Living well is the best revenge!
Can a company’s sole purpose be squandering all of its assets?
In the 13th century, the Republic of Siena was at the peak of its power and wealth. A group of twelve spendthrift friends, from the noblest and richest families, formed a company — the BRIGATA SPENDERECCIA (𝒕𝒉𝒆 𝑺𝒑𝒆𝒏𝒅𝒕𝒉𝒓𝒊𝒇𝒕 𝑩𝒓𝒊𝒈𝒂𝒅𝒆) — with a statute in which was written that the company’s sole purpose was squandering its capital for enjoying their life, organizing lavish parties and riotous living.
Once they reached that purpose, the company would be dissolved.
In a short time, the Brigade was able to squander the sum of 216,000 florins, which in today’s values corresponds to approximately € 15 Million. It is narrated that — in addition to organizing lavish banquets and events where they destroyed all plates and cutlery — they used cloves instead of wood to roast their beef (in that age cloves and other spices were hugely expensive) and that they were shoeing their horses with silver horseshoes.
The building in which they organized their parties is known as “ La Consuma” and still exists in Siena
This group of time-wasting friends is also mentioned by some poets such as Dante Alighieri, Guido Cavalcanti and Boccaccio, who dedicated to them the ninth novel of the sixth day of the Decameron.
What is the company’s purpose (oggetto sociale)?
“Oggetto sociale” (OG) is the economic activity that the shareholders of a company undertake to carry out for the purpose to share the profits (Art. 2247 of Italian Civil Code).
Accordingly, it would not be possible to replicate now a company similar to the 13th century Brigata Spendereccia!
The OG must be indicated in the articles of association and it must be clearly specified. It cannot be too general so that to leave the directors the discretion to choose the company’s activities.
The appointed directors can carry out only those activities which fall within the scope of the OG (art. 2384) and also the resolutions taken by the majority of shareholders are binding for the minority only if taken in compliance with the articles of association and therefore in line with the approved OG (art. 2377).
The Benefit Corporation
An exception to the above principle is the BENEFIT CORPORTATION, that Italy and few other countries have introduced in their legal system.
Benefit corporations are for-profit companies that — in addition, to maximize shareholder’s value and profits — undertake to expand their purpose to explicitly include the creation of public benefit and the commitment to carry out their activities in a responsible, sustainable and transparent way, in favor of persons, communities, and environment.
What else is to be included in the company’s articles of association?
Art. 2320 provides for that the articles of association of the company must include: (i) the details of each shareholder and the number of shares subscribed; (ii) the trade name of the company and registered address; (iii) the company’s purpose; (iv) the capital and the amount paid in; (v) the value and characteristics of each share; (vi) the value of any credits or other assets contributed by the shareholders; (vii) the terms for the distribution of the dividends; (viii) any preferential granted to the founding shareholders; (ix) the system adopted for the management of the company, the number of the directors and their powers and the list of those who are granted the powers to represent the company vis-a-vis this parties; (x) the number of the statutory auditors; (xi) the duration of the company; (xii) the approximate estimate of the costs for the company’s establishment.
SRL is the most common type of company in Italy
Srl (società a responsabilità limitata) is a company that benefits from a complete limitation of liability of the quota holders for company obligations. It is a “smaller-scale” company where the owners are usually a few individuals or entities (i.e. “quota holders”) holding “quotas” in the company rather than shares (like in a Spa, stock liability company).
Why choose an SRL?
· it has lower capital requirements (minimum share capital is only € 10,000).
· It allows to have a full presence in Italy and an Italian VAT number, but at the same time being less burdensome than a Joint stock company in Italian S.p.A. (Società per Azioni). In the future, if needed, the limited company SRL can be “upgraded” to a joint stock company (“S.p.A”).
· Quota holders have more freedom in setting up the rules for its functioning, management and organization
· in case there are two or more quota holders it is possible to pay in upon incorporation only 25% of the capital
What are the main steps to register an SRL?
The process of establishing a new company can be entirely handled by a trusted consultant, with no need for the prospective quota holders to travel to Italy.
1. Execute a power of attorney granting a counsel in Italy the powers to attend Notary’s meeting in Italy and to incorporate newco (notarization and legalization by Italian Consulate/ Apostille is required); No need of a power of attorney for officers of the parent company or quota holders of the new company to attend in person to the Notary’s meeting in Italy;
2. Provide all info/docs required by your consultant;
3. Apply for newco’s quota holders and officers Italian tax codes
4. Transfer funds for registered capital to Italian Notary’s trust bank account (funds must be available on Notary’s account the day of incorporation deed execution);
5. Incorporation of the new company: quota holders do not need to attend in person but can give a power of attorney (to be legalized) to a third party
6. Within 1–3 weeks from the date of execution of incorporation deed and bylaws, the new company is registered by the Notary with the Companies House and the company is provided with a VAT number and is officially registered (a new company’s PEC email must be provided to the Companies House);
7. Once the company is officially registered, the appointed director can open the company’s bank account and registered capital initially paid in is transferred to the company’s account. At this stage, registered capital can be used for the company’s operations.
Disclaimer: The information provided on this article (i) does not, and is not intended to, constitute legal advice; (ii) are for general informational purposes only and may not constitute the most up-to-date legal or other information (iii) this website may contain links to other third-party websites. Such links are only for the convenience of the reader; (iv) readers should contact their attorney to obtain advice with respect to any particular legal or tax matter.