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LEGAL ISSUES Start up a Company in Italy by Antonio Reschigna, Civil Law Notary The Italian legislation in support of innovative SMEs Source: Ministry of Economic Development T trepreneur or through some forms of companies with no limited responsibility, partially limited re- sponsibility (Società di persone), or through S.r.l. (Limited Liability Company). A Company Limited by shares (Società per azioni) is usually a Company of larger size than a Limited Liability Company (Società a responsabi- lità limitata) and has for a long time been the only Company open to mass investors. Thanks to new updates, PMI is now open to different kinds of shareholders: shareholders who want to run the Company and that usually start the Company and shareholders with limited voice powers whose only intent is to act as investors. In the past small and medium-sized companies could receive funding only from their members, nowadays the provisions are much more ﬂexible and this allows businesses to be easily funded from birth and small companies to develop and grow. he new Company Law passed by the Ita- lian Chamber and Senate in 2003 renewed substantially the rules regarding Limited Companies and Companies Limited by shares, creating much more ﬂexible provisions and up to time opportunities for entrepreneurs and inve- stors. A decade after the Companies’ Act of 2003, the Italian Parliament passed a new simpliﬁed ver- sion of the Limited Company (Società a responsa- bilità limitata sempliﬁcata) and established a new Company in the technological ﬁeld (Start-up inno- vativa) in order to facilitate the approach of young people to economic activities with up to date te- chnological characteristics. The purpose was to encourage sustainable growth, new forms of en- trepreneurship, youth employment and technolo- gical innovation development. Limited Liability Companies of small and me- dium size, furthermore, are not required to have forms of auditing, reducing the costs related to the company’s management. This trend of intro- ducing simpliﬁed forms for companies is common to many other Civil Law countries all over Europe, the United Kingdom and the United States of Ame- rica. In order to better understand the Italian com- panies system one important concept to be known is that the PMI (piccola media impresa i.e. a Com- pany of small or a medium size) is a company employing less than 250 employees and having an annual turnover of no more than 50 million euros or a total annual budget of no more than 43 million euro. Medium and small size companies are very common in Italy and they are run by a single en- Recently a new act has provided that small and medium-size companies can be externally funded both having or not having an innovative te- chnological purpose. This means that medium and small companies can be funded generally by inve- stors and also by Mutual investment funds and by venture capital investors or private equity entities. A medium or small size company can have mana- ging shareholders and investors as shareholders: the company can get different ﬁnancial incomes, from a tight circle up to an open market. Since April 2017 PMI incorporated as SRL’s can offer their shares to public investors and also through equity-based crowdfunding in order to reach mass investors. The entire small and medium-size system of Companies has been radically changed, this new approach allows for a much more simpliﬁed way of incorporating a company in Italy and its fun- ding. In Civil Law countries companies are registe- red with a local Company Register and by the local Revenue. The average time to incorporate a company and register it, once the Articles of Asso- ciation and By-Laws are executed, is 48 hours. # The Decree-Law 3/2015, (known as “Investment Compact”), converted into Law 33/2015, has ex- tended most of the beneﬁts envisaged for innova- tive startups to a broader range of companies: “innovative SMEs”, small and medium Enterprises operating in the ﬁeld of technological innovation, regardless of their date of incorporation, the eco- nomic sector in which they operate or their stage of maturity. This regulatory intervention ackno- wledges established principles of the contempo- rary economic doctrine, which unanimously ascribes to technological innovation a decisive im- pact on the levels of competitiveness and growth and on the processes of job creation. The aim of the legislator was thus to foster with greater effort and reach the propagation of technological inno- vation within the domestic productive fabric. In an economic environment, as it is the Italian one, dominated by small and medium enterprises, the “expansive breakthrough” impressed by the “Investment Compact” represents the logical and inescapable evolution of an industrial policy – as the one carried out by the Italian Ministry of Eco- nomic Development – that, through technological development, aims at promoting sustainable growth and the diffusion of an entrepreneurial cul- ture committed to research and innovation and open to the global ﬂows of human and ﬁnancial capital. Innovative startups and innovative SMEs clearly represent two sequential stages of the same con- tinuous and coherent growth process. Therefore, the Italian Government has intended to support not only the initial phase of the business but also, in view of the data collected on innovative star- tups during the four years of validity of the special regime (see the dedicated online, weekly-updated directory of the Business Register), to accelerate the dimensional growth and to support the conso- lidation of those companies characterised by high technological contents. As described in the following paragraphs, the legi- slation designed in favour of innovative SMEs con- sists in a vast and diversiﬁed package of measures that touch every aspect of a company’s lifecycle, including the introduction of more ﬂexi- ble corporate management tools, the liberalisation of remuneration schemes, the facilitation of the access to credit – for example by facilitating the investment in equity, and the support in the pro- cess of internationalisation of innovative enterpri- ses. 17

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