→ Nicola Canessa

The recent amendments of the 2004 Italian Company law (the “Reform”), have introduced, inter alia, a number of interesting developments with reference to limited companies in Italy, in particular to the Italian S.R.L. companies (Società a responsabilità limitata), modifying the relevant provisions of the Italian civil code, and limiting them to those institutions with a more limited number of members (linked very often – but not necessarily – by a sort of “intuitus personae”), whilst the S.P.A. (società per azioni) better refers to wider company body.

In fact, until this Reform came about, many “family” companies were structured as S.p.A., for little other reason than to create a stronger “public identity”, with weak legal motivation for such a choice. Now, however, the S.R.L. is reclaiming its position in corporate structuring, becoming the main point of reference for the major part of closely held Italian corporate realities, while the S.p.A. model is now more often reserved for “public traded companies”.

New rules allow the S.r.L. quota holders to pick and choose tailor-made by-laws to best suit their situation, structuring them either along the lines of a stock corporation or a partnership, according to the circumstances and the will of the quota holders.

Thus, rather than stark black or white, many subtle intermediate shades are now offered to entrepreneurs who desire to establish a “custom designed” company.
In light of the Reform, it is now possible to say that in Italy there are no standard S.R.L. company by-laws: the quota holders are allowed to establish tailor-made rules, referring to the Italian Civil Code only for those issues and topics not specifically addressed by the company’s by-laws.

As far as S.R.L. corporate governance is concerned, new rules have been provided in order to enhance the freedom of self-government and the rights of quota holders as well as the relationships between members.
For instance, S.R.L. corporate by-laws may establish that it is not necessary for the company to create a formal board of directors; in such a case, each quota holder would manage the company jointly or severally, according to the provisions of the by-laws.
Therefore, unless otherwise specified, a sole director, or a board of directors (in this latter case jointly or severally) is appointed to manage the company: their decisions may also be taken “away from the table” at informal meetings, but must always recorded in writing.

With reference to the S.r.l. governance systems provided by the Italian Civil Code (in the event that this is not explicitly addressed by the corporate by-laws), it is interesting to note the following.
In the case of joint governance, the consent of the majority or of all the directors is required to pass board motions (save in particularly urgent cases, in which each of the director may govern severally in order to avoid any significant company loss); in the case of a majority voting system (rather than a unanimous voting system), the by-laws must also specify the percentage necessary to win a majority vote , as well as the relevant calculation methods.

Conversely, however, under the several model of governance, all decisions may be taken by each of the directors, with no need of the consent of the others; each of the directors (even if he is not a quota holder) is entitled to oppose decisions taken by the other director(s) (obviously before the relevant managing act has been carried out).
In addition, mixed forms of the two different systems may exist: for instance, several governance may be adopted for ordinary or current management issues, whilst a joint system may be used for extraordinary management issues within the company.

Furthermore, relating to the matter of corporate governance, Article 2468 of the Italian Civil Code permits the assignment to one or more quota holders of a number of special “administrative rights” in relation to company management and profit sharing.

The vague definition of “administrative rights” has caused considerable doctrinal debate with regard to its precise meaning, and in particular whether voting rights should be included in above-mentioned provision, assigning additional administrative rights, of Article 2468 of the Italian Civil Code.

In light of the strong links between quotaholders, for instance, S.r.l. by-laws can provide limitations to quota transfers and to pre-emption rights in the event a partner wishes to transfer his quote.
To the same extent, it has been said that providing a quota holder with special voting rights (for instance veto rights in relation to specific resolutions) would not conform to the provisions of Article 2479 of the Italian Civil Code, which provides that voting rights are to be in proportion to quota held.

At the same time, however, many important Authors (among others, the Notary Association of Milan and Triveneto, which in Italy have an important role in creating legal doctrine) have interpreted voting rights to be an essential administrative right and have therefore included them in the provisions established under Article 2468 of the Italian Civil Code
Consequently, it is possible to assign special voting rights to one or to several quota holders, provided that this particular right is limited to specified and detailed types of decisions.

Therefore, in order to avoid a wholesale departure from provisions of Article 2479 of the Italian Civil Code, it is important to clearly set out those decisions that are to be submitted to any veto rights assigned: an unconditional derogation of such provisions, in fact, would be unlawful.

This interpretation is in line with the Reform’s ratio (that of enhancing companies’ right to self-regulation) as well as with the letter of the above mentioned Article 2468.
Hence, additional special administrative rights assignable to one ore more quota holders under the same Article 2468, inter alia, are:
a) the right to appoint one, or more than one, director;
b) the right to vote in quota holders’ meetings without regard to the proportion of contribution to company’s capital; and
c) the right to veto or to express prior approval to a motion or any other managing act (with the sole exemptions being those set forth in art.2475, last comma, of the Italian Civil Code, i.e. approval of the yearly financial statements).

Thus it is clear that these provisions provide effective guidance for the governance of the Italian S.R.L. company, allowing corporations to grant certain quota holders differing powers and special rights in relation to, for example, their positions in a family company (father/son) or particular skills they may have with regard to the core business of the company.