FAQ: Corporate Law Germany–Italy

The S.r.l. — the Società a responsabilità limitata — and the German GmbH are structurally related, as both provide limited liability to the company's assets, but differ from each other in several material respects.

As regards minimum capital, the S.r.l. has required only 1 Euro since the 2012 reform, although in practice at least 10,000 Euro is advisable, whereas the GmbH requires a share capital of 25,000 Euro. The membership interests of the S.r.l. — the so-called quote — are not embodied in securities and are not listed on a stock exchange; their transfer requires in particular notarial form or execution by a commercialista with registration in the commercial register. The internal governance of the S.r.l. is considerably more flexible, since a collegio sindacale — the Italian equivalent of a supervisory board — is mandatory only above certain statutory thresholds. Compared with the GmbH, the S.r.l. also lacks the strict German capital maintenance rules, although distributions may only be made from earned profits.

Incorporating an S.r.l. in Italy involves several sequential steps. First, the articles of association — the atto costitutivo — and the bylaws — the statuto — are drawn up by an Italian notary in notarially authenticated form. In addition, the minimum capital must be paid into a blocked account at an Italian bank, with at least 10,000 Euro recommended in practice. This is followed by registration in the Registro delle Imprese at the competent Camera di Commercio, which has constitutive effect — the S.r.l. thus comes into existence only upon registration. Finally, tax registration with the Agenzia delle Entrate is required to obtain the company's Partita IVA and Codice Fiscale.

As a foreign incorporator, a personal Codice Fiscale is required. In such cases I recommend granting a procura speciale to a representative in Italy, which can substitute for personal attendance before the notary. Incorporation costs — including notary, taxes and chamber fees — typically range from 1,500 to 3,000 Euro.

The S.r.l. semplificata — the simplified S.r.l. under Art. 2463-bis c.c. — is a sub-form of the S.r.l. introduced in 2012 with particularly low incorporation costs, since the minimum capital is only 1 Euro and notary fees are reduced by law to nil, so that only registry fees are payable. Shareholders may only be natural persons, and the bylaws must strictly follow the statutory model — the so-called modello standard — which precludes individual customisation.

This corporate form is particularly suitable for rapid market entry scenarios or start-ups with modest capital requirements where no complex governance structures are needed. For joint ventures, the involvement of outside investors or arrangements requiring individual clauses such as drag-along, tag-along or exclusion provisions, the S.r.l. semplificata is unsuitable, since the rigidity of the standard form allows no room for bespoke drafting.

The S.p.A. — the Società per Azioni — is the joint-stock company of Italian law and differs from the S.r.l. in several material respects. The minimum capital of the S.p.A. is 50,000 Euro, and its interests are embodied as shares — so-called azioni — in securities and are in principle freely transferable, which in particular enables a stock exchange listing. The governance of the S.p.A. is more heavily regulated, as both a supervisory body — the collegio sindacale — and a statutory audit are compulsory.

In my advisory practice it is apparent that for most medium-sized German-Italian corporate structures the S.r.l. is the right choice, since it combines limited liability, flexible governance and comparatively low administrative requirements. The S.p.A. is appropriate for larger companies with substantial capital requirements, the involvement of outside investors or concrete plans for a stock exchange listing.

The amministratore — the managing director of an S.r.l. — is appointed by resolution of the general meeting of shareholders, the assemblea dei soci, or, in the case of initial appointment, already in the founding act. Removal is generally possible at any time pursuant to Art. 2383 c.c., although the director has a claim for damages if removed without good cause — the removal itself, however, remains effective. Unlike in a German GmbH, in Italy a shareholders' resolution suffices without notarial authentication being required.

The resolution must, however, be registered immediately in the Registro delle Imprese in order to take effect against third parties. The liability of the amministratore is governed by Art. 2476 c.c. and covers breaches of duty towards the company as well as towards the shareholders and creditors — this applies in particular also to de facto management without formal appointment.

The core element of the S.r.l. consists in the limitation of liability to the company's assets under Art. 2462 c.c., so that shareholders are in principle not personally liable for the company's obligations. There are, however, several exceptions relevant in practice. In a single-member S.r.l. — the S.r.l. unipersonale — the sole shareholder is personally liable if the capital has not been fully paid up or if the capital contribution obligation has not been properly registered in the commercial register. Furthermore, Italian courts may pierce the corporate veil — responsabilità per abuso della personalità giuridica — where the shareholder uses the company as their alter ego, withdraws capital or deliberately disadvantages creditors. Finally, personal guarantees — so-called fideiussioni — give rise to direct personal liability, and such security is regularly required from shareholders in particular in bank financing.

The patto parasociale is a contractual side agreement between shareholders of an S.r.l. or S.p.A. which operates alongside the official articles of association — the statuto — and plays a central role in practice in structuring ownership arrangements. Typical subject matter includes voting agreements — so-called accordi di voto —, transfer restrictions such as lock-up, drag-along and tag-along, pre-emption rights in the form of the prelazione, as well as call options and arrangements relating to management.

From my advisory experience it is particularly important to emphasise that the patto parasociale operates exclusively between the parties — inter partes — and has no binding effect on the company or third parties. Breaches give rise to claims for damages but do not automatically invalidate the vote concerned. For German-Italian joint ventures a carefully drafted parasociale agreement is therefore indispensable in order to adequately safeguard the interests of all parties.

Both drag-along clauses — which entitle the majority shareholder to oblige minority shareholders to co-sell their interests on the same terms to a third-party acquirer — and tag-along clauses — which grant the minority shareholder a right of co-sale upon a transfer of interests by the majority shareholder — are permissible under Italian law and are regularly embedded in practice in both the statuto and patti parasociali.

The choice of instrument is of considerable significance: exit clauses embedded in the statuto have proprietary effect and bind the company directly, whereas those in the patto parasociale operate only inter partes. I particularly recommend, in German-Italian joint-venture structures, a precise and carefully considered drafting of the exit clauses, since the shareholders involved frequently pursue different exit horizons and strategic objectives.

The acquisition of an Italian S.r.l. typically takes the form of a share deal, in which the membership interests — the quote — are transferred from the seller to the buyer, either by notarial authentication or by execution by a person enrolled on the register of chartered accountants with subsequent electronic filing with the Registro delle Imprese. Before any transaction a comprehensive due diligence review is indispensable, covering in particular the corporate structure, existing liabilities, employment relationships — which enjoy strong statutory protection under Art. 2112 c.c. —, tax obligations, pending proceedings and IP rights.

Alternatively, an asset deal may be considered, in which the buyer acquires only specific assets such as fixed assets, customer relationships or trade marks without taking over the company itself, and accordingly does not in principle assume legacy liabilities. For transactions above certain turnover thresholds, a merger control filing with the AGCM — the Italian competition authority — or with the EU Commission may additionally be required.

The exclusion of a shareholder from an S.r.l. is, pursuant to Art. 2473-bis c.c., only possible where the articles of association — the statuto — provide for specific grounds for exclusion, with the law affording shareholders broad latitude in formulating those grounds. Well-drafted articles typically contain provisions for breach of non-compete obligations, insolvency of the shareholder, failure to make agreed contributions in kind or services, and serious breaches of fiduciary duty.

The exclusion itself is effected by shareholders' resolution, from which the shareholder to be excluded is barred from voting, and gives rise to a right to a settlement at market value of the interest. It must be noted that without a corresponding provision in the articles exclusion is in principle not possible — from my advisory experience the careful and forward-looking regulation of all exit scenarios already in the statuto is therefore indispensable, particularly in joint-venture arrangements.

The S.r.l. is subject in Italy to two principal taxes that differ markedly in their tax base and purpose. IRES — the Imposta sul Reddito delle Società — is levied as corporate income tax at a rate of 24% on taxable profit. In addition, IRAP — the Imposta Regionale sulle Attività Produttive — falls due as a regional production tax at a base rate of approximately 3.9%, which however relates not to profit but to a broader tax base that may include in particular wages and depreciation.

Profits distributed to a German parent company are subject to withholding tax — the ritenuta — of 1.2% under the EU Parent-Subsidiary Directive, provided that the holding amounts to at least 10% and the minimum holding period is satisfied. In addition, the Germany–Italy double taxation agreement of 1989 governs the tax treatment of dividends, interest and royalties in the cross-border context.

The dissolution of an S.r.l. — the so-called scioglimento — occurs on the exhaustive grounds set out in Art. 2484 c.c., which include in particular the expiry of the term in the case of a time-limited company, the impossibility of the company's purpose, the permanent loss of decision-making capacity, the onset of insolvency and a corresponding shareholders' resolution. After establishment of the ground for dissolution, the directors must cease to carry on current business and appoint a liquidator — the liquidatore — who may from then on only carry out acts related to the winding-up.

The liquidator winds up the company by satisfying creditors, realising assets, preparing the final balance sheet and distributing the remaining surplus to the shareholders in proportion to their interests. The liquidation ends with the deletion of the company from the Registro delle Imprese. In my advisory practice it is apparent that in cross-border liquidations with German shareholders, tax advice from both jurisdictions is indispensable, since both the Italian and German tax obligations during the winding-up phase entail considerable complexity.