Riassunto IECL: Partnerships, Companies, and European Company Law - PDF

ENTERPRISES LAW INTRODUCTION ============================ ### **Partnerships and Companies** Partnerships and companies are **organizations of persons and means** created by **private autonomy** for the **joint exercise of a productive activity**. They represent the **typical organizational structures** provided by the **legal system** for conducting business activities in an **associated form**. ### **Article 2082, Civil Code** ### **Key Elements of Business Activity** - - - ### **General Statute of the Entrepreneur** - - - - - ### **Distinctions Provided by the Civil Code Regarding Business Activities** - - - - - - - - - In addition to the **general entrepreneur statute**, depending on the type of entrepreneur, the special **commercial entrepreneur statute** also applies. This special statute includes: - - - ### **Article 2135 c.c. Agricultural Entrepreneur:** **A) Main Agricultural Activities:** Cultivation of land Sylviculture Animal breeding **B) Connected Activities:** Transformation, manipulation, conservation, commerce, exploitation of products obtained, predominantly, from an essentially agricultural activity. Supply of goods and services by using predominantly instruments or resources usually employed in agricultural activity - - ### **Article 2195 c.c. Commercial Entrepreneur:** The following are required to be registered in the business register who engage in: 1. 2. 3. 4. 5. ### **Article 2083 c.c. Small Entrepreneurs:** Small entrepreneurs are the direct cultivators of the land, artisans, small traders, and those engaged in a professional activity organized mainly with their own work and that of family members ### **Application Criteria of Insolvency Law** A **commercial entrepreneur** is **not subject to bankruptcy** if they meet the following three conditions, assessed over the three financial years prior to the date of filing the bankruptcy petition: 1. 2. 3. ### **Individual Entrepreneur and Enterprises in Collective Form** The category of entrepreneurs can be divided into: - - - - - - - ### **Article 2086 c.c.: Duty of the Entrepreneur** The **entrepreneur**, whether acting in a **corporate** or **collective form**, has a legal duty to establish an **organizational, administrative, and accounting structure** that is appropriate to the **nature and size of the enterprise**. This obligation is particularly relevant for: - - This legal duty ensures that enterprises are managed with foresight, allowing for early intervention in financial distress situations. The **Commercial Entrepreneur Statute** in Italian law encompasses several key areas: #### A) Legal Publicity and Business Register (Articles 2188 et seq. c.c.) The Business Register is a public database maintained by the Chambers of Commerce, containing essential information about businesses operating in Italy. It is divided into sections: - - Additionally, there are other special sections for entities like innovative start-ups, certified incubators, innovative SMEs, social enterprises, and entities involved in management and coordination activities. In Italian law, the **registration** of an entity in the **Business Register** can have varying effects, which are essential to understand: 1. 2. 3. 4. #### B) Accounting Records (Articles 2214 et seq. c.c.) Entrepreneurs engaged in commercial activities are required to maintain certain accounting records to ensure accurate financial tracking and legal compliance. According to Article 2214 of the Civil Code: - - These requirements ensure that the business\'s financial activities are transparent and verifiable. Notably, these obligations do not apply to small entrepreneurs, as defined in Article 2083 of the Civil Code. #### C) Statutory Agency (Articles 2203 et seq. c.c.) The Civil Code outlines specific roles for individuals who act on behalf of an entrepreneur: - - - ### Business Assets In Italian law, **business assets** (*azienda*) are defined under **Article 2555 of the Civil Code** as: This encompasses all resources, both tangible and intangible, that an entrepreneur arranges to operate their business. The Civil Code regulates several aspects concerning the transfer of a business: 1. 2. 3. 4. Regarding **distinctive signs**, Articles 2563 and following of the Civil Code outline: - - - EUROPEAN COMPANY LAW ==================== The European Union (EU) operates under a framework of competences defined by the Treaty on the Functioning of the European Union (TFEU). These competences delineate the areas in which the EU can legislate and take action, as well as those areas reserved for member states. ### Categories of Union Competence (Title I of the TFEU): 1. 2. 3. ### Company Law within the TFEU: Company law primarily falls under the EU\'s shared competence, particularly concerning the internal market. This allows both the EU and member states to legislate in this area, with member states exercising their competence to the extent that the EU has not. Article 2(5) and Article 6 of the TFEU outline areas where the EU has competence to carry out actions to support, coordinate, or supplement the actions of member states, but these do not specifically pertain to company law. ### Purpose of European Company Law (ECL): The objectives of ECL include: - - - - **Article 3 of the Treaty on European Union (TEU):** This article outlines the EU\'s objectives, emphasizing the establishment of an **internal market**, the promotion of **sustainable development**, a **competitive social market economy**, and the advancement of scientific and technological progress. It also highlights the Union\'s commitment to combating social exclusion and discrimination, promoting social justice and protection, ensuring equality between women and men, and protecting the rights of the child. Additionally, the EU aims to promote economic, social, and territorial cohesion, respect cultural and linguistic diversity, and establish an economic and monetary union with the euro as its currency. ### Internal Market The internal market of the European Union (EU) is founded on several key legal provisions within the Treaty on the Functioning of the European Union (TFEU). These provisions establish the framework for the free movement of goods, persons, services, and capital among member states. **Legal Bases:** 1. 2. - - 3. 4. 5. ### Freedom of Establishment The **freedom of establishment** is a fundamental principle enshrined in the Treaty on the Functioning of the European Union (TFEU), facilitating the mobility of businesses and professionals within the EU. This freedom is primarily governed by Articles 49 to 55 TFEU, with Article 26 emphasizing the establishment and functioning of the internal market. **Legal Basis:** - - **Key Provisions of Article 49 TFEU:** 1. 2. - - **Implications:** The freedom of establishment ensures that self-employed individuals, professionals, and legal entities legally operating in one Member State can: - - However, it is important to recognize that **companies established and/or operated in any of the EU member states are regulated by the Company Law of the Member States**; they are creature of the law. ### How do we know that a corporation is subject to the law of Member State? In the European Union (EU), determining which national laws govern a corporation involves two primary legal doctrines: the **incorporation theory** and the **real seat theory**. **1. Incorporation Theory:** Under the incorporation theory, a company is subject to the laws of the country where it is legally registered, regardless of where it conducts its actual business activities. This approach offers flexibility, allowing companies to choose a jurisdiction with favorable legal and regulatory frameworks. Common law countries, such as the United Kingdom, typically adhere to this theory. **2. Real Seat Theory:** Conversely, the real seat theory posits that a company is governed by the laws of the country where its central administration or principal place of business is located. This means that if a company\'s main operations are in a different country from where it was incorporated, it must comply with the legal requirements of the country where its actual headquarters are situated. Civil law countries, like Germany, have traditionally followed this approach. ### Article 54, TFEU 1.Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States. 2.\"Companies or firms\" means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making. ### What do we need to make the right of establishment effective? To make the **right of establishment** effective within the European Union (EU), it is essential to harmonize company laws across Member States. This harmonization ensures that businesses can operate seamlessly across borders, fostering a cohesive internal market. **Legal Framework:** - - 1. 2. 3. 4. To fully realize the **freedom of establishment** and the **freedom to provide services** as outlined in the Treaty on the Functioning of the European Union (TFEU), it is essential to establish a common legal framework for company law across all EU Member States. This framework does not necessitate the unification of national legislations into a single uniform law; rather, it requires that national laws share common basic principles. This objective can be achieved through the **approximation** or **harmonization** of laws, as specified in **Article 50(2) TFEU**. **Article 50 (par. 2) TFEU** states: This provision empowers the EU to issue directives aimed at harmonizing company laws, ensuring that while Member States retain their individual legal systems, they adhere to shared foundational principles. Such harmonization facilitates cross-border economic activities by reducing legal disparities and promoting a cohesive internal market. It\'s important to note that while company laws globally tend to converge due to similar business needs, certain legal institutions may vary significantly between states, reflecting unique cultural and legal traditions. Therefore, the EU\'s approach to harmonization seeks to balance the need for common standards with respect for national diversity. An effective corporate governance framework is essential for fostering a positive EU-wide business environment within the internal market. The harmonization of company law serves to promote the **freedom of establishment**, as outlined in Title IV, Chapter 2 of the Treaty on the Functioning of the European Union (TFEU), and to uphold the fundamental right to conduct a business, as enshrined in **Article 16 of the Charter of Fundamental Rights of the European Union**. The primary instrument for achieving these objectives is the **directive**. Directives are binding upon each Member State as to the result to be achieved, while allowing national authorities the discretion to choose the form and methods of implementation. This approach ensures that while common objectives are met across the EU, individual Member States can adapt Harmonizing company law also upholds fundamental rights such as the **freedom to conduct a business** (Article 16) and the **right to property** (Article 17) of the Charter of Fundamental Rights of the European Union. These rights ensure that businesses can operate freely and that possessions are protected within the EU. ### History of Directives Since the establishment of the European Community in 1957, the European Union (EU) has implemented a series of directives aimed at creating minimum standards for businesses across Member States. A central objective reiterated in each directive is to reduce barriers to the **freedom of establishment** within the EU by harmonizing fundamental laws. Harmonization ensures that businesses are not deterred by varying or more stringent national laws, while simultaneously providing a basic level of protection for investors in each Member State, preventing regulatory competition. **Key Directives in EU Company Law:** 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. ### **Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 (codification)** This directive consolidates several previous directives and is structured into two main titles: - - - - - - - - **Company Law Package:** The EU has introduced additional directives to further modernize and harmonize company law: - - **Directives Pertaining to Listed Companies:** The EU has also established directives focusing on listed companies to ensure transparency, shareholder rights, and market integrity: - - - - - ### Uniform Company Law The European Union (EU) has developed a series of regulations to establish uniform company law frameworks, facilitating seamless business operations across Member States. These regulations create EU-specific company structures and set common rules directly applicable to companies established under national laws. **Key EU Regulations in Company Law:** 1. 2. 3. 4. 5. **Proposed Regulations:** - - - - ### Current Level of Harmonization: The European Union (EU) has implemented several directives and regulations to harmonize company law across Member States. These efforts have led to the establishment of common standards in areas such as company formation, capital maintenance, mergers, and divisions. Notable instruments include the **Directive (EU) 2017/1132**, which codifies various aspects of company law, and the **Regulation (EC) No 2157/2001** on the Statute for a European Company (SE), providing a framework for companies operating on a European scale. ### Failed Attempts at Harmonization: Despite these efforts, certain initiatives have faced obstacles. For instance, the proposed **Fifth Company Law Directive**, which aimed to harmonize the structure of public companies and enhance shareholder rights, was ultimately abandoned due to disagreements among Member States. Similarly, the proposal for a **European Private Company (Societas Privata Europaea - SPE)** was withdrawn in 2013 after failing to gain unanimous support. ### Jurisprudence of the EU Court of Justice: The Court of Justice of the European Union (CJEU) has played a pivotal role in advancing harmonization through its rulings. Landmark cases such as **Centros Ltd v Erhvervs- og Selskabsstyrelsen (1999)** and **Überseering BV v Nordic Construction Company Baumanagement GmbH (2002)** have reinforced the freedom of establishment, allowing companies to incorporate in one Member State and operate in another. These decisions have effectively promoted a form of harmonization by enabling regulatory competition among Member States. ### Bottom-Up Harmonization: In addition to top-down legislative measures, harmonization has also occurred organically through market forces and mutual recognition. Companies often adopt best practices from other jurisdictions to remain competitive, leading to a convergence of corporate governance standards. This \"bottom-up\" approach complements formal harmonization efforts by fostering a more unified business environment across the EU. COMPANIES LIMITED BY SHARES =========================== A **company limited by shares** is a prevalent corporate structure in Italy and across Europe, characterized by several key features: 1. 2. 3. 4. ### Evolution of Italian Company Law Regulation: 1. 2. 3. 4. 5. ### Sub-Types of Companies Limited by Shares (Article 2325-bis, Italian Civil Code): Article 2325-bis of the Italian Civil Code distinguishes between two sub-types of companies limited by shares: 1. 2. - - ### (NEW) Article 2325-ter of the Civil Code provides specific criteria to identify companies whose shares are widely distributed among the public, yet not listed on regulated markets. These companies are subject to particular regulations due to their significant public interest. **Key Criteria Under Article 2325-ter:** 1. - - 2. - - - - **Exclusions:** Certain companies are not considered as having shares widely distributed among the public, even if they meet the above criteria: - - ### Applicability of Regulations: Based on their classification, companies limited by shares are subject to different regulatory frameworks: 1. 2. 3. 4. ### Incorporation In the Italian legal system, the incorporation of a **Società per Azioni (S.p.A.)**, or joint-stock company, can be achieved through two distinct methods: 1. 2. **1. Simultaneous Incorporation Procedure:** In this straightforward approach, the founders establish the company by directly executing the incorporation deed. The steps involved are: 1. 2. Notably, the requirement for judicial authority approval was abolished in 2000, streamlining the incorporation process. **2. Incorporation through Public Subscription:** This method involves a public solicitation to raise capital before the company\'s formal establishment. The process, governed by Articles 2333 to 2336 of the Italian Civil Code, includes: 1. 2. 3. 4. 5. Throughout this process, promoters have specific obligations and liabilities, as detailed in Articles 2337 to 2341 of the Civil Code. Due to its complexity and the responsibilities placed on promoters, this method is seldom utilized in practice. the **instrument of incorporation** for a **Società per Azioni (S.p.A.)**---a joint-stock company---can be established either through a **contractual agreement among multiple parties or as a unilateral act by a single founder**. This flexibility represents a partial deviation from Article 2247 of the Italian Civil Code, which traditionally requires a contract (agreement) for the formation of a company. **Form of the Act:** The instrument of incorporation must be executed as a public deed, authenticated by a notary, under penalty of invalidity. This formal requirement ensures the legal validity and enforceability of the document. **Directive (EU) 2017/1132:** At the European level, **Directive (EU) 2017/1132**, specifically Article 10, mandates that in Member States lacking preventive administrative or judicial control at the time of a company\'s formation, the instrument of constitution, the company statutes, and any amendments thereto must be drawn up and certified in due legal form. This provision aims to harmonize company formation procedures across the EU, ensuring legal certainty and uniformity. Hence both Italian national law and European Union directives emphasize the necessity of formalizing the instrument of incorporation through a public deed or equivalent legal certification. ### The content of the instrument of incorporation Both **Directive (EU) 2017/1132** and **Article 2328, paragraph 2, of the Italian Civil Code** outline specific information that must be included in the instrument of incorporation. **Directive (EU) 2017/1132 -- Article 3: Compulsory Information in the Statutes or Instruments of Incorporation** This directive mandates that the statutes or instrument of incorporation of a company must provide at least the following details: 1. 2. 3. - - 4. 5. **Directive (EU) 2017/1132 -- Article 4: Additional Information in the Statutes, Instruments of Incorporation, or Separate Documents** Further, the directive specifies that the following information should appear either in the statutes, the instrument of incorporation, or a separate document published according to national laws: 1. 2. - - 3. 4. 5. 6. 7. 8. 9. **Article 2328, Paragraph 2, of the Italian Civil Code: Mandatory Content of the Instrument of Incorporation** Italian law specifies that the instrument of incorporation, which must be executed as a public deed, should include: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. **Instrument of Incorporation and Articles of Association:** - **Conditions for Incorporation (IT):** - - 1. 2. 3. **Minimum capital EU directive 2017/1132 Article 45** Directive (EU) 2017/1132 consolidates various aspects of company law within the EU. Article 45 specifically addresses the minimum capital requirements for public limited liability companies: 1. - 2. - **Incorporation Process Under Italian Law** The Italian Civil Code outlines specific procedures and requirements for the incorporation of companies, particularly joint-stock companies (Società per Azioni - S.p.A.). Key articles include: - - - - - - - - - - - - - - - - - - ### Directive (EU) 2017/1132 Article 13 Directive (EU) 2017/1132, specifically Article 14, mandates that Member States ensure companies disclose certain essential documents and particulars to promote transparency and protect stakeholders. **Key Documents and Particulars to be Disclosed:** 1. 2. 3. 4. - - 5. 6. 7. 8. 9. 10. 11. ### BRIS The **Business Registers Interconnection System (BRIS)** is an EU initiative that enhances transparency and facilitates access to company information across Member States, as well as in Iceland, Liechtenstein, and Norway. Launched in 2017, BRIS connects national business registers, streamlining data exchange on companies and their branches within the EU. Through the **European e-Justice Portal**, BRIS provides a centralized search tool, allowing users to find essential company details such as legal names, registration numbers, registered offices, and information on legal representatives. This system ensures standardized company data across the EU, making it easier for businesses and authorities to verify information. A key advantage of BRIS is its role in simplifying **cross-border company procedures**, particularly in mergers and branch registrations. By automating data sharing between national registers, BRIS reduces administrative burdens and associated costs, creating a more efficient and transparent business environment. ### Opposability of Company Disclosures to Third Parties under Directive (EU) 2017/1132 Directive (EU) 2017/1132 establishes that companies can enforce disclosed documents and information against third parties only after proper disclosure, unless the company can prove that the third party was already aware of the information. For transactions occurring within 15 days following the disclosure, if a third party can demonstrate that it was impossible for them to have known about the disclosed information, the company cannot enforce these documents against them. Conversely, third parties may rely on documents and information that have not yet been disclosed, unless non-disclosure renders such documents ineffective. In Italy, this principle is implemented through the requirement of publication in the Business Register. The Italian Civil Code mandates that certain company documents and information be filed with the Business Register to ensure their enforceability against third parties. This process aligns with the directive\'s aim to promote transparency and protect third-party interests in corporate dealings. *EXAMPLE Let\'s say Alpha S.p.A., an Italian company, decides to change its legal representative. On March 1st, the company\'s board appoints a new CEO, Mr. Rossi, replacing the previous CEO, Mr. Bianchi. The company files this change with the Business Register on March 2nd, and the update is published on March 5th. According to Directive (EU) 2017/1132, the company can only enforce this change against third parties after publication, unless it can prove that a third party was already aware of it. Now, on March 10th, a supplier, XYZ Ltd., unaware of the change, signs a contract with Mr. Bianchi (the former CEO). Later, Alpha S.p.A. claims that the contract is invalid because Mr. Bianchi was no longer authorized to represent the company. Legal Outcome: XYZ Ltd. can argue that it was impossible for them to know about the change because it occurred less than 15 days after publication. If the court agrees, the contract remains valid.* ### **Liability for Pre-Registration Transactions under EU and Italian Law** Before a company is officially registered, it **does not yet have legal personality** and, therefore, **cannot independently bear legal obligations**. This means that any operations carried out **in the name of the company before registration** are legally attributed to the individuals acting on its behalf. #### **EU Law: Directive (EU) 2017/1132 -- Article 7** According to **Article 7 of Directive (EU) 2017/1132**, if transactions are conducted **before the company has acquired legal personality** and the company does not later assume these obligations, **the individuals who acted in the company's name are personally liable**. This liability is **joint and several**, meaning that creditors can demand full payment from any one of the responsible individuals. However, if the company **explicitly assumes these obligations after registration**, the liability shifts to the company, releasing the individuals who initially undertook the transactions. #### **Italian Law: Article 2331 of the Civil Code** Under **Article 2331 of the Italian Civil Code**, similar principles apply. The key aspects of pre-registration liability are: - - - - ### Nullity **Nullity of Companies Limited by Shares under Italian Law** In Italian company law, the concept of nullity (nullità) for companies limited by shares (Società per Azioni - S.p.A.) is addressed with the aim of ensuring legal certainty and the stability of corporate structures. **Pre-Registration Phase:** Before a company is registered in the Business Register, it lacks legal personality and exists solely as a contractual agreement among its founders. During this phase, the provisions of contract law apply, and the contract can be declared void or voidable based on the causes outlined in Article 1418 of the Italian Civil Code. This article specifies that a contract is void if it is contrary to mandatory rules, lacks essential elements, has an unlawful cause or object, or in other cases expressly provided by law. **Post-Registration Nullity:** Once the company is registered and acquires legal personality, the grounds for declaring its nullity are strictly limited. Article 2332 of the Italian Civil Code specifies the circumstances under which a company can be declared null and void: - - - SIMPLY EXPLAINED Before a company is officially **registered**, it **does not legally exist** as a separate entity. Instead, it is just a **contract** between the founders. Since there is no company yet, the **rules of contract law** apply. This means that if there is a serious legal issue---such as missing essential elements (agreement, purpose, object, or required form) or violating a mandatory law---the contract **can be declared void** (null). This is based on **Article 1418 of the Italian Civil Code**. However, once the company **is registered**, it becomes a **legal person** that can own property, sign contracts, and do business with third parties. If contract law nullity rules continued to apply **indefinitely**, it would create **uncertainty** because a company could be declared void at any time. Imagine if a company could suddenly be erased due to an old contract issue---this would **disrupt business transactions, make contracts unreliable, and put third parties at risk**. To prevent this instability, the law **limits** the reasons for declaring a company void **after registration**. A registered company can only be nullified in a **few serious cases**, such as **not having a proper incorporation document**, an **illegal corporate purpose**, or missing key legal elements like a name, shareholder contributions, or capital. Even if nullity is declared, it **does not affect past transactions**---instead, the company enters **liquidation** to protect creditors and business partners. **Conditions for Declaring the Nullity of a Company under Directive (EU) 2017/1132** Directive (EU) 2017/1132 establishes specific conditions under which a company can be declared null and void, aiming to harmonize company law across Member States and ensure legal certainty. According to Article 11 of the Directive, the nullity of a company must be pronounced by a court decision and can only be based on the following grounds: 1. 2. 3. 4. 5. 6. Beyond these specified grounds, the Directive prohibits Member States from declaring a company null and void for any other reasons, thereby promoting stability and predictability in corporate affairs. **Grounds for Nullity of a Company under Article 2332 of the Italian Civil Code** Article 2332 of the Italian Civil Code specifies the limited circumstances under which a company, after its registration, can be declared null and void. These grounds are narrowly defined to ensure legal certainty and stability in corporate affairs. The specified grounds are: 1. 2. 3. - - - - The absence of any of these critical elements in the incorporation documents constitutes a ground for declaring the company null. These provisions align with Article 11 of Directive (EU) 2017/1132, which harmonizes the conditions for nullity of companies across EU Member States. **Consequences of Declaring a Company\'s Nullity under Directive (EU) 2017/1132** Article 12 of Directive (EU) 2017/1132 outlines the effects and procedures following a court\'s declaration of a company\'s nullity: 1. 2. 3. 4. 5. **Consequences of Company Nullity under Italian Law (Article 2332, Paragraphs 2-5 of the Italian Civil Code)** Article 2332 of the Italian Civil Code outlines the specific consequences when a company is declared null after its registration: 1. 2. 3. 4. ### Single-Member Companies in European and Italian Company Law Single-member companies, where all shares are held by a single individual or entity, are recognized and regulated under both European Union directives and Italian national law. **European Union Framework** The EU\'s approach to single-member companies is primarily outlined in **Directive 2009/102/EC** of 16 September 2009. This directive allows for the formation of a company with a single member from the outset or for an existing company to become single-member if all its shares are acquired by one person. Key provisions include: - - - For public limited companies (Società per Azioni - S.p.A.), **Directive (EU) 2017/1132** addresses single-member scenarios, particularly in Article 11, which outlines conditions for nullity of a company. **Italian Company Law** Following the 2003 Company Law Reform, Italy allows the incorporation of single-member companies, both as private limited liability companies (Società a Responsabilità Limitata - S.r.l.) and public limited companies (S.p.A.). Specific rules apply to these entities: 1. 2. 3. 4. **Consequences of Non-Compliance** Failure to adhere to the requirements regarding capital contributions and disclosure can lead to significant consequences under Article 2325, paragraph 2, of the Italian Civil Code. Notably, the sole shareholder may lose the benefit of limited liability, becoming personally liable for the company\'s obligations incurred during the period of non-compliance. **Applicability to Subsequent Sole Ownership** The aforementioned rules apply not only at the time of incorporation but also if a company\'s shares become wholly owned by a single person after its formation. In such cases, the company must comply with the same disclosure and capital requirements to maintain the protections afforded by limited liability status. These regulations aim to balance the flexibility of single-member company structures with safeguards that protect creditors and ensure transparency in corporate operations. ### Contributions and Share Capital in Italian Company Law In Italian company law, **share capital** represents the total value of assets that shareholders commit to the company, serving as a financial foundation and a guarantee for creditors. **Minimum Capital Requirements:** - - - - **Purpose of Share Capital:** The primary purposes of share capital are: 1. 2. **Ensuring Effective and Genuine Contributions:** Italian law emphasizes the importance of the **effectiveness** and **true value** of contributions to maintain the integrity of the share capital: - - **Contributions to Share Capital in Italian Company Law** In Italian company law, contributions to a company\'s share capital are subject to specific regulations to ensure the integrity and reliability of the capital structure. **Permissible Forms of Contribution:** 1. 2. **Prohibited Contributions:** Italian law prohibits contributions in the form of services or work. Article 2342, paragraph 5, of the Italian Civil Code explicitly states that an obligation to perform work or supply services cannot be used as a contribution to the company\'s capital. This aligns with Article 46 of Directive (EU) 2017/1132, which mandates that subscribed capital may only consist of assets capable of economic assessment, explicitly excluding undertakings to perform work or supply services. **Cash Contributions** - - - - - - - **Contributions of Assets in Kind or Credits in Italian Company Law** In Italian company law, contributions to a company\'s share capital can include assets in kind or credits. To ensure the accuracy and reliability of these contributions, specific procedures are mandated, aligning with European directives. **Expert Valuation Requirement:** Article 2343 of the Italian Civil Code requires that any contributions of assets in kind or credits undergo a valuation by an independent expert. This expert is appointed by the court in the jurisdiction where the company has its registered office. The expert\'s sworn report must include: - - - This process ensures that the company\'s share capital accurately reflects its actual economic value, thereby protecting shareholders and creditors. **Simplified Valuation Procedure:** Article 2343-ter of the Italian Civil Code provides a simplified procedure for certain types of contributions, such as securities or money market instruments. In these cases, the law allows for a valuation without the need for a court-appointed expert, provided specific conditions are met. This streamlined approach facilitates capital contributions while maintaining safeguards against overvaluation. **Alignment with Directive (EU) 2017/1132:** These Italian provisions align with Article 48 of Directive (EU) 2017/1132, which mandates that a report on any consideration other than in cash be prepared before a company is incorporated or authorized to commence business. The directive specifies that the report should be drawn up by one or more independent experts appointed or approved by an administrative or judicial authority. The report must contain a description of each asset comprising the consideration, the valuation methods used, and a statement confirming that the values correspond at least to the nominal value of the shares to be issued. By adhering to these procedures, Italian company law ensures that contributions of assets in kind or credits are accurately valued, maintaining the integrity of the company\'s share capital and protecting the interests of all stakeholders. **Potential Discrepancies in Valuation: Remedies** To address possible discrepancies between the declared value of non-cash contributions and their actual worth, Italian law provides specific remedies: 1. 2. 3. ### Potentially Risky Acquisitions **Directive (EU) 2017/1132 -- Article 52: Substantial Acquisitions After Incorporation\ **To prevent conflicts of interest and safeguard a company's capital integrity, **Article 52** of **Directive (EU) 2017/1132** regulates acquisitions made by a company shortly after its incorporation. It states that if a company acquires an asset worth at least **10% of its subscribed capital** from certain related parties (such as founders, directors, or shareholders) **within two years of its incorporation**, the transaction must be: - - - However, these requirements **do not apply** to: - - - Member States can extend these rules to transactions involving shareholders or other related persons to enhance corporate safeguards. **Italian Company Law -- Article 2343-bis c.c.\ **Italy has adopted similar protections under **Article 2343-bis of the Italian Civil Code**, aiming to prevent companies from **circumventing capital contribution rules** by acquiring assets outside the normal contribution process. The key aspects of this regulation include: 1. - - 2. - - - 3. - - ### Shares with Obligations of Ancillary Performance in Italian Company Law In Italian company law, **Article 2345 of the Civil Code** allows for the creation of shares that impose additional obligations, known as **\"prestazioni accessorie\"** or ancillary performances, on shareholders. These ancillary obligations are non-monetary duties that shareholders agree to perform in addition to their primary obligation to contribute capital. **Key Features:** 1. - 2. - - 3. - - 4. - **Purpose and Benefits:** - - - ### SHARES In Italian company law, shares represent the portions of ownership held by shareholders in companies limited by shares, including società in accomandita per azioni (s.a.p.a.). The aggregate of these shares constitutes the company\'s share capital, which is divided into shares of equal value. Consequently, each share represents an identical fraction of the nominal share capital. According to Article 2346, paragraph 4, of the Italian Civil Code, each shareholder is allocated a number of shares proportional to the portion of the share capital they have subscribed, ensuring that the value of the shares does not exceed the value of their contribution. However, the company\'s bylaws (statute) may stipulate a different allocation of shares. **Main Features of Shares:** - - - - Article 2348, paragraph 1, of the Civil Code emphasizes that shares must be of equal value and confer equal rights to their holders. However, it **also allows for the creation of different categories of shares with varying rights**, provided this is specified in the statute or through subsequent modifications. In such cases, the company can determine the specific rights associated with each category, as long as all shares within the same category confer equal rights. **Valuation and Rights of Shares in Italian Company Law** shares can be issued with or without a nominal value. The nominal value represents the portion of the share capital attributed to each share and is expressed in monetary terms. In contrast, shares without a nominal value do not have this specific monetary designation. **Valuation of Shares:** - - - **Equality of Rights Conferred to Shareholders (Article 2348, Paragraph 1, Italian Civil Code):** Each share typically grants the owner a set of rights, which can be categorized as follows: - - - **Relative Equality (Article 2348, Paragraph 2, Italian Civil Code):** While the general principle is that each share confers equal rights, the law allows for the creation of different categories of shares that grant varying rights. This means a società per azioni (S.p.A.) can issue multiple classes of shares with distinct rights, provided such distinctions are outlined in the company\'s bylaws. **Objective Equality:** This principle ensures that all shares within the same category grant identical rights. It\'s important to note that this equality is objective, not subjective; the rights associated with shares may depend on the number of shares held by a shareholder. **Subjective Classification of Shareholder Rights** Shareholder rights can be subjectively categorized based on specific conditions related to shareholding. The primary classifications are: 1. - 2. - 3. - 4. - **Indivisibility and Independence of Shares in Italian Company Law** Shares possess specific characteristics that define their nature and function within a company\'s capital structure. Two fundamental attributes are the indivisibility and independence of shares. - - **Ordinary Shares and Special Categories of Shares** Shares are primarily classified into two categories: ordinary shares and special categories of shares. 1. 2. Certain special categories of shares are explicitly provided for by law, while others can be issued with considerable autonomy by the company, provided they adhere to specific legal limits: Article 2348, paragraph 2, of the Italian Civil Code states that **a company, within the limits set forth by law, can freely determine the content of the various categories of shares**. However, **all shares within the same category must confer identical rights**, as mandated by Article 2348, paragraph 3, of the Civil Code. **Special Categories of Shares and Voting Rights in Italian Company Law (Article 2351 c.c.)** The principle of \"one share, one vote\" serves as the standard framework, meaning each share typically grants its holder one vote in shareholder meetings. However, this principle is not absolute and **can be modified through the company\'s bylaws** to create special categories of shares with varying voting rights, as outlined in Article 2351 of the Italian Civil Code. **Types of Special Share Categories:** 1. 2. 3. **Legal Limitations:** Article 2351, paragraph 2, of the Italian Civil Code imposes a limitation on the issuance of shares with restricted or conditional voting rights. Specifically, the **total value of such shares may not exceed 50% of the company\'s share capital**. This ensures that a majority of the share capital retains standard voting rights, maintaining a balance between flexibility in capital structuring and shareholder democracy. **Voting Rights Based on Shareholding Quantity:** Companies may also implement mechanisms that limit voting rights based on the number of shares held by a single person. For instance, a **cap can be established where voting rights are limited once a shareholder exceeds a certain percentage of total shares**, or a scaled voting system can be applied, where the number of votes per share decreases as the number of shares held increases. It\'s important to note that **these mechanisms are not considered special categories of shares**, as the limitations are related to the quantity of shares held by an individual rather than the inherent characteristics of the shares themselves. **Special Share Categories and Voting Rights in Italian Company Law (Article 2351 c.c.)** In Italian company law, the principle of \"one share, one vote\" serves as the standard framework, meaning each share typically grants its holder one vote in shareholder meetings. However, this principle is not absolute and can be modified through the company\'s bylaws to create special categories of shares with varying voting rights, as outlined in Article 2351 of the Italian Civil Code. **(new) Unlisted Companies:** For unlisted companies, Article 2351, paragraph 4, of the Italian Civil Code, as introduced by the so-called \"Legge Capitali,\" **allows the issuance of shares granting multiple voting rights**. Each share can carry up to a maximum of 10 votes. These multiple voting rights can be: - - It\'s important to note that the total value of shares with such enhanced voting rights may not exceed 50% of the company\'s share capital, ensuring that a balance is maintained between shares with standard and enhanced voting rights. **Listed Companies:** **Listed companies** are not permitted to issue shares with multiple voting rights as described above. Instead, they **can implement mechanisms to reward long-term shareholding through increased voting rights**, known as \"voto maggiorato,\" as per Article 127-quinquies of the Consolidated Law on Finance (TUF). This mechanism allows shareholders who have held their shares for a specified continuous period to receive additional voting rights. Initially, after an uninterrupted holding period of at least 24 months, shareholders are entitled to two votes per share. Subsequently, for each additional 12-month period of continuous ownership, an additional vote per share can be granted, up to a maximum of 10 votes per share. This structure incentivizes long-term investment and stability within the company\'s shareholder base. It\'s crucial to understand that this increased voting right is attributed to the shareholder based on the duration of their shareholding, not to the shares themselves. Therefore, this mechanism **does not create a special category of shares** but rather rewards shareholders\' loyalty over time. **Special Categories of Shares and Economic Rights (Article 2350 c.c.)** In Italian company law, shares generally confer economic rights related to a company\'s assets, such as profit distribution and liquidation proceeds. However, different categories of shares can modify these rights, offering preferential treatment or limitations on losses. These special share categories are regulated by Article 2350 of the Italian Civil Code. - - ### **Types of Special Shares with Economic Rights:** - - - - - - - - - - - - - - - - - - - - - - - - - - ### Circulation of Shares Italian company law regulates the circulation of shares based on whether they are represented by certificates and whether the company is listed or unlisted. ### **1. Share Certificates and Their Legal Nature** - - - - - - ### **2. Transfer of Shares** The method of transferring shares depends on whether **certificates have been issued** and whether the company is **listed or unlisted**. #### **A. Transfer of Shares Without Certificates (Art. 1406 et seq., c.c.)** - - #### **B. Transfer of Shares With Certificates** If share certificates exist, the transfer can occur in two ways: 1. - - - - - 2. - - - ### **3. Transfer of Listed Shares** - - - ### Restrictions on the Transfer of Shares In Italian company law, the transferability of shares can be subject to various restrictions arising from legal provisions, the company\'s articles of association, and shareholders\' agreements. **A. Legal Restrictions** 1. 2. **B. Restrictions Provided by the Articles of Association (Art. 2355-bis c.c.)** For registered shares and in cases where no share certificates are issued, the articles of association may impose specific limitations on share transfers: 1. 2. 3. - - 4. **C. Restrictions Contained in Shareholders\' Agreements** Shareholders may enter into agreements that impose additional restrictions on share transfers, commonly known as \"blocking syndicates.\" These agreements can include: - - **Enforceability and Consequences of Breach** The enforceability of these restrictions depends on their nature: - - ### Company transactions involving own shares ### **Subscription of Own Shares (Prohibited Without Exception)** A company **cannot subscribe to its own shares** at the moment of incorporation or during a capital increase. The rationale is that if a company subscribes to its own shares, it essentially advances money to itself, resulting in a **zero-sum operation**---no real capital increase occurs, only a nominal change. **\"subscribing to shares\"** refers to the process where an investor commits to purchasing newly issued shares directly from a company, typically during events like an initial public offering (IPO) or a rights issue. This commitment is formalized through a **subscription agreement**, which outlines the terms of the investment, including the number of shares and the price per share. **Consequences of Breach** If a company illegally subscribes to its own shares, the subscription remains **valid** to ensure that the company can still acquire the contributions. However, liability for payment falls on specific parties: - - - ### **Purchase of Own Shares (Regulated Under Article 2357 c.c.)** While **subscription** is completely forbidden, the **purchase** of own shares (i.e., shares that are already in circulation and owned by someone) is permitted under strict conditions. **Potential Issues with Own Share Purchases:** If a company buys its own shares using its available capital, the **nominal capital remains unchanged**, but the **real capital decreases**, essentially nullifying shareholders' contributions. However, in certain cases, such operations may provide **benefits to the company**, such as stabilizing stock prices or facilitating buybacks. **Legal Conditions for Purchasing Own Shares (Article 2357 c.c.)** A company can only purchase its own shares if the following conditions are met: 1. 2. 3. #### **Consequences of Non-Compliance** - - #### **Exceptions (Article 2357-bis c.c.)** There are exceptions where these rules do not apply, such as when the company **buys back shares to reduce its share capital** as part of a corporate restructuring. ### **Rules on the Exercise of Rights for Own Shares** To **prevent directors from controlling the company** through the ownership of its own shares, the law imposes several restrictions on these shares: - - - ### Internal Bodies of SPAs **Governance Structure of Italian Joint-Stock Companies (Società per Azioni - S.p.A.)** A Società per Azioni (S.p.A.) is characterized by the mandatory presence of three distinct internal bodies, each endowed by law with specific functions and powers: 1. 2. 3. **Administration and Control Systems** Italian law provides S.p.A.s with three models of corporate governance, allowing companies to choose the system that best aligns with their characteristics and needs: 1. 2. 3. ### Shareholders meeting The Shareholders\' Meeting is a collective body composed of the company\'s shareholders. Its primary function is to **form the will of the company on matters reserved to its competence** by law or the bylaws. Decisions are made according to the **majority principle**, meaning that resolutions passed in accordance with the deliberative procedures are binding on all shareholders, including those who are absent, dissenting, or abstaining. This ensures that the will expressed by the majority in the meeting is considered the will of the company. #### ordinary meeting and extraordinary meeting The Shareholders\' Meeting is categorized into two types based on the matters assigned to its competence: 1. - - - - - - 2. - - - 3. It\'s important to note that, depending on the system of administration and control adopted by the company, certain competencies assigned to the Ordinary Shareholders\' Meeting may vary. #### General Meeting and Special Class Shareholders\' Meetings In Italian corporate law, the structure of shareholders\' meetings varies depending on the classes of shares a company has issued: 1. 2. #### Shareholdings Meeting Procedure The process for calling and conducting shareholders\' meetings in an S.p.A. is governed by specific provisions of the Italian Civil Code, ensuring structured and lawful decision-making within the company. **1. Convening the Shareholders\' Meeting** - - 1. 2. 3. - - - - **2. Notice of Call** - - - - - **3. Participation in the Shareholders\' Meeting** - - - - - - **4. Plenary Shareholders\' Meeting (Assemblea Totalitaria)** A shareholders\' meeting is considered duly constituted, even if not formally convened, when the entire share capital is represented, and all directors and statutory auditors are either present or informed and none opposes the discussion of the items on the agenda. In such cases, the meeting can validly deliberate on any matter within its competence (Article 2366, paragraph 4, Italian Civil Code). ### Shareholders meeting for Listed Companies **Right to Request Integration of the Agenda** Shareholders who, individually or collectively, represent at least one-fortieth (2.5%) of the share capital have the right to request additions to the agenda of a shareholders\' meeting. This request must be submitted in writing within ten days following the publication of the meeting notice. The request should clearly specify the additional items proposed for discussion. The company is then obligated to publish an updated agenda in the same manner as the original notice, ensuring all shareholders are informed of the new items to be addressed. **Right to Submit Proposals on Existing Agenda Items** In addition to proposing new items, shareholders holding at least 2.5% of the share capital can submit resolution proposals concerning matters already included in the meeting\'s agenda. These proposals must also be presented within ten days of the meeting notice\'s publication. The company is required to disclose these proposals to the other shareholders, facilitating informed decision-making during the meeting. ### Constitution of the Shareholders\' Meeting and Validity of Resolutions In Italian corporate governance, the effectiveness of a shareholders\' meeting and its resolutions hinges on specific quorum requirements and procedural protocols. **1. Quorum Requirements** - - **2. System of Successive Calls** To facilitate the adoption of resolutions, Italian law permits a system of successive calls (first call, second call, etc.), with quorum requirements adjusted accordingly. - - - - - - - ![](media/image4.png) ### The Chairman of the Shareholders\' Meeting The chairman presides over the shareholders\' meeting, ensuring that proceedings are conducted in an orderly and efficient manner. Typically, the **chairman of the board of directors assumes this role**. In their absence, the vice-chairman or another designated director may fulfill this function. The chairman\'s responsibilities include **declaring the meeting open, guiding the discussion according to the agenda, facilitating voting procedures, and addressing any procedural issues that may arise.** ### The Secretary The secretary is responsible for **documenting the proceedings of the shareholders\' meeting**. This includes recording attendance, noting the resolutions passed, and capturing the outcomes of votes. The minutes should accurately reflect the discussions and decisions made during the meeting, serving as an official record. ### The Right to Request Postponement of the Meeting Shareholders may have the **right to request the postponement of a meeting** under certain circumstances. For instance, if shareholders holding a specified percentage of voting rights believe that additional time is needed to consider the matters at hand, they can request a postponement. The specific procedures and requirements for such a request are typically outlined in the company\'s bylaws or governing documents. ### The Minutes The minutes of the shareholders\' meeting are a vital **record that captures the essential details of the proceedings**. They should include the date, time, and location of the meeting; a list of attendees; a summary of discussions; the exact wording of resolutions proposed and adopted; and the results of any votes taken. The minutes serve as an **official record and may be referenced in future legal or corporate governance contexts**. Once prepared, the minutes are typically signed by both the chairman and the secretary to authenticate their accuracy and completeness. ### Representation at Shareholders\' Meetings in Non-Listed Companies (Article 2372 of the Italian Civil Code) In non-listed companies, shareholders may appoint representatives to attend and vote at shareholders\' meetings on their behalf. However, Article 2372 of the Italian Civil Code outlines specific provisions regarding such representation. #### Closed Companies: Exclusion or Restriction of Representation In **closed companies**, the **company\'s bylaws may exclude or limit the ability of shareholders to be represented at meetings**. This means that, unless the bylaws explicitly allow representation, shareholders are generally expected to attend meetings personally. The rationale behind this provision is to encourage direct participation and ensure that decisions are made by those directly involved in the company. #### Proxies (Delega) When representation is permitted, it must be granted through a **written proxy (delega**). The proxy **cannot be issued with the name of the representative left blank** and is always revocable, regardless of any agreement to the contrary. The representative may only delegate their authority to another person if explicitly stated in the proxy. #### Subjective Limits Certain individuals are prohibited from serving as representatives at shareholders\' meetings. Specifically, **representation cannot be granted to members of the company\'s administrative or control bodies, employees of the company, or companies controlled by the company, nor to members of their administrative or control bodies or their employees**. These restrictions aim to prevent conflicts of interest and ensure impartial decision-making. #### Quantitative Limits There are also limits on the number of shareholders a single individual can represent in a meeting. **An individual cannot represent more than twenty shareholders**. However, for companies that make use of the capital market, the limits are higher (not included in the slides): - - - ### Abuse of majority in the exercise of voting rights **Conflicts of Interest Between Shareholders and the Company (Article 2373 c.c.)** Article 2373 c.c. stipulates that a **shareholders\' resolution is void if it is adopted with the determining vote of shareholders who have, on their own behalf or on behalf of third parties, an interest in conflict with that of the company, and if such resolution could cause damage to the company.** This provision aims to prevent shareholders from exercising their voting rights to pursue personal interests that conflict with the company\'s interests. For instance, a shareholder might vote for a transaction that benefits a business they own, to the detriment of the company. In such cases, the resolution can be challenged and declared void to protect the company\'s welfare. **Abusing Majority Power to the Detriment of the Minority** Beyond conflicts of interest, majority shareholders may also abuse their voting power by passing resolutions that, while not directly conflicting with the company\'s interests, unfairly prejudice minority shareholders. This can occur through actions such as: - - - Italian jurisprudence recognizes that such actions constitute an abuse of majority power. The Italian Supreme Court has affirmed that a majority abuse can invalidate a resolution made by shareholders if the resolution lacks justification in the company's interest or is the result of intentional fraudulent activity by the majority aimed at harming the rights of minority shareholders. ### Voting syndicates (shareholders agreements) Voting syndicates, commonly known as shareholders\' agreements, are contractual arrangements among shareholders to coordinate their actions and influence the governance of a company. In Italy, these agreements are prevalent in both listed and non-listed companies and serve various strategic purposes. *Advantages:* - - - *Risks:* - - - **Effects** Shareholders\' agreements can significantly influence corporate governance by: - - - **Duration** The duration of shareholders\' agreements in Italy varies depending on the type of company: - - **Rules for Open S.p.A. and Listed Companies** ***Disclosure:*** In listed companies, shareholders\' agreements must be disclosed to the public. This includes **notifying the Italian Companies\' Register** and, in some cases, publishing an abstract in national newspapers. The aim is to ensure market transparency and inform investors about potential concerted actions among significant shareholders. ***Consequences for Breach**:* Violations of shareholders\' agreements do not affect the validity of corporate resolutions. Instead, the breaching party may face contractual liability, typically resulting in a claim for damages by the other parties. To mitigate enforcement challenges, parties often incorporate penalty clauses or integrate key provisions directly into the company\'s bylaws, making them enforceable against all shareholders and the company itself. ### Invalidity of Shareholders\' Meeting Resolutions the invalidity of shareholders\' meeting resolutions is categorized into two primary types: annulability (voidable) and nullity (void, more serious). The main difference is that while the first (annullability) can only be annulled upon request by the damaged party and within strict time limits, the latter are considered more serious and can therefore be voided ex officio by the court or on the request of any interested party. Moreover, time limit are longer (just in one case there are no time limits) ### Annulability (Voidable Resolutions) -- Article 2377 of the Italian Civil Code A resolution that is **not passed in accordance with the law or the articles of association may be contested.** Such resolutions are considered **voidable** and can be annulled upon request by the damaged party within strict time limits. #### Persons Entitled to Contest a Voidable Resolution: - - - - - - - - #### Special cases Although the resolution would be invalid, the law states that it is voidable only if the violation reaches a certain severity (thus favoring the stability of company resolutions): - - - It\'s important to note that not all violations within these categories result in annulability. The law favors the stability of corporate resolutions and mandates annulment only when the violation reaches a level of severity that undermines the integrity of the decision-making process. Minor or technical breaches that do not substantially affect the outcome or understanding of the resolution typically do not lead to annulment. #### Time Limit for Contestation: The resolution may be contested within 90 days from: a\) The date of the resolution. b\) The date of registration or filing in the Business Register, if the resolution must be recorded or filed. #### Effects of Annulment: - - #### Sanatoria (Remedial Actions): The resolution may not be annulled if it is replaced by another resolution taken in accordance with the law or the articles of association, or if it is revoked, without prejudice to the rights acquired by third parties. ### Nullity (Void Resolutions) -- Article 2379 of the Italian Civil Code Certain defects in shareholders\' meeting resolutions are deemed so severe that they render the resolutions null and void. Article 2379 of the Italian Civil Code provides an **imperative list of such cases**, specifying the conditions under which resolutions are considered void. #### Imperative List of Cases Leading to Nullity (Article 2379, Paragraph 1): 1. - - - - 2. - - - 3. - - - #### Persons Entitled to Contest a Void Resolution: - #### Effects of Nullity: - - #### Remedial Actions (Sanatoria): - #### Time Limits for Contesting a Void Resolution: - - - - - ### Administrative Body in the Traditional system the traditional system outlines the structure and responsibilities of a company\'s administrative body. #### Structure of the Administrative Body 1. - 2. - - 3. - - #### **Directors\' Duties:** Directors are exclusively responsible for the company\'s management and are obligated to perform all operations necessary to achieve the company\'s objectives. They are empowered to approve resolutions not expressly reserved for the shareholders\' meeting. Specific powers and duties include: - - - - - - These responsibilities are **mandatory and cannot be waived or altered by the company\'s bylaws or by resolutions of the shareholders\' meeting**. They reflect the **principle of separation of powers** among the different corporate bodies and serve as a counterbalance to the limited liability of shareholders. Directors may be held civilly and, in certain cases, criminally liable for breaches of these duties. #### Relationship between Shareholders Meetings and Directors the delineation of responsibilities between the shareholders\' meeting and the directors is clearly defined by law, particularly in Articles 2364 and 2380-bis of the Italian Civil Code. **Shareholders\' Meeting Competence:** Article 2364 of the Italian Civil Code outlines the specific powers reserved for the shareholders\' meeting, which include: 1. 2. 3. 4. 5. **Directors\' General Management Competence:** Article 2380-bis, paragraph 1, of the Italian Civil Code **confers upon the directors the authority for the company\'s management**. Once appointed, **directors possess broad decision-making powers that are derived directly from the law, not merely from their appointment by the shareholders\' meeting**. They exercise these powers independently and are solely responsible for their management duties. **→ management competence of the shareholders meeting is limited, management competence of the directors is general, and the latters power is can be exercised independently (as it is not appointed by the shareholders meeting)** **Authorizations by the Shareholders\' Meeting:** While directors have general management competence, certain operations may require authorization from the shareholders\' meeting. These typically involve significant transactions that could substantially impact the company\'s structure or capital, such as mergers, acquisitions, or substantial asset disposals. The requirement for such authorizations is usually stipulated in the law or the company\'s bylaws. #### Appointment of Directors in Italian Companies In Italian corporate governance, the appointment of directors is governed by specific procedures outlined in the Italian Civil Code and, for listed companies, additional regulations to ensure transparency and minority shareholder representation. **Initial Appointment:** - **Subsequent Appointments:** - **Bylaws Provisions:** - **Listed Companies:** - **State or Public Entities:** - **Number of Directors:** - **Eligibility Requirements:** - - #### Eligibility the appointment, duration, and termination of directors\' mandates are governed by specific provisions in the Italian Civil Code, particularly Articles 2382 and 2386. **A. Causes of Ineligibility (Article 2382 c.c.)** Article 2382 of the Italian Civil Code specifies conditions under which individuals are ineligible to serve as directors. These include: - - - If any of these conditions arise after an individual\'s appointment, the director is automatically removed from office. **B. Causes of Incompatibility Provided by Special Laws** Certain special laws may impose additional incompatibility conditions for directors. In such cases, if an individual is appointed as a director and an incompatibility arises, the director must choose between the directorship and the conflicting position or interest. **Duration of the Office** - - **Other Reasons for Termination of Office** - - - - In cases where a director\'s term ends before the natural term, the law stipulates that the termination takes effect when a replacement is appointed and accepts the position. Until then, the director remains in office under a system known as \"**prorogatio**.\" However, in certain situations where immediate termination is necessary, prorogatio does not apply, and specific replacement mechanisms are outlined in Article 2386 of the Italian Civil Code. **Key Provisions of Article 2386:** 1. - - 2. - - **Situations Requiring Immediate Replacement:** Immediate replacement mechanisms are particularly crucial in scenarios where: - - - #### Remuneration of Directors In Italian corporate law, the remuneration of directors is primarily governed by **Article 2389 of the Italian Civil Code**. **Determination of Remuneration:** The company\'s bylaws may specify the remuneration for directors. If not explicitly stated, the responsibility falls to the shareholders\' meeting. **Additional Remuneration for Specific Duties:** - - **Listed Companies:** - #### Prohibition for Directors 1. - - - 2. 3. - - **Effects of Breach:** Violations of these prohibitions can lead to significant consequences, including: - - - #### Functioning of Directors in Italian Corporate Governance In Italian corporate law, the roles and responsibilities of directors are defined based on the company\'s governance structure, which can include a sole director or a board of directors. **Sole Director:** A sole director holds the entirety of the administrative powers and duties of the company. This individual is responsible for all management decisions and represents the company in its dealings. **Board of Directors:** In companies with a board of directors, the governance structure includes: - - **Validity of Board Resolutions (Article 2388 c.c.):** For a board resolution to be valid: - - Resolutions that are not in compliance with the law or the company\'s bylaws can be challenged. According to Article 2388 of the Italian Civil Code, such challenges can be initiated by the board of statutory auditors, the supervisory board, the management control committee, and also by absent or dissenting directors. **Directors\' Interests (Article 2391 c.c.):** When a director (not shareholders) has an interest in a particular transaction, either personally or on behalf of a third party, the following procedures must be followed: - - - In the case of a sole director, they must inform the board of statutory auditors and the shareholders\' meeting at the earliest opportunity. **Consequences of Non-Compliance:** If these obligations are not met, the following consequences may arise: - - - Challenges to resolutions must be made within 90 days from the date of the resolution by the board of statutory auditors, absent or dissenting directors, or even directors who voted in favor if the conflicted director failed to disclose their interest. These regulations are designed to ensure that directors act in the best interests of the company and maintain transparency in their dealings. #### Delegated functions and Representation the delegation of functions within a company\'s administrative structure is governed by **Article 2381 of the Italian Civil Code**. This article outlines the procedures and limitations for delegating managerial powers to ensure effective governance and accountability. **Delegation of Functions (Article 2381 c.c.):** - - - - - - - - - - - - #### Powers of Representation (Article 2384 c.c.): - - directors possess **general representational authority**, enabling them to act on behalf of the company in dealings with third parties. This authority is not confined strictly to activities within the company\'s stated corporate object. Consequently, even if directors engage in acts beyond the company\'s specified purposes---known as \"ultra vires\" acts---the company remains bound by these actions in relation to third parties. This principle aligns with **Article 9 of Directive (EU) 2017/1132**, which states that **acts performed by a company\'s organs are binding upon it**, even if they fall outside the company\'s objects, unless such acts exceed the powers conferred by law. However, Member States may stipulate that the company is not bound if it can prove that the third party knew the act was outside the company\'s objects or could not have been unaware of it. **In Italy**, **the internal limitations on directors\' powers**, as outlined in the company\'s statutes or decisions by competent organs, **cannot be invoked against third parties**, even if these limitations have been disclosed. This ensures that **third parties can rely on the apparent authority of directors without delving into internal corporate restrictions**. While the company is bound by ultra vires acts concerning third parties, directors may face internal repercussions, including the removal for just cause or liabilities for damages. **Limitations on the Power of Representation:** 1. - 2. - 3. - #### Directors\' Liability Directors may be held liable under Italian law in various capacities: 1. - - 2. - 3. - #### Joint and Several Liability of Directors (Art. 2392, para. 1, c.c.) Directors are collectively responsible for fulfilling the obligations imposed by law and the company\'s bylaws. If they fail to perform their duties with the required diligence, they are **jointly and severally liable for any damages caused to the company**. This means that each director can be held accountable for the entire damage, regardless of individual involvement. #### Directors Assigned Specific Duties (Art. 2381, para. 3, and Art. 2392, para. 2, c.c.) When specific tasks are delegated to one or more directors, those directors are primarily responsible for the execution of these tasks. However, other directors are not absolved of liability; they must still supervise the general conduct of the company and intervene if they become aware of any prejudicial acts. #### Fault-Based Liability (Art. 2392, para. 3, c.c.) Directors are liable for damages resulting from their intentional or negligent failure to perform their duties. This fault-based liability emphasizes the importance of directors acting with due care and diligence in the best interests of the company. #### Initiating Liability Actions Against Directors Several parties have the legal standing to initiate liability actions against directors: - - - - #### Waiver and Settlement of Liability Actions The company can renounce a liability action or reach a settlement through a resolution of the shareholders\' meeting. However, this is only valid if shareholders representing at least 20% of the share capital (or 5% in publicly traded companies) do not vote against the resolution. #### Statute of Limitations Liability actions against directors must be initiated within five years from the date the directors cease to hold office. #### Liability Towards Company Creditors (Art. 2394 c.c.) Directors are liable to the company\'s creditors **if they fail to preserve the company\'s assets, leading to insufficiency in satisfying creditor claims**. **Creditors can initiate a liability action only if the company\'s assets are inadequate to cover the debts**. The statute of limitations for such actions is five years from the day the insufficiency of assets becomes apparent or when creditors could reasonably have become aware of it. #### Liability Towards Individual Shareholders and Third Parties (Art. 2395 c.c.) Directors may also be held liable to individual shareholders and third parties for damages **directly caused to them** through intentional or negligent actions. To establish this liability, it must be demonstrated that: 1. 2. Such actions must be brought **within five years** from the time the prejudicial act was committed. This form of liability is distinct from contractual liability, as it arises from the breach of obligations not necessarily pre-existing between the parties, making the burden of proof more challenging. → in simpler terms: directors can be held liable in different ways: 1. 2. 3. ### Alternative Administration and Control Systems Other than the traditional model for structuring the administration mechanisms, there are two more. **1. Traditional System** This is the default model under Italian law. It comprises two main bodies: - - **2. Two-Tier System** Inspired by the German model, this system separates supervisory and managerial functions into two distinct boards: - - **3. One-Tier System** This model integrates management and control functions within a single board: - - ### Two Tier System In the Italian two-tier corporate governance model, responsibilities are divided between two distinct bodies: the **Supervisory Board** and the **Management Board**. #### Supervisory Board The particular difference of this entity with respect to the traditional model: the supervisory board is given both the responsibilities of the of the internal control body of the traditional systems, but also some functions that in the traditional system are under the responsibility of shareholders meeting (it is also possible to increase these functions by the bylaws) *Composition and Appointment:* - - - - - - *Functions:* - - - - - *Operation:* - - - - #### Management Board The management board has almost all the rules provided for the BOD in the traditional system *Composition and Appointment:* - - - - *Liability:* **corporate liability actions** against members of the Management Board are governed by **Article 2409-decies of the Italian Civil Code**. This article outlines specific provisions regarding the initiation and management of such actions: 1. - 2. - 3. - ### One-Tier system In the Italian corporate governance framework, the **one-tier system** integrates management and control functions within a single board structure, **eliminating the need for a separate Board of Statutory Auditors**. This model is characterized by the establishment of a **Management Control Committee (MCC)** **within the Board of Directors**, which assumes the oversight responsibilities typically held by the Board of Statutory Auditors in the traditional system. The audit of account shall be entrusted, without exception, to an external legal auditor or an audit firm. #### Board of Directors - - - #### Management Control Committee (MCC) Functions of the Management Control Committee: - - - - - In listed companies, the flow of information between the MCC, the Board of Directors, and external auditors is subject to specific regulations to ensure transparency and effective communication. **Functioning of the Management Control Committee:** - - - - **Appointment of Committee Members:** - - - - **Removal and Replacement of Members:** - - ### Financial Statements Financial statements are comprehensive accounting documents that provide a true and fair view of a company\'s assets, financial position, and economic performance at the end of each financial year. They serve to assess both the **static aspects** (state of assets) and **dynamic aspects** (profitability) of the company, reflecting profits earned or losses incurred during the year. **Applicable Provisions** The preparation and presentation of financial statements in Italy are governed by: - - - The European Union has established comprehensive regulations to harmonize financial reporting across member states, ensuring transparency, comparability, and reliability of financial statements. Key directives and regulations include: **1. Directive 2013/34/EU** This directive, known as the Accounting Directive, consolidates and replaces the Fourth (78/660/EEC) and Seventh (83/349/EEC) Company Law Directives. It sets out the requirements for annual financial statements, consolidated financial statements, and related reports of certain types of undertakings. The directive aims to **simplify accounting obligations, particularly for small and medium-sized enterprises (SMEs),** while ensuring that financial statements provide a true and fair view of an undertaking\'s financial position. **2. Regulation (EC) No 1606/2002** Also known as the IAS Regulation, this regulation mandates that all publicly traded companies within the EU prepare their consolidated financial statements in accordance with **International Financial Reporting Standards (IFRS)** as adopted by the EU. The objective is to ensure high-quality, transparent, and comparable financial reporting across the European capital markets. #### Clarity Financial statements must be presented clearly, facilitating understanding by users. This principle is emphasized in the Italian Civil Code, which mandates that financial statements provide a true and fair view of the company\'s assets, liabilities, financial position, and results for the year. #### True and Fair View Financial statements should offer a faithful representation of an entity\'s financial position, performance, and cash flows. This entails accurately depicting the effects of transactions, events, and conditions in accordance with established definitions and recognition criteria for assets, liabilities, income, and expenses. #### Application of General Principles - - #### Key Accounting Principles (Article 2423-bis c.c.): 1. 2. 3. 4. 5. 6. **Composition of Financial Statements:** The structure of financial statements varies depending on the applicable accounting standards. #### Under the Italian Civil Code: - 1. 2. 3. 4. - 5. 6. 7. #### Under International Accounting Standards (IAS/IFRS): - 1. 2. 3. 4. 5. - 6. 7. 8. These components collectively ensure that financial statements are comprehensive, transparent, and provide stakeholders with a clear understanding of the company\'s financial health. #### Different types of financial statements **1. Ordinary Financial Statements** These are comprehensive financial statements that include: - - - - These statements are mandatory for companies that have issued securities traded on regulated markets or those that exceed certain size thresholds. **2. Abridged Financial Statements (Art. 2435-bis c.c.)** Small enterprises that meet at least two of the following criteria for the first financial year or for two consecutive financial years can opt to prepare abridged financial statements: - - - The abridged financial statements consist of: - - - **3. Financial Statements of Micro-Enterprises (Art. 2435-ter c.c.)** Micro-enterprises are defined as companies that, during the first financial year or for two consecutive financial years, have not exceeded two of the following limits: - - - Micro-enterprises are exempt from the requirement to prepare: - - Consequently, the financial statements for micro-enterprises can consist solely of the **balance sheet** and **income statement**, following the same form, structure, and content as those for abridged financial statements. ![](media/image3.png) #### Invalidity of Resolutions Approving Financial Statements In Italian corporate law, specific provisions govern the invalidity of resolutions passed by shareholders to approve financial statements: 1. 2. 3. #### Distribution of Profits The distribution of profits, commonly referred to as dividends, is subject to specific regulations: 1. 2. 3. - - - 4. 5. 6. #### Sustainability Reporting The European Union has progressively integrated sustainability considerations into corporate reporting through key directives, enhancing transparency and accountability among large enterprises. **Directive 2014/95/EU: Non-Financial Reporting Directive (NFRD)** Enacted in 2014, the NFRD amended Directive 2013/34/EU, mandating that certain large companies disclose non-financial and diversity information. This directive applies to large public-interest entities with over 500 employees, including listed companies, banks, and insurance firms. The required disclosures encompass environmental protection, social responsibility, employee treatment, respect for human rights, anti-corruption measures, and board diversity policies. The primary aim is to provide stakeholders with a comprehensive understanding of a company\'s development, performance, position, and the impact of its activities. **Directive (EU) 2022/2464: Corporate Sustainability Reporting Directive (CSRD)** Adopted in December 2022, the CSRD significantly expands the scope and detail of sustainability reporting requirements. It amends existing directives to introduce more comprehensive corporate sustainability reporting obligations. The CSRD extends the reporting requirements to a broader range of companies, including listed and non-listed entities meeting certain size criteria, thereby increasing the number of companies subject to sustainability reporting. The directive mandates detailed reporting on environmental, social, and governance (ESG) factors, aligning with the European Green Deal's objectives to enhance corporate transparency and accountability in sustainability matters. ### Bonds In Italy, *società per azioni* (joint-stock companies) have the option to raise capital by issuing bonds, which are debt securities representing equal-value portions of a loan to the company. These instruments allow companies to access funds from investors who, in return, become creditors of the issuing entity. #### Key Characteristics of Bonds: - - Distinctions Between Bonds and Shares: - - - #### Many kinds of bonds 1. 2. 3. 4. 5. #### Bond Issuance Limits and Exceptions in Italian Corporate Law **Standard Issuance Limit:** Per Article 2412, paragraph 1, companies may issue bonds up to an amount that in the aggregate does not exceed twice the share capital (the sum of: - - - The board of statutory auditors is responsible for certifying compliance with this limit. According to Article 2412, paragraph 4, any guarantees provided by the company for bonds issued by other entities are included in the calculation of the total bond issuance limit. **Maintenance of the Issuance Ratio:** The prescribed ratio between issued bonds and the combined total of capital plus reserves must be maintained throughout the bond\'s duration. Consequently: - - **Exceptions Allowing Exceedance of the Standard Limit:** Article 2412 provides specific scenarios where the standard bond issuance limit can be surpassed: 1. 2. 3. 4. 5. #### Issuance Procedure: 1. 2. 3. 4. 5. #### Convertible Bonds: Convertible bonds are a hybrid financial instrument that grants bondholders the right to convert their bonds into shares of the issuing company at a predetermined conversion ratio. **Key Features:** - - **Issuance Conditions (Article 2420-bis, Italian Civil Code):** 1. 2. 3. **Issuance Authority and Delegation:** - - **Resolution Content:** The resolution to issue convertible bonds must detail: - - **Safeguards for Conversion Rights:** To protect bondholders\' conversion rights, the following rules apply: 1. - 2. - 3. - - - - - - #### Organization of Bondholders The rights and interests of bondholders are safeguarded through structured mechanisms outlined in Articles 2415 to 2418 of the Italian Civil Code. These provisions establish the framework for the bondholders\' meeting and the appointment of a common representative. **Bondholders\' Meeting:** - - - - - - **Bondholders\' Common Representative:** - - - #### Participating Equity Instruments In 2003, the Italian corporate law reform introduced *Participatory Financial Instruments* (PFIs), providing *società per azioni* (joint-stock companies) with a flexible mechanism to acquire assets beyond traditional capital contributions. **Key Characteristics:** - - **Rights Associated with PFIs:** - - **Bylaws Provisions:** Companies can outline in their bylaws the specific conditions for issuing PFIs, including: - - - ### Amendments to the bylaws Amendments to the bylaws refers to changes in the **objective content** of the **bylaws** or the **instrument of incorporation**. This includes modifications to the fundamental clauses that define the corporation\'s structure, governance, and operations. It\'s important to note that **changes involving the individuals serving as directors, statutory auditors, or shareholders are considered alterations of the subjective content and are not classified as amendments** to the bylaws. Formally, an amendment involves the **removal or modification of existing clauses** within the bylaws and the **introduction of new clauses**. The procedures and rules governing amendments apply exclusively to changes in the **objective content** of the bylaws. **Understanding Objective vs. Subjective Content** The objective content of the bylaws encompasses the essential elements that define the corporation\'s purpose, governance structure, operational procedures, and other foundational aspects. Examples include the company\'s purpose, procedures for amending corporate bylaws and articles of incorporation, and how officers and directors are selected and removed. In contrast, the subjective content relates to the specific individuals who occupy roles within the corporation, such as directors, auditors, and shareholders. Changes in these positions do not alter the fundamental structure or governance of the corporation and, therefore, are not considered amendments to the bylaws. #### Procedure for Amending the Bylaws (Article 2346 of the Italian Civil Code) Amending a company\'s bylaws in Italy involves a structured procedure to ensure legal compliance and proper corporate governance. The process is primarily governed by Article 2346 of the Italian Civil Code and includes the following steps: 1. - - 2. - - - - 3. - - #### Effectiveness and Legal Publicity of the Amendment - - #### The Right of Withdrawal In Italian corporate law, the right of withdrawal (diritto di recesso) allows shareholders to exit a company under specific circumstances, thereby safeguarding their interests when significant changes occur within the company. **Ratio Legis** The rationale behind the right of withdrawal is to **protect shareholders who may disagree with substantial corporate decisions** that could alter the nature of their investment. This mechanism ensures that shareholders are not compelled to remain part of a company whose direction or structure has fundamentally changed beyond their initial expectations. **Grounds for Withdrawal** The Italian Civil Code specifies several situations where shareholders are entitled to exercise their right of withdrawal: - - - - **Liquidation of Shares** Upon exercising the right of withdrawal, the withdrawing shareholder\'s shares must be liquidated. The Italian Civil Code outlines the following process: 1. 2. 3. #### Grounds for Shareholder Withdrawal **A. Mandatory Grounds (Non-Derogable)** Shareholders who are absent, dissenting, or abstaining during certain corporate decisions can exercise the right of withdrawal, either partially or fully, in the following situations: 1. 2. 3. 4. 5. 6. 7. In these cases, any agreement aimed at excluding or complicating the right of withdrawal is null and void, as stipulated in Article 2437, paragraph 6, of the Italian Civil Code. **B. Derogable by the Bylaws** The company\'s bylaws may modify or exclude the right of withdrawal in the following scenarios: 1. 2. **C. Provisions by the Bylaws (Closed Companies)** In closed companies, the bylaws can specify additional circumstances under which shareholders may withdraw. This allows for tailored provisions that suit the specific needs and agreements of the shareholders involved. **D. Withdrawal in Case of Indefinite-Term Company (Article 2437, Paragraph 3, c.c., Non-Listed Companies)** For non-listed companies established without a defined term, shareholders have the right to withdraw, provided they give a notice period of at least 180 days. This provision ensures that shareholders are not indefinitely bound to the company without the option to exit. **E. Withdrawal in Case of Delisting (Listed Companies, Article 2437-quinquies, c.c.)** In the event that a listed company decides to delist its shares from a regulated market, shareholders who do not concur with this decision have the right to withdraw. This protects investors who prefer to hold shares in publicly traded entities. #### Terms and Procedures for Exercising the Right of Withdrawal Under Article 2437-bis of the Italian Civil Code, shareholders intending to exercise their right of withdrawal must adhere to specific procedures and timelines: 1. 2. - - 3. 4. #### Criteria for Determining the Value of Shares Article 2437-ter of the Italian Civil Code outlines the methods for valuing shares when a shareholder exercises the right of withdrawal: 1. 2. 3. 4. #### Procedure for Liquidating Shares upon Shareholder Withdrawal Article 2437-quater of the Italian Civil Code outlines the process for liquidating shares when a shareholder exercises their right of withdrawal. The procedure involves several steps to ensure fair treatment of both the withdrawing shareholder and the remaining stakeholders: 1. 2. - - 3. 4. #### The amendments to the share capital The Civil Code provides specific regulations for certain amendments to the bylaws: the increase and the reduction of share capital, transformation, mergers and divisions of the companies. #### Increase of Share Capital Share capital can be increased through two primary methods: ##### Material Increase (Paid Increase) - - - - - - - - - - - - - - - - Directive (EU) 2017/1132 -- Article 68: Decision by the General Meeting on the Increase of Capital - - - - - - - **Directive (EU) 2017/1132: Provisions on Paying Up Shares Issued for Consideration** Directive (EU) 2017/1132 establishes specific requirements for the payment of shares issued during an increase in subscribed capital. **Article 69: Paying Up Shares Issued for Consideration** **Minimum Payment Requirement**: Shares issued for consideration must be paid up to at least 25% of their nominal value or, if there is no nominal value, of their accountable par. If an issue premium is stipulated, it must be paid in full at the time of subscription. **Article 70: Shares Issued for Consideration Other Than in Cash** 1. 2. - - - ##### The Right of Pre-emption in Share Capital Increases (Article 2441 of the Italian Civil Code) In Italian corporate law, the right of pre-emption (diritto di opzione) ensures that existing shareholders have the first opportunity to subscribe to new shares issued during a capital increase, maintaining their proportional ownership in the company. **Persons Entitled to Exercise the Pre-emption Right** The pre-emption right is granted to current shareholders, allowing them to subscribe to newly issued shares in proportion to their existing holdings. Additionally, holders of convertible bonds are entitled to exercise this right, based on the conversion ratio of their bonds into shares. **Rationale (Ratio Legis)** The primary purpose of the pre-emption right is to protect existing shareholders from dilution of their ownership and voting power. By offering new shares to current shareholders first, the law ensures that they can maintain their proportional stake in the company. **Term for the Exercise of Pre-emption Rights** Shareholders must exercise their pre-emption rights within a specified period. Recent amendments to Article 2441 have reduced this term from 15 to 14 days, starting from the publication of the offer on the company\'s website or, if not published online, from the date of registration in the Business Register. **Shares on Which Pre-emption Rights Have Not Been Exercised (Preferential Right on Unsubscribed Shares)** If some shareholders do not exercise their pre-emption rights, the unexercised shares (inopted shares) can be offered to other shareholders who have already exercised their rights and expressed an interest in subscribing to additional shares. This is known as the preferential right on unsubscribed shares or oversubscription. **Circumstances in Which the Pre-emption Right Can Be Excluded** The pre-emption right can be excluded in specific situations, such as: - - - - - **Directive (EU) 2017/1132: Provisions on Pre-emption Rights and Derogations** Directive (EU) 2017/1132 establishes a framework for company law within the European Union, detailing regulations on share capital increases and the rights of shareholders. **Article 72: Increase in Capital by Consideration in Cash** 1. 2. - - - 3. - - - - 4. - - 5. - **Article 84: Derogation from Certain Requirements** Member States may derogate from specific provisions of the directive, including Article 72, to encourage employee participation or the involvement of other groups defined by national law in the capital of companies. This allows for the exclusion of pre-emptive rights when new shares are offered to company employees as part of schemes designed to promote their participation in the company\'s capital. ##### Nominal Increase (Free Increase) In this case, the company increases its share capital without new contributions from shareholders. This is achieved by converting available reserves or profits into share capital. The increase can be realized by raising the nominal value of existing shares or by issuing new shares distributed proportionally to current shareholders. This method does not alter the shareholders\' proportional ownership but strengthens the company\'s capital base. **Assets Utilized for Free Share Capital Increase** According to Article 2442 of the Italian Civil Code, the following assets can be used for a free increase in share capital: 1. 2. 3. **Methods for Implementing Free Share Capital Increase** The company can execute a nominal share capital increase through the following methods: 1. 2. #### Reduction of Share Capital The reduction of share capital can occur under various circumstances: ##### Material Reduction This involves returning part of the capital to shareholders or releasing them from the obligation to pay the portion of capital they have not yet paid. Such a reduction is typically decided when the company has excess capital relative to its operational needs. The procedure requires a resolution by the extraordinary shareholders\' meeting and must comply with legal provisions to protect creditors. **Material Share Capital Reduction (Article 2445 of the Italian Civil Code)** A material reduction in share capital involves decreasing a company\'s subscribed capital, typically to adjust its capital structure or return excess funds to shareholders. This process is governed by Article 2445 of the Italian Civil Code and includes specific procedures to protect creditors\' interests. **Causes and Conditions** The primary reasons for a material share capital reduction include: - - S

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