Italian Company Law: Shares and Capital

Enterprises Law Introduction

• Partnerships and companies are organizations using people and resources, created for a joint productive activity
• They represent standard organizational structures within a legal system for business activities in an associated form
• According to Article 2082 of the Civil Code, an entrepreneur professionally conducts organized economic activity to produce or exchange goods/services

Key Elements of Business Activity

• Organization requires planning, coordinating acts, and coordinating productive factors (capital, labor)
• The economic methods that distinguish business activity involve revenues covering costs
• Business activity is conducted habitually, not occasionally

General Statute of the Entrepreneur

• Discipline of business assets (Azienda) refers to regulations for a company's assets (tangible/intangible)
• Proper asset management ensures efficient use to achieve company objectives
• Distinctive signs are unique identifiers distinguishing a company's products/services from competitors
• Competition law promotes fair competition by prohibiting monopolies, cartels, and unfair trade practices
• Consortia are collaborative agreements between companies to achieve common objectives (joint ventures)
• Antitrust Law is defined by the Treaty on the Functioning of the European Union; Italian Law No 287/1990

Distinctions Provided by the Civil Code Regarding Business Activities

• Depending on the object of the business activity:
  • Commercial Entrepreneur or Agricultural Entrepreneur
• Depending on the size of the business:
  • Small Entrepreneur or Medium-Sized Entrepreneur
• Depending on the person carrying out the business activity:
  • Individual Entrepreneur or Enterprise Carried On Using a Collective Form
• The special commercial entrepreneur statute applies to these cases in addition to the general entrepreneur statute

Agricultural Entrepreneur

• An agricultural entrepreneur engages in activities like cultivation of land, sylviculture, animal breeding, and related activities (Article 2135 c.c.)
• Main agricultural activities include cultivation of land, sylviculture, and animal breeding
• Connected activities involve the transformation, manipulation, conservation, commerce, exploitation of agricultural products
• The supply of goods and services uses equipment and resources usually employed in agricultural activity
• Subjective connects the entrepreneur with the main and connected activities
• Objective joins the agricultural activities functions

Commercial Entrepreneur

• According to Article 2195 c.c. commercial entrepreneurs are required to be registered in the business register and engage in:
  • Industrial activity directed to the production of goods or services
  • Intermediary activity in the movement of goods.
  • Activity of transportation by land, water, or air
  • A banking or insurance business
  • Other activities ancillary to the above

Small Entrepreneurs

• Per Article 2083 c.c., these are those who directly cultivate land, artisans, small traders, and those in a professional activity
• They are organized mainly with their work and that of family members

Avoiding Bankruptcy

• A commercial entrepreneur is not subject to bankruptcy if they meet the following conditions:
  • Total annual assets do not exceed €300,000
  • Total annual gross revenues do not exceed €200,000
  • Total amount of debts, including overdue debts, does not exceed €500,000

Entrepreneur Structure

• The category of entrepreneurs include:
  • Individual entrepreneurs
  • Enterprises carried on in collective form (partnerships, companies, public enterprises, associations, foundations)
• Article 2086 c.c. defines an entrepreneur’s legal duty to establish an organizational, administrative, and accounting structure proportional to the company's nature and size
• This supports the timely detection of crises and the risk of business continuity loss

Commercial Entrepreneur Statute and the Business Register

• The Business Register is a public database maintained by the Chambers of Commerce, containing essential information about businesses
• It is divided into sections:
  • Ordinary Section: Includes entities like partnerships, companies, consortia, foreign companies, European Economic Interest Groups (EEIGs), public entities, business entrepreneurs
  • Special Section: agricultural enterprises, small/direct farmers, simple partnerships, artisan enterprises.
• In Italian law, registration in the Business Register has varying effects:
  • Legal Publicity: Ensures transparency, making registered acts opposable to third parties
  • Constitutive Effects: Registration is a condition for the legal effectiveness of an act
  • Normative Effects: influences the application of specific legal norms to the registered entity
  • Certification: Serves merely as notice, without conferring legal effects

Accounting and Liability

• Per Article 2214 et seq. c.c., entrepreneurs engaged in commercial activities must maintain accounting records for tracking accurate financial tracking legal compliance
  • Mandatory Books: journal (libro giornale) and inventory book (libro degli inventari)
  • Additional Records: may be necessary depending on the nature and size of the business, and records must be retained according to Article 2083
• For individuals who act on behalf of an enterpreneur the civil law states:
  • Factor (Institore) (Article 2203), an individual appointed by the entrepreneur to manage a commercial enterprise or a branch of it
  • Attorneys in Fact (Procuratore), someone authorized to carry out business-related acts on an ongoing basis
  • Commesso, it is an employee entrusted with specific tasks and granted the limited authority to represent the enterprise in matters related to their duties

The Transfer of a Business

• In Italian law, business assets (azienda) are defined under Article 2555 of the Civil Code as "a set of assets organized by an entrepreneur for the purpose of carrying out the business activity"
• This encompasses all resources, tangible and intangible, that an entrepreneur arranges to operate their business
• The Civil Code regulates several transfer aspects:
  • Form of the Transfer Contract: Specifies legal requirements.
  • Non-Competition of the Transferor: Restricts the seller from engaging in competing harmful activities
  • Succession in Business Contracts: Ensures the continuity of assigned and existing contracts are handled
  • Business Credits and Debts: Deals with the receivable assignments with business liabilities

Distinctive Signs

• Articles 2563 of the Civil Code outlines:
  • Business Name (ditta) that identifies the entrepreneur
  • Banner (insegna) identifies the places where the business activity is carried out
  • Trademark (marchio) identifies and distinguishes the goods/services produced

European Company Law

• The European Union (EU) works under the framework of competences defined by the Treaty on the Functioning of the European Union (TFEU) that delineates the areas it can legislate in, and those reserved to member states
• There are 3 categories of Union Competence:
• Exclusive Competence: only the EU legislate and adopt binding acts
• Shared Competence: Both the EU and member states can act within EU limits on the competence
• Supporting Competence: The EU complement the actions without harmonizing the national laws

Company Law within the TFEU

• Company law primarily falls under the EU's shared competence, particularly concerning the internal market
• This area both the EU and member states legislate, within the EU's share of competence
• Article 2(5) and Article 6 of the TFEU outline areas where the EU supports member states that do not pertain to company law

Purpose of European Company Law (ECL)

• The objectives of ECL include:
  • Facilitating Freedom of Establishment, enabling companies to easily establish themselves in new member countries
  • Improving Transparency and Legal Certainty, ensuring clear operations that foster stability
  • Protecting Interests safeguarding the rights of shareholders
  • Regulating Company Structures and Operations by setting rules on limited liability companies and setting minimum single-member private limited-liability companies requirements

Article 3 of the Treaty on European Union (TEU)

• Emphasis on the EU's emphasis of internal market establishment and sustainable development
• Also promotes scientific progress, combats social exclusion, and ensures equality for all
• Promotes and respects cultural diversity and will establish an monetary euro-based union

Internal Market

• The internal market founded on several key legal provisions within the Treaty on the Functioning of the European Union (TFEU)
• They establish the framework for free movement of goods, people, services, and capital among member states
• Legal Bases:
  • Article 4(2)(a) TFEU: Internal market is an area of shared competence between the EU and member states
  • Article 26 TFEU: Mandates adopting measures ensures the internal market functions in accordance to treaty provisions
  • Article 27 TFEU: Union considers the extent of state compliance, allowing derogations where necessary, where it highlight conditions economic development
  • Article 114 TFEU: Legal basis to ensure the functioning. of the internal market
  • Article 115 TFEU: Legal basis for the Council for directives to approximate laws that impact the internal market's functioning

Freedom of Establishment

• Legal framework for freedom of establishment facilitate the flexibility for EU businesses and professionals
• Legal Basis:
  • Article 26 TFEU: Union must adopt to ensure the free movement of capital as its charactistic
  • Articles 49 to 55 TFEU: Addresses establishment specifics, prohibiting establishment restrictions

Key Provisions of Article 49 TFEU

• Prohibition of Restrictions, this establishes branches and subsidaries by those already established elsewhere
• Rights Included, includes taking up the ability to pursue activities with self-employment, or to manage and run businesses
• Implications allows individuals to carry out economic activities in any member countries

EU Regulations And Member State Laws

• EU established or regulated companies are determined by member states.
• Determining national laws governed for corporations involves incorporation theory and the real seat theory.
  • Theory of incorporation:
  • Legal Registration occurs regarless of the type of buisness.
  • Real seat Theory:
• Central administration and principal base laws
• Article 54,TFEU
  • Company and firm laws of member states.

Right of establishment framework

• How can we make the right of establishment

• By effectively harmonizing company laws.

• Directives:

  • Aimed at freedom
  • Cross border Buisness. - Article 50 TFEU

• Exercise the union competencies. Directives: : Directice oblication. Legal Instruments.

• General application. -Regulations of state.

• Non binding nature:

• Express views.

Key derectives in eu company laws

• Article 50 part 2 TFEU: State has the following
• Parlament and council.
• Economic and scocial commitee.
• Shall act by manes of Derectives.
• Member state takes in indiviial legal systems by shared foundatiional principalities. Facilitate cross border economic business activities.

History of Derectives

• Derectives as the result to be achieved, whie allowimg national authorities discretion choose

• Harmonizing company laws help uphold freedom of corprate conduct.

• Key Derectives in eu company laws: First Company Law Directive (68/151/EEC):

• Coordination of safe gaurds.

• Second company Law Derectives (77/91 EEC):

• Addrrssed fromation of puclic. companies and Alteration of capitals.

• third Company Law Derectives (78/855 EEC):

• Concered merfers of the pulic law comanies replaced by directives 2017'1132 EU.

  • Draft 5th Company Law Directive: -Regulatiions on the structure of pulic companies.
  • Share holder regarding Directors re numaeration. -Sith Company Law Diretive ( 82/891 EEC): -Dealt with the vivison of puclicl campanies and repalced by the directives 2017"1132 EW -Seventh company Law derectives ( 83/349 EEC): -Focused in group accounts replaced 2013''34 EW -Eitghth compnay law derective ( 84/253 EEC): -Outlined audit reuiremwnnts adn Has bee repalce -Draft Ninth company Law Derectives: -Addressed corprate groups: -Tenth company Law Derectves 2005-56EC Partinaed to corsso brooder mergers of pubic. Company. -Eleventh company Law derective (89'6.01 EEC): Partianid ro the dioscreous of rbrnach ewtavblsihred Twelve compnay law Directives ( 89'667 EEC): -Realred to singel members. Directives E U is a consildations of the previous Directives. . The two parts of a company.
  • title 1 General Provisions and the Esbalishmwernt and Fubncitiboning of Limbited Liasbirtes -Titel 10 mergers and Divisions of limtied Liablities. -The eu has inrodued adssiionaal Directives furhture modern.

• Directives Paritaning To listed compsnaes. -The Eu has elslatblsided derectives focusing kn listed compnaeis in. Order to ensure tsnsparensy shara holders rights. -Takeover Bids Derectives ( 2004 "225 EC Regulares take over. -Market ause Direcitve addresseed insider eals. -Shanre hloderrs rgiths directive .

• Share holders rtits derectives 2. unfiorm Company Law:

• The europeans has d eveloped a series of regulagtion to estlablish iniform cor,panty laws frane wroks faciliting seames broders opreations

  Key Eu Regulatesin compmay law;

• Eunropean Econmic intreest gouping estlatblished Establishes regualtiob to faclitalte co opreations bebtwween companies. Europenar Company. The regulation allo ws compnaies to operate on eueopreans acale. -European o co repavtibe soceity, Estlabhsed by regualtion ofuly is ther sce ptivdes.

key eu reugaltions compnay laws.

1. Euoreapean ecimic intreeeest griouoing established by regualting july. 2 Europenan cosmpnay soecity introduced by regulations.
2. eUropean coperative osceisietey
3. internarionsl accouonty standards Insovecy proceedibss regualte eficlaiencies.

Europena priavets company socates priveea euorpearae see

sEALEuopreans uatl soseitieys fuantaitoios sociaets uslus persona

Currrent leveal of harmoinaztoiosn The Eu implementend the following

1. Derectives harmoizaitoiio to a member. State. 2. regulation on staurres.

• falled aateempts at hamzratoiio.
• juripuradencees of the EU court od justice.
• Botttom upe

Companies limited by shares

• A corporte seturucyure in eautly.

  • and acrewose Eurpppe Charactered

• Lagel Personalties: -the company its recognzie d as seoprtate legel eni

  • Limted Laiitey of sahreholderss shaolderrre are libable

• up to theirinvest

• Corportae orgnaiztioesn These campsanes sturictrues has a system of gobernaices, Shares Ownershi the cosmpnay is ddviede.

Evolutaointtaltians company laws reugalitito

Civel code:

• ESTABLSISH the general prinicplles governing companies. Intaliac law 216,1974.
• Leed to estlabsihmenrts of teh commaossines nosationasl pera.

Texo Unic dell intedimazioni fonazira

Two types of sub types of companies limtied by sahrrs.

1. closde companies:

• do tiresort to riks capitals markers. Companies that resort to riks capitak maerkedt so call open companies . share widely held among pulbics: compnaeis whose sahres rwidkly distributed .

NEw aricle od ciivil cddee

• povides specfiic crirtea to identity the campanies Whose saher are windly dstruibuteds amoung. Kyy critis Comapoistion

the campnayy should be collrectiviwly own in. At leatss 5 prcent of compnais sahrecapitals. Size reuuiremnrs the comes pany mUsi exeed two fo the follo ingn thee the esholds outlineed Totlal asset . E c440. Revunuese. Exceed 800 million. average numnber of EMPloyoes Exclusion ceratin cosimpaies . Comnpanies. A aoolcabity of regulatio Al come apsines Limated. Closed companie.

• Open compnaiseis
• Listed campnaiess

Incorporation

• In the itallain legal ssyte smh, theo incoreation .can be achicied 1 Similtaniour 2 Incoproratin throuygh. Uclic subscrition.
• Drafyin into the incopraration: The founders Regiaition inn bussiess rsgsitryo The ncotratin deed is then rgrsisyerde with The buess resitrr gramngin trhe compnay Simiultanos Inocorpratin prcoedure: 1 Sttng uo a Proggarams.

2 usciptioon Meetintng off svubscripitoers s The conrtaictiom insruumwnrts Regioatratuins The busienss restisyr Aetioisnd to be fthe indruments

Formm if the acrts . Then insructmenti impaortant Reeuirectives E U 20't . Thhe eu reuires that in member states Lacking .

The contents of Insrtrumnrnrt of Iocroprauton

• Botthd Derecrie eUU articsel sprectif that the insturmente iunclued infro This dreetives mandae ts that that ther satutess if the insrtuyr
• Comapnty tyres aadn m e
• Comnay objextivss Capaiatls desitales: Goersn tires Comampny duration

The direcitvee spesifie that thee foo lwoing infor shouler epere Lsgisrete offica . the icdicaials foem paoissny headsrures.

Sahre dtsailes nonimanl value number.

Tansrfrer redrticoins A y spertifal conifitoons.

Sahre classifis Informatiopmn on dijerrnnrt class

Thes epeuireminents enuwer that ythe buensss activite is transaprtne adn verifable noteabythe se obkugaitiosn so don apply

• Casuse od nelegbity: B Ankurpty . Individuals who aare enlegbilltyee. For irsrtrsrchipop Crtiminal convicitoosn
• Bauses o infamipbaity. Prvded by specfual laws
• the term will conluse on an accourt of treh sahre holrdwrse.

Other resasions ifor Termanitions from office:

• Renmovdal b syhrahre ahrelders . The ordinalry sahsre hlder ahre ldreers Elesuignatiiton A iderectoor ma y resigntd from office. A rising of cvaouses of enelegbialioty.

• Iineligibilty or detah. Thhe emergengence .

• Key prvissiosn os article . - B-opoituion by borard iof idirectiosn

• shareholders appaoitrmernt What type if sutation will reuires immariridsts repllcmetsns't:

• Siiltanious deptrteurt. Murltipe disrtcoro a rreisng -Legal ilegbiity: Aa areirctoirr berciomrs enelgilbirltye too serve

The directors re nuernartoio The italian corprae tlaw, ther re nuernaetiosn of didertors is gobermed. Determinatiosn fo yhe ruernaerattions the compnayy’s bylaws

Cimpaie: the anuaul renunmraatons .

• Prohjbiriooon fot ditersr

Enlgagingin competing Buinsessss. Dierctor are prohbiote from a beicmiong shahre

2. xcepriotn. the aharr hloderrs meeting ican ayuthorsize surch acitivitiwse dterctroes to engage activiters uthe in detalinad circuymatncnses. Anusl renuioneratiosns:

Consoe icle.

Effects of Breach

Violations of Prohibitions

• Legal Sanctions
• Liability of the Damages: .Disqualification Functioning of Directors in Italian Corporate Governance
• Sole Director The person is responsible for the entire functions. Board of Directors” The chair parson needs to be the leader communications and effcientscy Validity of Boad resoutions (Actcile 2388 ccc)
• Quorm Mjor Vote Ressolutiojns ate apprivesd the bsy a y majortiry

Director Interessts are as follkwss:

• Disclosruue
• Atrehntion
• Justitcation In case od saolye idrtrcitors

Selections in the bussiness of interest

• the challnges

Responsilblities : the compoay reutires a

delegaa tedsf yuntionm

Authoerization for deelgation

• Thye cosmmopnayys, the ayutohristy. For trh dieroetors.

Apoiintment and Definitioon of porwresse: The apoponemjtn of the yreccovre .

• Non deelegsate respoosiotiies. Thes eliumations enures that funadmanetr all corprait e

Interatiop between delsafsted Boodies dnd yhe Boade:

Powers of RE presenttation ( rtreciset 223844 ccc):

• Scloe os re pesrsematitoos:

Assesitment oh rerepaesntttation WwHile treh comapnty iss boundr by ulrta bives acts consserrnimg bthrd ivalritiews . This is becuse of iutnerbial restrsitoon cnanot br irnrkdd ayfaint the re lInmitationss on re p resen t to 3partioed realicnes.

Validdity of appointmenty is dec medinvalids leagal lumitssre

Directotrs liabitiyle

Directors mays be helf liwable . Liabilty touwads the. Campnay:

• Oblitry atiopoon to pee frorwm.
• Biuniness guntmente Laitiy tawats htee cmmpaies cretiors . -Liabity forwads indivdualsl. Share hoder a and thisrd pratoese. Joint adn severlly liabitty to eht co.

Assignned Specfiic Durties,

Breeach:

• Thers are vioalitnsd on the poihibtions
• A sirectotrres may face civel nad rctiminsl pentailitess imcludngnng Liabiliuty for ddamagess

Fucnitining of diiretcs in aItlian corspoae gvonannce

-Sol directors a.

• board 8of 88 directis The chairersss perosns . The rchairssns leads the boadr coonessnes meetinge Wabliity of brooads o reslutatids artical 32.
• Wourmn
• Mayortjytv otees ressolitiions are approvessed byss

Diirectots intereass

-Disclooisure and infrot other dditierc. Laititu to asjess tne htrea d of an at

Delageted funcyions and repoatnsseition

Authrations for yheleatiopnyh. The componaits. Bylaws.

• yisngelr.

• Delegaed Boidies :the authoirty to commtieetses .

• Appoutmente, for all the meemrtss and dirvrsifys.

  Nonddelegae respsonibitiys:

• Imtrocatis between delegete byies

• -Limitattioons in respresatnatioi is are aso tbe 3

1. Protectionss of triod paetoielas

• The Itlali sn lw proirirsites yhe prtiecions. Ivnadiytioes in appaointmensst redsolotiins

Power for repreesnetatioen

1. Potrtecioons of 3079

The lTalin a lw proirirsities the protectioniosss.

Corporate and financial

A

Apporvaials procersess artical

Etach esahrehlds. _ Tacits apporovalk.

Compnay canilaisation form htee business

• Auter the fianal financial

• U paid cretiditoris thye hves to
  

• COMRAPMYYGROUOSUPSSSS Defiions of conapm,y gruspo

The legal framework governings

Puirposed of compnay rgouop.

2. Protiotn of moniry shanrehodelss

2 Preventuion on Crdosss Shahre hdsolds

3 fORMms of controls

• Leagler cantrol addn sominaint interacnncees artcle . 1 Da June in treantrol
• The prente cop many his the mayt joruty of ytoing reigtss . 5 Der fatto in treantrol Singsficsants Iluance :

A company ids is consisidesersed sgificanatly influnce d if ithe prent holss

ross shre holldings ( rtsicel.

• Pprvent finsicanals a insavltuyy croses th e
• Regualtorisns ibn Prhase 8if Perint Cosmapnys.

C

The law imspsose specficial obligationson prent coamnisa.

Managementt Adn Co ordinaitonssActivyt

• Kkey Lagel Providsions
• 1 Paernt Commapnys Liabilties.

2 Disclose rtaht thet camlanyysss

3 Jjustsifitscaitoons o decioisns indfluence ed by tyhte Parnet Thie 8 retsie that is itmportnat that trhe In that rth ethe P.

An d Coordiiaatiopn

E

Thes damags is of f set by 3i9aitivyey g roup wisse resluistsss

Explore the intricacies of shares in Italian società per azioni (S.p.A.) including relative and objective equality, nominal value, and allocation. Examine the rights granted to shareholders and the relationship between share capital and individual shares. Also, consider deviations from Article 2348 of the Italian Civil Code.