Company Law PDF

COMPANY LAW SPA- COMPANY LIMITED BY SHARES a Spa is a separate and autonomous legal enBty vis a vis its shareholders and has a full and perfect autonomy regarding assets. Is the company that has the status of entrepreneur, and only the company is responsible for governing its business acBviBes. à ONLY the company can be held liable for company obliga9ons undertaken to run the business. Limited liability of shareholders: Shareholders have no personal liability for company obligaBons, obligaBons can only be saBsﬁed by the company’s assets, shareholders are only obliged to make their pledged contribu9ons. They may predetermine how much of their wealth the would expose to risk. Remember: there is an excepBon so this protecBon of shareholder’s limited liability in a special case of single-member SPA, for which the sole shareholder should have unlimited liability if the contribuBon have not been made pursuant. CORPORATE ORGANIZATION Presence of three special bodies: o Shareholder’s meeBng o management body o internal control body Shareholder’s meeBng is the tool that shareholders use to express their intenBons. Is based on the majority principle. The weighBng of each shareholder in the shareholder’s meeBng is proporBonate to the share of capital they have subscribed. Decision making power is concentrated in the hands of those who own the majority of the capital (higher the share of the risk, greater is the share of the power) In fact the role of shareholder meeBng Is limited to the most signiﬁcant decisions , while the running of the company is entrusted to the sole responsibility of the administraBve body. The management of the company is carried out by the directors, subject to the supervision of the internal control body. shareholder’s par4cipa4on in the company: Par9cipa9on in the company is represented by SHARES, that are all uniform and standardized. Company shares have an equal value and provide their holders with the same rights. The capital of an SPA is divided up according to an abstract mathemaBcal criterion. The value obtained by dividing the total capital and the number of shares represents the nominal value of each single share (making easier for shares to circulate). Shares circulate using documents that are subject to the same regulaBons as negoBable instruments what are nego4able instruments? à standardized documents intended for circulaBon which grant their holders the right to certain beneﬁts Remember: shareholders are protected by limited liability while running the company. small shareholders can invest in the company who are not interested in the management but only in invest in saving INCORPORATING AN SPA Currently there are two key phases involved with incorporaBng an SPA. - drawing up the instrument of incorporaBon -registering the instrument of incorporaBon with the companies register à the company acquires legal personality once it has been registered with the companies register and comes into existence, only from this moment can be considered an independent legal enBty whose rights and obliga9ons are separate from its shareholders and directors. TODAY the relaBve checks fall under the sole responsibility of an authorized public oﬃcialà a notary, that draws up the instrument of incorporaBon and the company’s arBcles of associaBon, adapBng the content desired by the founding shareholders to meet applicable legal provisions Thanks to this change, leading to the approval of a notary, the average Bme needed to incorporate a company is reduce, therefore shareholders can quickly start their business. The drawing up of the instrument of incorporaBon can be done in two diﬀerent ways: -Simultaneous incorpora9on (the instrument of incorporaBon is sBpulated by those who take the iniBaBve to incorporate the company, they sign the instrument of incorporaBon and arBcle of associaBon and at the same Bme fully subscribe the share capital providing the relaBve contribuBons) -Incorpora9on through public subscrip9on SPA can be incorporated by two or more shareholders, through a contract or in the case of one founding shareholder through a unilateral act, but remember that in any case the instrument of incorporaBon must be drawn by a notary. Instrument of incorpora9on must indicate: 1. the par4culars of the shareholders and any promoters as well as the number of shares assigned to each of them: these details must indicate domicile and naBonality of each shareholder. indicaBon about their naBonality are important to check regulaBons concerning a foreign naBonal holding shares in an Italian company. In fact a foreign naBonal may hold shares in an Italian company as long as one of these requirements is met: -is an EU ciBzen -is not an EU ciBzen but must be legally reside in Italy -is not an EU ciBzen, cannot reside legally in Italy: in this case the condiBon of reprocity must be met. à if a legal person holds shares in the company, then it is also necessary to specify the country where it was incorporated. 2. Company name and company’s registered oﬃce, the company can have any name, the important thing is that is not the same as other compeBtors and it must include the abbreviaBon SPA in the name. the company register oﬃce is the place where the company’s administraBve and management body is located. There must be just o]ne registered oﬃce that must be clearly idenBﬁed. (Shareholders are responsible for the locaBon of this oﬃce) 3. Company’s object, the object states the type of acBviBes that the company is going to carry out. A number of acBviBes can be indicated in the instrument of incorporaBon (only broad acBviBes ca be stated invalid) 4. Company dura4on, it is possible to state the duraBon of a company, can be ﬁxed term of an indeﬁnite duraBon. In the la`er case (indeﬁnite duraBon) if the shares are not listed in the stock market shareholders can withdrawal in any Bme , but with a minimum noBce of 180 days and a maximum of one year extend. 5. The amount of subscribed and paid capital, the share capital can be freely ﬁxed without this needing to be or to remain in line ‘s object which the company aims to achieve. 6. Number and nominal value of shares 7. Value of receivables and assets 8. Rules according to which proﬁts must be shared 9. Beneﬁts to shareholder, the only proﬁt agreed is a greater share of the proﬁts 10. Corporate governance system adapted 11. Number of statutory auditors 12. Appoin4ng ﬁrst directors and statutory auditors 13. Incorpora4on expenses SPA can only be incorporated with a capital of at least 50000, in order to incorporate the requirements must be fulﬁlled: - shareholder must subscribe share capital in full -ContribuBons must be complied and 25% of contribu9ons must be paid in cash to a bank. If the company is incorporated by unilateral act the full amount must be paid. -Any authorizaBon and other condiBons must be duly in place Cash contribuBons must be paid before the instrument of incorporaBon is drawn up and they shall be held in a bank unBl the incorporaBon procedure is complete Registra4on with a company register: Remember, is the notary appointed to receive the instrument of incorporaBon, who is responsible for checking that legal requirements for incorporaBon have been met. So, the notary should carry out legality checks aimed at ensuring that the company being incorporated complies with the law and that does not go against law and order or morality. Eﬀects of drawing up the instrument of incorporaBon: -makes the contracBng parBes bound by the declaraBons made before the notary during the company’s incorporaBon phase -it obliges the notary to register the company with the relaBve companies register The documents providing evidence of compliance with the legal requirements is requested! once the company is registered in the companies register, acquires legal personality and it oﬃcially exists. Remember: -the company and therefore the company’s assets cannot be held liable for acBons taken in the name of the company which occurred before registraBon with the companies register. -even if certain acBons were carried out by future directors in order for the company to be held liable it is necessary for the body in charge to approve the completed transacBons afer the registraBon -before the registraBon it is forbidden to issue shares and the la`er may not be oﬀered to the public, except if the company is incorporated through public subscripBon. Nullity of companies limited by shares: Remember: before registraBon the company does not have legal personality, it is a contract between the founding shareholders that has the nature of a private transacBon desBned to have eﬀect only in the contracBng parBes Afer the registraBon, legal consequence of invalidity this Bme will not have eﬀect on the contracBng parBes but on the company’s organizaBon itselfà which is the sancBon? DISSOLUTION (DeﬁniBon of the acBvity carried out by the company) In three cases the company is declared invalid: -failure to draw up the instrument of incorporaBon as a public deed -illegality of the company’s object -failure to provide indicaBon in the instrument of incorporaBon of the company name or the contribuBons or the share capital amount or the company’s object Therefore, we can declare a company invalid only if it is registered. The declaraBon of nullity does not interfere with the acBvity undertaken by the enBty. This should act as a simple cause for the company’s dissoluBon and should have the same eﬀects. DirecBve (EU) 2017/1132 establishes the condiBons under which a company may be declared null. According to ArBcle 11, nullity can only be declared by a court of law and under speciﬁc circumstances. These include the absence of a properly executed instrument of incorporaBon, an unlawful or public policy-violaBng company object, missing essenBal informaBon in the incorporaBon document, failure to comply with naBonal rules regarding minimum capital requirements, incapacity of all founding members, or the number of founders being below the minimum required by naBonal law. Apart from these cases, no other grounds for nullity are recognized, meaning that nonexistence, absolute nullity, relaBve nullity, or other declaraBons of nullity are not applicable. Moreover, nullity does not automaBcally lead to the winding-up of the company unless dissoluBon is speciﬁcally required. Furthermore, nullity does not aﬀect the validity of commitments entered by the company, except in cases where the company is wound up. Single member companies: The regulaBon of single-member companies is outlined in European direcBves. Single-member limited liability companies (s.r.l.) are governed by DirecBve 2009/102/EC, while single-member joint-stock companies (s.p.a.) are regulated by ArBcle 11 of DirecBve (EU) 2017/1132. The 2003 Italian Company Law Reform allows for the incorporaBon of a single-member company limited by shares (ArBcle 2328 of the Civil Code). However, speciﬁc rules apply, such as the liability of the sole shareholder before company registraBon (ArBcle 2331), the requirement of a contract between the company and the sole shareholder to ensure transparency and prevent conﬂicts of interest (ArBcle 2362), regulaBons regarding contribuBons (ArBcle 2342), and speciﬁc disclosure requirements (ArBcles 2250 and 2362). CONTRIBUTIONS ContribuBons refer to the part of the shareholder’s equity that is dedicated to the business produc9vity. ContribuBons form the iniBal assets of the company. The aim of the regulaBon of contribuBons is to ensure the correct formaBon of share capital. Main purpose regulaBons: -ensure the company acquires the contribuBons -ensure that the shareholders ascribe the correct value of their contribuBons, to avoid their overall value being less than the total amount of share capital Remember: subscribed capital may only be formed by assets capable of economic assessment. However, an undertaking to perform work or supply services may not form part of those assets. In a company limited by shares can only be contributed cash or assets in kind or credits. CONTRIBUTIONS MUST BE MADE IN CASH Cash contribuBons Implies: obligaBon to pay 25% of the cash contribuBon at the Bme of incorporaBon of the company, or the enBre amount in the case of single member company. Once the company is incorporated the directors can ask any Bme shareholders to pay contribuBons. payment of the residual contribuBons must be made by both new shareholders and transferor, for the transfer of shares not fully paid. rules for non-payment contribuBons contribu4ons of assets in kind or credits: a report on any consideraBon other than in cash shall be drawn up before the company is incorporated or is authorized to commence business, by one or more independent experts appointed or approved by an administraBve or judicial authoriry. The report should at least contain a descripBon of each of the assets comprising the consideraBon as well as the methods of valuaBon used and shall state whether the values arrived by the applicaBon of those methods correspond at least to the number and nominal value or, where there is no nominal value, to the accountable part or the premium on the shares to be issued for them. Contribu4ons of assets in kind or credits: o ValuaBon report is done by an expert: must check that the value of contribuBons is equal to the value a`ributed to them for the purposes of calculaBng the share capital and any premium. If the value of the assets or receivable contributed is more than a ﬁfh lower than the value based on which the contribuBon was made then the company must reduce the share capital o Check by directors. o Possible non concordance of value/remedies o ContribuBons without valuaBon Poten4ally risk acquisi4on: If before the expiry of a Bme limit laid down by naBonal law of at least two years from the Bme the company is incorporated or authorized to commence the business, the company acquires any asset belonging to a person or company or ﬁrm, the acquisiBon should be examined and details of it published in the manner provided by arBcle 49, submiQed for the approval from the general mee9ng. Poten4ally risk acquisi4on: àthis discipline aims to prevent the company from acquiring assets not by way of contribuBon and thus without following the rules provided for them. à ﬁeld of applicaBon, Bme limit àexcluded operaBons. àliability SHARES Shares are the quota held by shareholders in companies limited by shares. Their sum represents the share capital of the company, and is divided into shares of equal value, so each share represents the same porBon of the nominal share capital. All shares must have an equal value, they must represent the same proporBon of nominal share capital. The nominal value of shares is the part of the share capital expressed in monetary amount, represented by each share. If shares are issued with nominal value then the arBcle of associaBon must specify the subscribed share capital, the total number of shares and the nominal value of each share Remember the company’s balance sheet does not aﬀect the nominal value of shares or the nominal share capital, these values may only be changed by amending the company’s instrument of incorporaBon. If shares are issued without nominal value, the arBcles of associaBon must only indicate the subscribed capital and the number of shares issued. Under no circumstances may the total value of contribuBons be less than the total share capital amount, share may not be issued for an amount that is higher than their nominal value (issued at a premium) Remember: the real value of shares is equal to the company’s assets divided by the number of shares and is conceptually diﬀerent from the issuing value. This value varies depending on the company’s proﬁts and loss posiBon, in fact the real value of shares can be used using the ﬁnancial statement. Shares can have a market value too, for listed shares is the exchange price of the shares resulBng from oﬃcial stock exchange lisBngs. There is equality of rights conferred to the shareholders, all shares have equal value and grants the owner a set of administraBve rights, rights which regard to the assets and mixed rights. Equality can be: - Rela9ve equality: SPA could issue diﬀerent categories of shares that grant diﬀerent right such as share with and without nominal value - Objec9ve equality: is not subjecBve, rights may depend on the number of shares held, in fact the posiBon and power of a person owning only one vote is very diﬀerent from one that owns one thousand From a subjecBve point of view, shareholder rights may be disBncted in four categories: 1. Rights independent of the number of shares held 2. Rights that compete only if one owns a given percentage of the share capital 3. Rights that compete only if one holds a shareholding for a given period 4. Rights that compete to each shareholder in proporBon to the number of shares Ordinary shares and special categories of shares: - Ordinary shares are those provided with the typical rights provided by the law - Special shares are provided with rights other than those typically provided by law. They can be created by statute or a subsequent amendment to it. The creaBon of special categories of shares implies a modiﬁcaBon in the internal organizaBon of the company. If special share categories exist, any resoluBons of the general meeBng that aﬀect the rights of a speciﬁc category must also be approved by the meeBng of that category. - Some special categories of shares are established by law. (ordinary shares) - Other special categories of shares may be issued freely by the company, provided they comply with certain legal limits (ArBcle 2348, paragraph 2, Civil Code). (special shares) - All shares within the same category must grant the same rights (ArBcle 2348, paragraph 3, Civil Code). Special Share Categories and Vo#ng Rights: The general rule is the "one share, one vote" principle, which can be modiﬁed by the company's bylaws. However, the law allows for a few excepBons: - Shares without voBng rights. - Shares granBng voBng rights limited to speciﬁc ma`ers. - Shares granBng voBng rights only upon the occurrence of certain events (provided they are not purely discreBonary). According to ArBcle 2351, paragraph 2, the total value of these shares (special category) must not exceed 50% of the company's share capital. VoBng rights may also be limited based on capital thresholds or assigned progressively (scaled voBng) depending on the number of shares held by a single individual. These are not a special category of shares but rather a voBng mechanism Bed to shareholding levels. àIn non-listed companies, shares may carry mulBple voBng rights (up to three votes), but only for speciﬁc ma`ers or events (provided they are not purely discreBonary). àListed companies are not allowed to issue such shares. However, they may grant increased voBng power (majority voBng, ArBcle 127-quinquies of the Consolidated Financial Act) to shareholders who have held the shares for a certain period. This beneﬁt applies to the shareholder, not to the shares themselves. Special Share Categories and Rights Related to Assets : Each share grants the right to a proporBonal share of net proﬁts (dividends) and equity resulBng from liquidaBon. This principle can also be modiﬁed. - Preferred shares grant priority in proﬁt distribuBon. - Deferred shares take losses before ordinary shares. - RestricBons apply, such as the prohibiBon of leonine clauses (which guarantee proﬁts or shield shareholders from losses). - In listed companies, dividends may be increased for certain share categories (ArBcle 127-quarter of the Consolidated Financial Act). Tracking Shares : These shares grant economic rights linked to the performance of a speciﬁc business sector (ArBcle 2350, paragraph 2, Civil Code). Savings Shares: These are special shares that represent securiBes but do not grant administraBve rights. 1. Italian companies with ordinary shares listed on regulated markets in Italy or the EU may issue non-voBng shares with special asset-related privileges. 2. The company's arBcles of incorporaBon must deﬁne the privileges, condiBons, limits, and rules for their exercise. They must also specify the rights of savings shareholders in case of exclusion from trading or share conversion. Circula4on of shares: Shareholdings can be represented by share cer9ﬁcates. diﬀerent rules apply to the circulaBon of shares depending on whether or not cerBﬁcates have been used. in addiBon, diﬀerent rules apply to listed companies. If the company has not issued share cerBﬁcates, to the circulaBon of shares will apply the rules provided for the transfer of the contract. So, share cerBﬁcates are documents that represent the shareholding. Are securiBes based on a contractual relaBonship. The rights and undertakings incorporated in the shares are not simply those menBoned on the cerBﬁcate, they also include the rights and undertakings governing the relaBonship between original holder and the issuer. Transfer of Shares: If shares are issued to the bearer, they can be transferred simply by delivering the share cerBﬁcate. However, if the company has issued registered share cerBﬁcates, ownership can be transferred in two ways: o Transfer (Trasfert): This method requires updaBng the shareholder's name both on the share cerBﬁcate and in the shareholders’ ledger. Only afer this update can the new shareholder exercise their rights. This method is rarely used, as it requires company involvement, making share transfers ineﬃcient. o Endorsement (Girata): The transferor and transferee sign the share cer9ﬁcate before a notary or another public oﬃcial. The buyer then presents the share cerBﬁcate to the company, which veriﬁes the conBnuous chain of endorsements. In this case, the new shareholder can exercise their rights even before their name appears in the shareholders' ledger. The company must update the register, but the shareholder’s name in the ledger is not strictly required for the exercise of rights. For listed companies, share transfers occur through an electronic system, where transacBons are recorded in accounts under the names of both the seller and the buyer. This process is known as dematerializaBon of securiBes. RestricBons on the Transfer of Shares: Certain limitaBons may apply to the transfer of shares, depending on legal regulaBons, company statutes, or agreements among shareholders. Legal Restric4ons: - Non-monetary contribu9ons: Shares paid for with assets other than cash cannot be transferred unBl their valuaBon has been approved by the company's directors. - Shares with ancillary services: If a share requires the holder to perform speciﬁc services, it cannot be transferred without the approval of the board of directors. Restric4ons in the Ar4cles of Associa4on: - Clauses prohibi9ng transfer: A company may include a clause forbidding the transfer of shares, but this restricBon cannot exceed ﬁve years. - Pre-emp9on clauses: Shareholders who wish to sell their shares must ﬁrst oﬀer them to exisBng shareholders before selling them to third parBes. Other Contractual Restric4ons (Shareholders' Agreements or Syndicates) : - Approval clauses: Some companies require board approval for share transfers. In cases where approval is denied, there must be provisions for the company to repurchase the shares or allow the seller to withdraw. - RedempBon clauses: These allow the company or other shareholders to repurchase shares under speciﬁed condiBons. - Blocking syndicates: Shareholder agreements may include clauses that restrict share sales. The consequences of violaBng these agreements depend on their enforceability. Company Transac4ons Involving Its Own Shares : SubscripBon of Own Shares A company cannot subscribe to its own shares under any circumstances. For example, if a company issues shares worth 1,000 and then subscribes to them itself, it essenBally lends itself 1,000 and later oﬀsets the debt (+1000 - 1000 = 0). This results in a zero-sum transacBon with no real capital contribuBon—only a nominal increase. Who is responsible if the ban is violated? Even if the company subscribes to its own shares improperly, the subscrip9on remains valid (to ensure the company receives the contribuBons). However, the following people must pay for the shares: - At the Bme of incorporaBon: Founding shareholders are responsible for paying the shares. - in a capital increase: Directors must pay for the shares. - In indirect subscripBons: If individuals subscribe to shares on behalf of the company, they will be treated as actual subscribers and held **jointly and severally liable**, along with the founders and directors. Purchase of Own Shares: Unlike subscripBon, purchasing shares already in circulaBon is allowed but subject to strict rules. Why is purchasing own shares problemaBc? Imagine a company with a nominal capital of 1,000 and a real capital of 1,000. If the company spends 1,000 to buy its own shares, the nominal capital remains unchanged, but the real capital becomes zero essenBally repaying shareholders instead of keeping capital within the company. To prevent ﬁnancial instability, the law imposes strict condiBons for repurchasing own shares: 1. The company can only use speciﬁc funds for the purchase. 2. The shares must be fully paid-up before repurchase. 3. The shareholders' meeBng must approve the purchase. What happens if these rules are violated? If the company buys shares without following the legal requirements, it must sell them within one year. If it fails to do so, the shares must be canceled, and the corresponding capital must be reduced. Restric4ons on Rights for Own Shares: To prevent companies from controlling their own voBng rights, certain restricBons apply: - VoBng rights are suspended for shares held by the company. -Dividends and pre-empBon rights related to these shares are proporBonally distributed among the other shareholders. - Selling these shares requires authorizaBon from the shareholders’ meeBng. THE SHAREHOLDER’S MEETING One of te characterisBcs pf an SPA is the presence of three bodies: -shareholder’s meeBng -administraBve body -internal control body Administra4on and control systems: - tradiBonal system (made od administraBve body and board of statutory audistors) - Two Ber system(made of supervisory body and management board) - One Ber system( made of board of directors and management control commi`ee) The shareholder’s meeBng is a collecBve body composed of the shareholders. Its funcBon is to form the will pf the company in the ma`ers reserved to its competence by law or by the bilaws. Remember sharehlolder’s meeBng decides according to the majority principle , calculated based on the percentage of the share capital held by each shareholder. The will express at shareholder’s meeBng is considered as the will of the company and inds all shareholders. Ordinary and extraordinary shareholder’s mee4ng: This disBncBon depends on the ma`er dicussed at the meeBng, and also on the system of administraBon and control adopted. Ordinary shareholder’s meeBng: - approves the ﬁnancial statement -appoints and removes directors, statutory auditors and chairman of the board of statutory auditors -determines the remuneraBon of directors and statutory auditors unless it is not provided by the bylaws - decides on the liability of directors and statutory auditors -decides on other ma`ers assigned by law to the competence of shareholder’s meeBng and on any authorizaBons required by the bylaws for the performance of acts of the directors without prejudice to the liability of the la`er for the acts performed

Document Details

Tags

Related

Summary

Full Transcript