent or disagreeing shareholders.
The rules that govern decision-making in limited liability companies, that can be included in the Memorandum of Association on the advice of your notary public to avoid problems of legitimacy, are designed to ensure that decisions can be taken rapidly, but when drafting this clause one must not overlook the need to ensure that well-pondered decisions can be taken (with stakeholders being informed prior to the meeting), and the need to protect the absent or disagreeing partners. In order to make sure that the clauses in the by-laws of a limited liability company on issues that require unanimity are consistent with the law and that also the clauses that establish different quorums (higher or lower) than those envisaged in Articles 2479, para. 6, and article 2479-bis, paragraph 3 of the Civil Code are drafted in accordance with the law, seek the professional advice of an expert.
The partner’s investment is then represented by shares (in the s.p.a. and in the s.a.p.a.) or quotas (in the s.r.l.), which determine the extent of the partner’s rights of participation and are destined to be circulated and thus, to varying degrees, they can easily be traaded.
The reform has expanded the cases in which (with some differences for the s.p.a. and the s.r.l.) the partner can exercise the right to withdraw and obtain reimbursement of his shares or of his quota in accordance with the provisions of the law. The provisions also indicate how to determine the liquidation value to be paid to the partner who leaves the company. The notary public will give advice on the limits set on the autonomy of the individual in determining the criteria to be adopted in calculating the liquidation, in order to avoid going against the law. The Memorandum of Association of an s.r.l. can envisage circumstances whereby a partner can be excluded.
The choice of one or the other type of company must be verified in the light of the concrete requirements of the enterprise, of the expected turnover, the scope of the corporate purpose and the running costs.
Seek the advice of your notary public, who will explain in detail the differences in the rules applying to the s.p.a., the s.r.l. and the s.a.p.a., so as to choose the type of company that best suits your business.