The functioning of the company with share capital, in its traditional model, is based on the necessary simultaneous presence of three bodies: the shareholders’ meeting, the board of directors and the board of statutory auditors, each of which has its own distinct sphere of competence. Accounts are audited by an auditor or by an audit firm, except for closed companies where this is decided in the By-laws.
The shareholders’ meeting, which is a sovereign body since it is empowered to decide on the most important management issues, may deliberate at its ordinary or extraordinary sessions, with different constitutive and deliberative quorums and different procedures of reporting, depending on the specific subject being dealt with.
In fact, the ordinary meeting has competences of a general nature plus some specific competences. Instead, the competences of the extraordinary meeting are laid down in Article 2365 of the Civil Code which clearly lists the issues (amendments to the Memorandum of Association, issuing bonds, appointment and powers of the liquidators) ; the list of issues set forth in article 2364 of the Civil Code for the ordinary meeting is merely indicative since it has to be supplemented by other provisions. There is also the possibility that some competences of the extraordinary meeting are attributed, as put forth in the by-laws, (exclusively or not) to the Board of Directors or the monitoring board or the management board: seek the advice of your notary on this.
Finally, the Memorandum of Association can no longer empower the ordinary meeting to deliberate on given management activities, because it can only envisage that the meeting gives prior authorization to the directors to carry out management activities; the company can be managed only by the directors and hence they are wholly and entirely responsible for such management.
However, as mentioned, the legislation in force as of January 2004 envisages the adoption of other management and control models. The two-tier model, which is not compulsory but can be freely chosen, has a considerable impact on the powers of the shareholders’ meeting. Indeed, the latter elects a supervisory board, which takes on some of the more important functions that are usually performed by the meeting: election of the business managers (the management board ), shouldering the relevant responsibility, and approval of the company’s accounts. The notary public will advise you as to whether you should adopt this form.