Società a responsabilità limitata (srl)
The srl is the most common legal form for Italian start-ups. It has the advantage of simple organisation and limited liability. Under certain conditions, the srl may be incorporated with a minimum share capital of EUR 1.
If the srl has a Supervisory Board, an investor may participate in this. Participation in the Board of Directors is not permitted. Instead, the investment may, subject to certain contractual conditions, be supervised by granting an observer seat status.
One or more directors forming a Board of Directors (consiglio di amministrazione) manage the srl.
As a supervisory body, the articles of association may provide for a Supervisory Board (organo di controllo). The establishment of a supervisory body is basically voluntary and only mandatory if certain company values (number of employees, turnover, total balance sheet) are exceeded. Instead, an auditor may be appointed to supervise the Board of Directors.
A contractual observer seat status is possible, but unusual in Italy. The observer may attend management meetings but shall not have the right to vote.
If a Supervisory Board has been established, a PE/VC Fund may participate in it.
In principle an observer seat can be accepted, whereby the contractual structure is decisive in the individual case. The observer may not exercise any influence on the management decisions.
A direct participation in the Board of Directors is not permitted.
società per azioni (SpA)
A conversion to the form of SpA takes place when the company has reached a certain size and can no longer profit from the advantages for small and medium-sized enterprises in the form of srl. This conversion is usually triggered by a planned IPO, project financing, incentive plans with equity-similar instruments or similar measures.
In dualistically structured companies, a PE/VC Fund may participate in the Supervisory Board. In monistically structured companies, participation in the Board of Directors is not permitted. Instead, the investment may, subject to certain contractual conditions, be supervised by granting an observer seat status.
For corporate governance, Italian law provides for a traditional system in addition to the monistic and dualistic systems.
In the monistic system, the Board of Directors (consiglio di amministrazione) is responsible for the management and sets up a control committee (comitato per il controllo sulla gestione). The members are elected from among the members of the Board of Directors. There is no separate supervisory body. However, investors can be granted an observer seat status by contract. The observer may attend meetings of the board but is not entitled to vote.
In the dualistic system, again the Management Council (consiglio di gestione) is responsible for the management but monitored by the Supervisory Board (consiglio di sorveglianza).
In the traditional system, management is the responsibility of an individual Director (amministratore unico) or the Board of Directors. The supervision of the general managers is assumed by a Control Council (collegio sindacale). In addition to the Control Council, an auditor must be appointed to supervise the general managers. The appointment of a separate auditor shall not apply if all members of the Control Council are themselves auditors.
A PE/VC Fund can assume a Supervisory Board mandate in dualistically structured companies.
In a monistic structure, a PE/VC Fund can in principle accept an observer seat, whereby the contractual structure is decisive in the individual case. The observer may not exercise any influence on the management decisions. PE/VC Funds may not participate in the Board of Directors.
In the traditional structure, a mandate as a member of the Control Council could be accepted.
The information in our toolbox provides managers of private equity or venture capital funds with an initial overview of certain framework conditions in the respective country. It does not provide advice on the law of any country, neither does it substitute such advice. Before taking over a board seat in a portfolio company, it is at all times necessary to seek expert advice. Our team is happy to assist you with all questions at any time.
In collaboration with: Ludocivi Piccone & Partners
Sources: Wegen/Spahlinger/Barth, Gesellschaftsrecht des Auslands 2. EL Januar 2018