Easy Milano Admin Asst 15/07/2024 0 comments

A Guide to Starting a Business in Italy: Private Limited Companies (Part 2 of 3)

Private Limited Companies by Quotas

Società a responsabilità limitata (S.r.l.) – Traditional S.r.l. vs. Simplified S.r.l.

Under Italian law, there are two main types of private limited companies including:

– Traditional Società a Responsabilità Limitata (Traditional S.r.l.), and

– Simplified Società a Responsabilità Limitata Semplificata (Simplified S.r.l.s.).

Traditional S.r.l. and Simplified S.r.l. are the most common types of limited liability companies in Italy and they allow for the most flexibility for the founder(s).

A shareholder of a Traditional S.r.l. or Simplified S.r.l. holds only one “quota” of the company’s shares that represents a varying portion of subscribed capital. In the case of a single member company, the “quota” represents the entire share capital.

The Main Differences Between Traditional S.r.l. and Simplified S.r.l.

The main difference between Traditional S.r.l. and Simplified S.r.l. is that Simplified S.r.l. have the following restrictions as opposed to Traditional S.r.l.:

– The shareholders of a Simplified S.r.l. can be only individuals and not other companies;

– The initial share capital of a Simplified S.r.l. cannot be more than Euros 10,000.00;

– Simplified S.r.l. can only adopt the standard model articles of association by-laws provided by Italian law and no amendments to model articles are allowed (i.e. you cannot tailor-make the company’s by-laws).

Common Features of Traditional s.r.l. and Simplified s.r.l.

Traditional S.r.l. and Simplified S.r.l. join, among others, the common features:

– The company shall have at least one director and one shareholder (the shareholder/s and the director/s can be the same person and do not need to be Italian residents);

– The company must have a registered address in Italy (if you do not have an office in Italy, Lexia can provide registered office service);

– The director(s) and shareholder(s) of the proposed company shall obtain a tax identification number (codice fiscale) with the Inland Revenue;

– The company shall obtain a certified email address (PEC) which, simply put, is unofficial email address for the company that has the same legal value as registered mail with return receipts;

– The shareholders of the proposed company shall execute an incorporation deed in front of an Italian public notary, but the incorporation deed can be completed at a distance if the shareholders of the proposed company grant us a power of attorney duly notarized and apostilled (or notarized and legalized with the local Italian Embassy or Consulate).

Is there any minimum initial share capital requirement to set up a Traditional s.r.l. or a Simplified s.r.l.?

There is no longer any minimum capital requirement to open a Traditional S.r.l. or a Simplified S.r.l. (i.e. the initial share capital can be any amount starting from 1.00 Euro ). However, if the company’s capital is less than Euros 10,000.00 the following minor restrictions will apply:

– no contributions in kind of any assets other than cash are allowed;

– 20% of the profit for the business year shall annually be put aside as a legal capital reserve until the net asset of the company has reached 10,000.00 Euros. This reserve can be used only to increase the capital or to cover losses.

Is it Possible to Open a Traditional s.r.l. or a Simplified s.r.l. From a Distance?

To open an Italian company, the founder(s) shall execute an incorporation deed (including memorandum and articles of association) before an Italian public notary. The incorporation process can be carried out from a distance through power of attorney granted to Lexia. In this case the power of attorney shall be notarized and apostilled or (or notarized and legalized with a local Italian Embassy or Consulate if the country where the power of attorney is executed is not a member of the apostille convention).

Allotment of The Shares

Allotment of the shares does not have to be proportional to the value of the shareholders’ contributions to the company.

Unless otherwise specified in the Memorandum of Association, the value of each quota is calculated proportionately to the value of the shareholder’s contribution to the company, and his/her rights (e.g. voting rights, and the right to share in profits) are also proportionate. For instance, if a shareholder holds 60% of an S.r.l. or S.r.l.s. capital, he/she is the owner of a quota equal to 60% of total capital, is entitled to 60% of the company’s earnings, and his/her vote represents 60% of the quorum required for passing quota-holders’ resolutions. Nevertheless, shareholders may establish – either in the Memorandum of Association or, subsequently, in the Articles of Association – shares not proportionate to the value of the contribution to the company, and may also establish special rights for specific shareholders.

Shareholders’ Meetings

Shareholders may make decisions provided for by law or company’s Articles of Association in the collegial manner typical of Shareholders’ Meetings. However, the Articles of Association may also provide for such resolutions (unless related to specified matters) to be taken through more streamlined procedures, such as written consultation or written consent.

Management Body

Unless otherwise specified in the Articles of Association, Traditional S.r.l. and Simplified S.r.l. management is entrusted to one or more directors appointed by the shareholder(s) themselves.

As such, Traditional S.r.l. and Simplified S.r.l.. may be managed by a sole director or by multiple directors. In the latter case, the company may adopt one of the following management systems:

– Board of Directors;

– Several Management;

– Joint Management.

The managing body may also be a corporate body, unless there exist further legal provisions setting forth restrictions or requirements related to certain types of companies.

The articles of association may establish that multiple administration systems be used, each for a specific set of issues for which the managing body is called upon to decide. In any event, all directors’ decisions shall be documented in a dedicated corporate book.

What is a Board of Statutory Auditors (Collegio Sindacale)?

A Board of Statutory Auditors (Collegio Sindacale) or Sole Auditor (Sindaco Unico) is an internal supervisory body. It is largely entrusted with the oversight of corporate management in order to ensure compliance with the law, memorandum and articles of association; compliance with the principles of sound administration, in particular the effectiveness of the organizational, administrative and accounting systems adopted by the Company, and its effective performance.

The Board of Statutory Auditors (Collegio Sindacale) or Sole Auditor (Sindaco Unico), therefore, supervises:

– the activities of the BoD, attending the board meetings;

– the activities of the shareholders’ meeting, attending the meetings with the power to challenge the resolutions adopted against the law or the articles of association.

The Board of Statutory Auditors (Collegio Sindacale) or Sole Auditor (Sindaco Unico) is appointed by the shareholders’ meeting. The Board of Statutory Auditors is composed of 3 or 5 standing members and 2 alternate members. The auditors must satisfy the requirements of integrity, experience, and independence prescribed by law; must be professionally independent from the company, its subsidiaries and parent companies; and must possess technical expertise.

Regarding Traditional S.r.l. and Simplified S.r.l. the appointment of a Board of Statutory Auditors or a Sole Auditor is mandatory only if:

– the company is required to keep a consolidated balance;

– the company controls or is controlled by a company which is subject to statutory audit (e.g. a Public Limited Company by Shares or S.p.A.);

– for two years has exceeded at least one of the following limits: (a) total assets of the balance sheet: Euro 2 millions; (b) revenues from sales and services: Euro 2 millions; (iii) workers employed on average during a financial year are more than 10 units.

Audit Requirements

An audit of the accounts of a Traditional S.r.l. or Simplified S.r.l is mandatory only if the requirement to appoint a Board of Statutory Auditors or a Sole Statutory Auditor is triggered. As a general rule, such an audit is carried out by an external Auditor or Audit Firm. The bylaws can assign the audit to the Board of Statutory Auditors or to the Sole Statutory Auditor.

Please keep in mind that it is important to consult with an Italian lawyer who can provide up-to-date information and guidance specific to your situation. Lexia offers expert legal assistance and has a team of experienced lawyers who are well-versed in the requirements for starting a business and can assist you during the process. Contact them using the form below for more information.

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