THE ITALIAN “S.R.L.” OR (PRIVATE) LIMITED LIABILITY
COMPANY
A condensed guide for foreign investorsItaly has finally
revamped its Business Corporation Laws with the aim of providing businessmen
with more flexible and transparent business entities.
The following information is based on the
recently revisited Business Corporation Act (Dlgs. 17 January 2003 n. 6),
effective as of January 1, 2004.
The purpose of this memorandum is to
acquaint foreign investors to the Italian "Società a responsabilità limitata"
(or Limited Liability Company, hereinafter referred to by its Italian acronym,
"S.r.l."). The Srl is the most commonly used corporate form in Italy, although
the Società per Azioni or "S.p.A." is the corporate form used by major public
corporations quoted on the Italian stock exchange and preferred by large
private enterprises. The S.p.A. (similar to a Joint Stock Company) is the most
regulated of the two major limited liability companies requiring a full-blown
board of directors and board of auditors, as well as higher minimum capital
requirements (i.e. ¤ 120.000,00). The regulations set forth in the Italian
Civil Code ("ICC") for the S.p.A. also apply to the S.r.l., unless stated
otherwise.
Limitation of Liability
Whereas the S.p.A is a company having
shareholders whose liability is limited to the par value of their shares, the
S.r.l. is a company whose owners hold “quotas” instead of shares. Like
shareholders of an S.p.A., “quotaholders” of an S.r.l. also enjoy limited
liability up to the par value of their “quotas”.
Choice of Business Entity
The more structured S.p.A. is the business
entity required by law for public corporations. The S.p.A. is also the
business entity most favored by large private enterprises and foreign
investors.
The formation procedures of an Italian
limited liability company (S.r.l.) are basically the same as for an S.p.A.
The S.r.l. is the corporate form most used
by smaller businesses. There are no requirements for management by a board of
directors. Also in most cases, small S.r.l.'s can do without a board of
auditors provided there be at least one director (Sole Director).
Capital Structure
The minimum authorized capital stock ("share
capital") of an S.r.l. is as stated above, fixed at ¤ 10.000,00 which may be
contributed in cash or kind and, under the new Business Corporation Act,
individuals may even contribute professional work or services. In practice
prior to formation, quotaholders are required to deposit only ¤ 2.500,00 in
cash or bonds with a local Bank corresponding to 25% of the minimum authorized
capital stock. The annual government tax on an S.r.l. is ¤ 361,52. In the
S.r.l., liability is limited by quotas instead of shares as in the SpA. Thus
an individual participant’s capital contribution in an S.r.l. is termed a
participant's "quota" and the participants are termed "quotaholders". Higher
amounts must be expressed in multiples of ¤ 1,00. S.r.l.’s may now issue bonds
(debentures). Quotas may not be issued to the bearer but must be issued in
nominative form. The list of quotaholders must be filed with the business
registry office at the time of filing the financial statements. Every deed for
the transfer of quotas must also be filed with the business registry office.
Relationship of quotaholders, directors
and officers
The requirements are the same as for an
S.p.A., except that, unless otherwise stated in the By-laws ("statuto"), the
management of an S.r.l. is entrusted to the quotaholders. An S.r.l. must have
one or more directors who need not be quotaholders or Italian nationals. S.r.l.’s
may be formed by two or more quotaholders or unilaterally by a single (sole)
quotaholder. An individual or corporate entity may be the sole quotaholder of
an S.r.l. without such person losing limited liability status, regardless of
similar holdings by the same quotaholder in other limited liability companies.
And, in the event of insolvency, the sole quotaholder will continue to have
limited liability, provided all capital contributions have been fully paid-up
or the S.r.l.’s sole quotaholder has been identified and the entity’s sole
quotaholder status publicized in the Registry of Companies.
Transfer of quotas
Unlike with other Italian corporations, the
By-laws of an S.r.l. may contain a clause restricting the transfer of shares
or subjecting transfers to the unanimous approval of the other quotaholders,
making the S.r.l. the ideal form of "closed" corporation, well-suited for
defending substantial private fortunes and holdings.
Books and Records
A board of statutory auditors is mandatory
for S.r.l.’s under the following conditions:
1. A board is required by the By-laws.
2. The capital stock is greater than or equal to ¤ 120.000,00.
It should be noted that Italian principles of accounting conform to
internationally accepted principles of accounting.
Estimated Time of Formation:
Excluding regulated industries such as
banking, insurance, shipping, or aviation, requiring government licensing and
compliance with special laws, formation of S.r.l.’s usually takes about four
weeks.
Estimated Cost of Formation:
The cost of incorporating an S.r.l. will
vary, depending on where the entity is incorporated and headquartered, i.e.
where the registered offices are located. Setting up an S.r.l. in Milan or
Rome will normally be more expensive than in the smaller towns and cities.
Incorporating an S.r.l. in the northern industrial areas, regardless of the
location, will tend to be more expensive, generally-speaking, than setting up
a similar entity in rural areas, including southern regions and the islands.
Incorporation costs will normally include legal fees and notarial fees, as
well as accountants’ fees. Start-up S.r.l.’s will also need the on-going
services of an accounting firm to do the company book-keeping, income tax
returns, as well as provide tax advice on a yearly basis.
The above memorandum is no more than a brief
overview of the subject matter and aims at providing only basic legal
information. Although it has been prepared, as of 29 February 2004, with
attention to accuracy, it is not intended to be relied upon as comprehensive
advice or as a specific opinion on the subject matter, and it is recommended
that its relevance and accuracy be rechecked prior to taking any implementing
action.
