handbook DOING BUSINESS IN ITALY 2017

Transcription

1 handbook DOING BUSINESS IN ITALY PG Legal - all rights reserved

2 FOREWORD This handbook is intended to provide the reader interested in doing business in Italy a brief overview of Italian forms of business organisations and related factors, such as labour, intellectual property, bankruptcy, debt collection, litigation and taxation. The subjects treated in this booklet are not covered exhaustively, and are intended only to provide basic information on Italian commercial law. Companies or individuals seeking to conduct business in Italy are advised to obtain current and detailed information on applicable laws and regulations from experienced professionals. The material contained in this booklet is updated to January 2017 and, unless otherwise indicated, is based on information available at that time. * * * 2

3 PROFILE Italy is characterised by a broad based, mixed economy divided between State holdings, major corporations and medium to small businesses. Large corporations operate principally in the manufacturing, automotive, banking, insurance and, most recently, telecommunications sectors. Medium and small businesses, which account for nearly one third of Italy s economic output, are concentrated primarily in the retail and wholesale trades and the fashion and furniture industries. Over the past decade, the Italian Government has engaged in a concerted effort to privatise State holding companies with a goal to liberalising substantial sectors of the economy, in particular telecommunications and energy production. As a founding member of the European Union, Italy has actively contributed to the elimination of frontiers in Europe which has been essential to the free exchange of capital, goods, services and labour. Italy is a global leader in the construction and cement industries, Italian steel is second only to Germany and the robotics industry places fourth, after Japan, Germany and the United States. Telecommunications has been the object of significant interest in recent years. Free competition for fixed line and portable global network services, calling cards, video conferencing and several million cellular phone users are only a few dimensions of this rapidly expanding market. In 2002, the energy sector underwent significant market changes with the opening of the Italian Power Exchange, substantially liberalising the Italian energy market favouring the entry of Independent Power Producers, including particular incentives for green energy production. Italian law places no restrictions on foreign investment. Foreigners may control and manage 100 percent of the equity capital of an Italian business and are free to transfer, either in whole or in part, any activities that they have acquired or established. In fact, the country has provided Italian law places no restriction on foreign investments and provides fertile ground for investors The Italian Government is committed to liberalising substantial sectors of the economy Italian law places no restrictions on foreign investment 3

4 fertile ground for acquisitions, and statistics indicate that several hundred transactions have occurred over the past few years alone. All companies established in Italy are governed by the provisions of the Italian Civil Code, whether they are owned by Italian citizens or foreigners. Special laws also apply to banks, insurance companies, and investment and trust firms. New enterprises must register with the Italian Registry of Businesses, notify the tax authorities and register employees with the relevant social security authorities. Companies that intend to import or export goods subject to licensing must register with the Ministry of Economic Development and retailers may be required to receive licensing from municipal or regional authorities. * * * 4

5 PRINCIPAL FORMS OF DOING BUSINESS IN ITALY CORPORATIONS TYPES AND FORMATION There are two principal corporate forms utilised to establish a company in Italy: the corporation - Società per azioni-, commonly known as an S.p.A.; and the limited liability company - Società a responsibilità limitata-, commonly known as an S.r.l. Incorporation requires the signing of Articles of Incorporation and approval of By-laws before an Italian notary. The incorporators may either appear personally before the notary or appoint attorneys in fact to appear on their behalf. A corporation is established either by contract or by deedpoll. Both the S.p.A. and the S.r.l. may have just one shareholder and the sole shareholder shall enjoy also limited liability for corporate obligations arising during the time it remains the sole shareholder. The sole shareholder shall incur into unlimited liability in the event of insolvency only under two specific circumstances provided for by law, i.e. failure to pay in the corporate capital and failure to comply with certain mandatory filings. Generally, there is no restriction on foreign shareholders. Generally there is no restriction on foreign shareholders CAPITAL REQUIREMENTS An S.p.A. has a minimum capital requirement of Euro and its capital is divided into shares represented by share certificates. With the exception of a particular class of shares (- Azioni di Risparmio - or savings shares), all shares must be issued to the name of a specified person or company and are transferred by endorsement, or by annotation of the transfer on the certificates and in the shareholders ledger. Only an S.p.A. can be listed on a stock exchange. 5

6 Not only S.p.A. but also S.r.l. can issue bonds (Obbligazioni). However, bonds cannot be issued in an amount exceeding the double of the sum of the corporate capital plus legal and available reserves, as reported in the last approved balance sheet. In cases strictly provided by law, inter alia, if bonds are to be listed on one or more regulated markets, bonds can be issued exceeding the aforementioned amount. An S.p.A. may, however, borrow from other sources without any limits. The minimum capital requirement of an S.r.l. is Euro and, as opposed to an S.p.A., the capital is divided into quotas that are not represented by share certificates. With the intent of re-launching productivity and economic growth, recently the Legislator has introduced a simplified form of limited liability company (S.r.l. a capitale semplificato), whose minimum capital requirement can be lower than Euro and ranges from a minimum of Euro 1 to a maximum of Euro At the time of the formation of the company, 25% of the minimum capital must be deposited with a bank in an account held by the company s designated director(s) and, if the corporation is established by deed-poll, the entire amount of the capital must be deposited. Such sums will be returned to the company after its formation, and the payment of the outstanding amounts of the company's capital can be made at a later time, usually at the request of management. Instead, the entire corporate capital of an S.r.l.s. must be paid - in upon incorporation.capital contributions to corporate capital can be made in cash, inkind and even in services, pursuant to the provisions of the Articles of Incorporation (with the exception of an S.r.l.s. whose contribution must always be in cash). Such contributions are subject to registration taxes whose rates vary depending on the nature of the good conferred. In any event, all in-kind contributions must be appraised by an independent expert appointed by the President of the Italian law imposes no specific limitations on debt-to-equity ratios 6

7 Court which has jurisdiction over the place where the company has its registered office. Italian tax law imposes no specific limitations on debt-toequity ratios. It is important, however, to structure operations so that the income of a company at least offsets the interest due on debt financing. Otherwise, there is the risk of falling under the provisions of Articles 2446 and 2447 of the Italian Civil Code, described below. Article 2446 of the Italian Civil Code provides that, when corporate losses cause the corporate capital to undergo a decrease of more than one-third, the directors or the board of auditors of the company must call a meeting of the shareholders, without delay, in order to consider the financial position of the company. The directors must submit, to that meeting, a report on the financial condition of the corporation accompanied by the opinion of the internal auditors. If, before the end of the subsequent financial year, the deficit has not diminished to less than one-third of the corporate capital, the shareholders' /quotaholders meeting must resolve to reduce the capital by the amount of the losses incurred. If the meeting fails to do so, the directors and the internal auditors must apply to the Court to carry out the reduction. In addition, Article 2447 of the Italian Civil Code provides that if, as a result of corporate losses, the corporate capital falls below the legal minimum requirement, the Directors or the management committee or the supervisory board are required to call a shareholders'/quotaholders meeting without delay to resolve that: - (i) the corporate capital be reduced by the amount of the losses and then immediately increased to an amount not less than the minimum requirement set by law; (ii) ; or - in case of S.r.l., the company may be transformed into an S.r.l.s. and the legal minimum corporate capital shall be equal to 1 Euro. If the meeting fails to increase the capital to the legal minimum, the company may be required to go into Italian corporate management systems offer flexibility and ensure that shareholders can exercise suitable control over management 7

8 liquidation. Therefore, it is compulsory to structure the company so that it will operate at a break-even point. MANAGEMENT Italian Law provides three different systems regarding the management of corporations: the ordinary system, the monistic and dualistic ones. The monistic and dualistic systems can be adopted only if they are provided for in the By-laws. In the ordinary system, the General Meeting of Shareholders is responsible for approval of the balance sheet, the appointment of directors and the determination of the remuneration for directors and statutory auditors; the sole director (or the board of directors) is in charge of management; the board of statutory auditors supervises the compliance by the company management with the law and the Articles of Incorporation, the respect by the management of rules of correct business administration as well as the adequacy of the company s organization and accounting and its actual operation. Control of the company accounts is entrusted to external auditors. In the monistic system the management is committed to a board of directors while a management committee, elected in the board of directors, has supervisory functions. The audit is up to an external auditor or an external auditing company. In the dualistic system, there are a management board, with the same type of responsibilities as those which are attributed to the board of directors, and a supervisory board, whose tasks are wider than those of statutory auditors, in that it sees to the appointment and revocation of management board members and to the approval of the company s accounts. As the ordinary system is the generally preferred form of management, this review of corporate management refers to the rules that apply to this latter system. 8

9 MANAGEMENT STRUCTURE An Italian corporation does not have officers (e.g., CEO, CFO). Instead, in an Italian corporation the role of officers is exercised by its directors (Amministratori). Directors of an Italian corporation carry out transactions on behalf of the company, manage its business, and represent it in dealings with third parties. Management of a company may be entrusted to a board of directors (Consiglio di Amministrazione) or a sole director (Amministratore unico). Moreover, except for some functions, such as drafting the balance sheets and increasing the corporate capital, the board of directors may delegate its authority to a managing director (Amministratore delegato) or an executive committee (Comitato esecutivo). The managing director (or the executive committee) may in turn delegate part of its authority to a general manager (Direttore generale). The same person may be a general manager and a managing director, as well as chairman of the board. Rules governing the responsibility of directors also apply to general managers, limited to the scope of their powers. Directors of an S.r.l., however, must be quotaholders, unless the Articles of Incorporation authorise otherwise. The Chairman of a corporation is called Presidente in Italian, since there is no duality chairman/president CEO MANAGING DIRECTORS In Italian, the chairman is called Presidente since there is no duality chairman/president. The chairman leads the board and is a member of the board. If the By-laws so provide, the board of directors may elect one or more managing directors (or an executive committee) and one or more vice-chairmen. The position of chairman is frequently given to the majority shareholder. Some Italian corporations act by means of a chairman, unless a managing director has been appointed. The position of managing director is similar to that of the Chief 9

10 Executive Officer (CEO) of a U.S. corporation, although not precisely equivalent. Directors stand in a fiduciary capacity to both the corporation and its shareholders and are restricted from engaging in competitive activities and/or conflicts of interest. GENERAL MANAGERS General managers are not necessarily members of the board. However, they are appointed by the directors, unless the Articles of Incorporation grants this power to the shareholders. The position of general manager is generally given to a professional manager (Dirigente). General managers are employees of the company. The general manager is charged with the company s day-today operations and powers are usually included in a power of attorney. INTERNAL AUDITORS An S.p.A. is required to appoint a board of internal statutory auditors. If the company is listed, the audit is entrusted to an external auditing company while internal auditors are in charge of control on management. If the company is not listed and the ordinary system is adopted, the board of internal auditors may be responsible for auditing as well as controlling on management, provided that this choice is set up in the By-laws, the company does not have to draft consolidated financial statements and the internal auditors are enrolled in the Auditors Registry. The board is composed of three or five regular members, who may or may not be shareholders of the company, and two substitute members. The auditors shall either be appointed in the Articles of Incorporation or at the shareholders' meeting and shall remain in office for a period of 3 years. In order to be eligible, a potential auditor must possess special technical skills, professional An S. p. A. is required to appoint a board of Statutory Internal Auditors that exercise a control over management. Statutory auditors have to be enrolled in the Auditors registry 10

11 experience and be selected from a list of official auditors deposited with the Ministry of Justice. As an alternative to a board of auditors, the By-laws may provide for a sole auditor who shall have the same tasks and must meet the same requirements as the members of the board of auditors. Auditors are jointly liable with the directors for any acts or omissions on the part of the directors that result in damage to the company. The board of auditors meets at least every 90 days and its resolutions must be taken by an absolute majority. An S.r.l. will be required to have a board of internal auditors, only when such a company: (i) has to prepare consolidated financial statements; (ii) controls another company obliged to carry out audit; (iii) exceeds, for two consecutive financial years, the following limits: a. Asset value of Euro 4,400,000; b. Profits from sales and services rendered of Euro 8,800,000; c. An average of 50 people employed during the fiscal year. The auditors have a duty to oversee the acts of the directors and to protect shareholders' rights. The role of the auditors is, however, in practice limited to ensuring that the company's accounting records are properly kept, that the profit and loss statements of the company correspond to the figures in the corporate books, that the directors do not violate the By-laws or the law. The article of association may entrust the audit to an external auditing company. CORPORATE BOOKS AND RECORDS An Italian company must keep certain mandatory books and records, including a daily journal, an inventory ledger, a shareholders' ledger (since 2009, an S.r.l. is no longer required to keep a quotaholders ledger), minutes of the shareholders' meetings, minutes of the board of directors' meetings, minutes of the board of auditors meetings, and 11

12 minutes of the executive committee's meetings, if appointed. The originals of all incoming letters, telegrams, and invoices, and copies of all outgoing letters, telegrams, and invoices must be kept for at least ten years. In addition, the company must keep certain registers required by tax laws (such as a VAT register) and by labour laws (such as payroll registers). ANNUAL FINANCIAL STATEMENTS Within 120 days (up to a maximum of 180 days, if allowed by the By-laws for specific reasons provided for under the law) from the close of the corporate fiscal year, the ordinary shareholders' meeting must approve the financial statements of the company and resolve upon the distribution of dividends, if any. The financial statements are comprised of a Balance Sheet prepared by the board of directors and reviewed and commented upon by the board of internal auditors or sole auditor (if existing). The financial statements must be accompanied also by a report of the board of directors to the shareholders. The ordinary meeting, upon approving the financial statements, may resolve the distribution of the profits or dividends or to carry them forward. Losses not impairing the capital and, therefore, not requiring remedial action pursuant to Articles 2446 and/or 2447 of the Italian Civil Code (commented upon above) may also be carried forward. AGENCY AND DISTRIBUTION Many foreign companies choose to enter the Italian market by introducing their products through agents or distributors, rather than establishing a subsidiary or branch. This approach to the market has several advantages. It 12

13 permits companies to increase market share while avoiding substantial capital investments and start-up costs associated with the formation of Italian companies, as well as related corporate taxation and labour burdens. It is important, however, to be aware of the fundamental distinctions between agents and distributors in order to avoid unexpected costs, particularly in the event of termination of the relationship. AGENCY AGREEMENTS Under an agency agreement, generally the principal appoints the agent as its exclusive agent for a given territory, but the exclusivity may be regulated differently by agreement of the parties. The agent then acts on behalf of the principal for the promotion of contracts for sales of the principal's products. Although an agent may be granted the power to execute agreements on behalf of the principal, the actual contractual relationship is not with the agent, but between the principal and the buyer. Agency agreements must be in writing. Agents are required to be enrolled in the Italian Registry of Businesses (Registro delle Imprese) (if the agent is a company) or in the Administrative Economic Registry (Repertorio Economico Amministrativo) (if the agent is a physical person). The agent typically will be compensated entirely on a commission basis, as salaries are not permissible. Agents, however, may be granted advances on future commissions, even in the form of periodic payments. Commissions vest at the moment the principal performs or should have performed its obligation as called for in the contract sold by the agent on the principal s behalf. In addition, the Parties to an agency agreement may agree that the agent will acquire the right to the commission at the moment in which the third party performs or should have performed its obligation as called for in the contract. The contractual Many foreign companies choose to enter the Italian market by introducing their products through agents or distributors, rather than establishing a subsidiary or branch. It is important, however, to be aware of the fundamental distinctions between agents and distributors in order to avoid unexpected costs, particularly in the event of termination of the relationship 13

14 provisions referring to the agent s right to the commission is relevant also for tax purposes. Commercial agents have long enjoyed protected status under Italian law. They may operate as self-employed persons carrying on their own business independently or on behalf of a sole principal. In either case, an agent has certain guarantees in the event of termination by the principal. Specifically, an agent is entitled to an indemnity payment upon termination of the agency agreement, assuming that the following circumstances exist: (i) The agent has brought new customers to the principal or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers; and (ii) The payment of the indemnity is equitable, taking into consideration all the circumstances and, in particular, the commissions lost by the agent on the business transacted with such customers. In any event, the annual indemnity may not exceed the value of the annual average of the commissions charged by the agent during the last five years or, if the agreement has been in effect for less than five years, the value of the average for the contract. The above indemnity payment would not be due should the principal terminate the contract because of a default attributable to the agent, which would justify immediate termination of the contract. However, each party can terminate a contract of indefinite duration by giving the other party proper notice. This notice period must not be less than one month for the first year of the contract, two months for the second year commenced, three months for the third year commenced, four months for the fourth, five for the fifth and six months for the sixth year and all subsequent years. The parties may agree on different periods of notice. 14

15 DISTRIBUTION AGREEMENTS Distinguished from an agent, a distributor makes arrangements contracts with a manufacturer or exporter to directly purchase goods that the distributor will resell to retailers or to the public for its own account. The distributor earns on the difference in the purchase price for the goods and the price at which the goods are resold. In a recent judgment, the European Court also underlined that another economic value for the distributors usually consists in the provision of assistance to the distributors regarding access to forms of advertising, communication of know-how by means of training, or payment facilities. Although a manufacturer may provide a distributor with suggested retail prices and incentives to purchase, the distributor is entirely independent in its contractual relations with ultimate buyers. Most distribution agreements operate by repeated sales of goods to the distributor, who may or may not be bound by a designated territory or exclusivity terms. As opposed to an agent, there will be no compensation upon termination of the contract. The major limitation on distribution agreements is that they must not violate the rules against unfair competition. These rules relate primarily to restrictions to the independence of the distributor, such as fixing resale prices, limiting the distributor to a defined territory, discrimination in the terms and conditions offered to different distributors or exclusion of the manufacturer from selling directly in the territory. Since territoriality and exclusivity are fundamental to a meaningful distribution system, the European Commission has provided for block exemptions for exclusive distributorships. These exemptions permit the parties to restrict the manufacturer from making sales of the goods within a defined territory and obligate the distributor not to distribute competing goods or make sales outside of its The major limitation on distribution agreements is that they must not violate the rules against unfair competition. In the case of exclusive distributorships the EC ha provided for block exemptions. Prior to entering into an exclusive distribution relationship, it is advisable to review the applicability of block exemptions 15

16 own territory. This exclusivity provides the distributor with an obvious advantage over other independent wholesalers, providing an incentive to invest time and resources in effective marketing efforts for the products. Prior to entering into an exclusive distribution relationship, it is advisable to review the applicability of EU block exemptions. FRANCHISING In Italy, franchising (Affiliazione commerciale) is defined as the agreement entered by two parties, legally and economically independent of each other, by which the franchisor grants the franchisee, in return for financial consideration, the authorisation to use industrial and intellectual property rights such as trademarks, trade names, formulas, shop signs, utility models, designs, copyright, know-how or patents. Further, the franchisor shall provide commercial or technical assistance. The franchisee becomes part of a chain of franchisees located throughout the territory for the commercialization of products or supply of services. Generally, the franchisor does not provide sales premises for the franchisee, although the franchisor will retain the right to approve them. The franchisee is normally responsible for the cost of leasing a suitable space. In situations where the franchise itself requires a particular location, the franchisor may purchase the property and subsequently lease it to the franchisee, thereby gaining the double advantage of being paid franchise royalties and fees and simultaneously holding a real estate investment. It should be highlighted that mandatory provisions state that franchising agreements must be done in writing otherwise they are considered void and null. They can be open-ended or fixed-term agreements. In the second case, the law establishes that their duration cannot be less than three years (except for termination of contract due to 16

17 breach) and the contract shall meet certain mandatory requirements. LABOUR LAW EMPLOYEE RIGHTS Italian labour laws grant numerous rights to employees based on national collective bargaining agreements and generally limit the actions of employers in relation to hiring, firing, disciplinary measures, holidays, sick and maternity leaves, and so forth. For example, Italian law requires, under certain circumstances, that the employer negotiate with union representatives on various issues including firing and disciplinary actions, as well as in relation to corporate restructuring, mergers, etc. These rights cannot be overridden by collective bargaining or individual employment agreements, unless such agreements are more favourable to the employee than the minimum requirements set forth by Italian labour laws. Employees may choose which union to join and employers are prohibited from discriminating against employees on the basis of union membership. Employers are also prohibited from forming or financing labour unions. Whenever an employer fails to acknowledge union activity or attempts to inhibit it, the law permits immediate intervention by a labour judge. EMPLOYEE DISMISSAL Employers may dismiss employees only for just cause or a justified motive. A just cause may be defined as something that prevents a continuation of the employment relationship or any serious situation which may jeopardise trust between employer and employee. A justified motive may include a failure to comply with contractual obligations such as insubordination, disobedience, outrageous behaviour, or low employee output in relation to reasonable and Italian labour laws grant numerous rights to employees based on national collective bargaining agreements and generally limit the actions of employers in relation to hiring, firing, disciplinary measures, holidays, sick and maternity leave. It is always advisable to seek legal advise on employment issues to avoid employment suits being brought against an employer 17

18 established goals (so-called justified subjective motive). A justified motive may also derive from economic necessity, such as a reorganisation of the workplace (so-called justified objective motive). Collective bargaining agreements may specify that certain activities constitute just cause or justified motive of termination. Under certain conditions, an employee who is dismissed in violation of applicable provisions may seek both reinstatement in the workplace and damages. Terminations for wholly economic reasons normally involve collective terminations, i.e., the termination of more than one employment contract. Provided that certain requirements are met, such terminations require prior consultations between the employer and trade unions. Unions often legally challenge large staff reductions if the employer fails to consult with the union. CORPORATE EXECUTIVES Corporate executives fall under a separate employment category and are not subject to the same provisions as other employees. Nevertheless, collective bargaining agreements provide executives a unique working status and, although executives are not subject to rules governing employees generally, e.g., fixed daily and weekly working hours, indefinite-term employment contracts, and dismissal requirements, most collective bargaining agreements prohibit the dismissal of corporate executives without a justified motive. COLLECTIVE BARGAINING Collective bargaining agreements vary in substance according to industry sector but usually contain essential contract terms. National unions and national employer associations generally enter into collective bargaining agreements every three or four years. Unlike foreign labour 18

19 unions, unions in Italy engage in political activity. However, such activity is usually related to employment. Collective bargaining agreements often designate compensation amounts payable to employees of different categories. Social security contributions are also added and may amount to a predetermined percentage of the monthly salary. Trade workers receive fixed work schedules of up to 40 hours per week and fixed paid leave of absence and vacation. Unjustified dismissals may require the payment of indemnities. BANCRUPTCY The Italian bankruptcy legal framework has undergone continuous legislative amendments, the last of which are: Law Decree no. 83 of 2012, Law Decree no. 69 of 2013 and Law Decree no. 145 of Italian bankruptcy law, enacted under Royal Decree no. 267 of 1942 (Legge Fallimentare), regulates the treatment of commercial enterprises in financial distress by setting forth various procedures that may apply whenever a creditor or creditors seek to collect from a debtor enterprise that has insufficient resources to satisfy its debts. Strictly speaking, in the Italian context, the term bankruptcy (Fallimento) refers exclusively to the liquidation of insolvent commercial enterprises. Italian bankruptcy law also provides specific types of liquidations and various types of financial reorganisations as detailed below. One of the main characteristics of the Italian bankruptcy system is that only those entities which are deemed to have engaged in a commercial activity may be declare bankrupt. Italian law does not consider all professions to be commercial activities. Accordingly, in the event of insolvency, lawyers, doctors and architects are not entitled to avail themselves of Italian bankruptcy law. Entities engaged in commercial activities, except public entities, cannot be declared bankrupt if all of the following conditions are met: Bankruptcy legislation in Italy has undergone a series of reviews and amendments since 2005, the latest of which is Law Decree 78/

20 (i) their assets did not exceed Euro ,00, in the last three financial years preceding the bankruptcy petition or from the beginning of the commercial activity (if less than three years); (ii) their gross income did not exceed Euro ,00 in the period mentioned; (iii) their indebtedness does not exceed Euro ,00 considering also debts not yet due. Such thresholds are adjusted in accordance with the ISTAT index, every three years. BANKRUPTCY PROCEDURES A bankruptcy petition can be submitted by a creditor, the insolvent party itself, the judge or the public prosecutor. Upon filing of the petition, the Court must declare whether the debtor should be placed in bankruptcy or whether a different arrangement would be more appropriate to protect the interests of the creditors, debtor, and in specific cases, other concerned parties such as employees. Once the debtor is declared bankrupt, the Court appoints a receiver (Curatore) and a delegated judge (Giudice Delegato). The latter supervises the receiver and appoints a creditors committee. The committee has the right to be consulted and the power to request any relevant documents from the receiver and the bankrupt that pertain to the bankruptcy. In determining the assets of the bankruptcy estate, the disposal of assets prior to the petition are considered void per se. These include gratuitous acts of disposal and payment of certain debts by the debtor during the two years preceding the bankruptcy declaration. In other instances, it is presumed that parties which dealt with the debtor before the bankruptcy declaration were aware of the insolvency, and thus have the burden of proving that such operations did not constitute voidable transactions. 20

21 Bankruptcy procedures may conclude with a particular type of arrangement among creditors known as a postbankruptcy composition with creditors, which may be proposed by a petition to the insolvency Court. Such a petition may be filed by creditors and third parties or by the debtor under certain circumstances and may provide for a large variety of arrangements. COMPULSORY ADMINISTRATIVE LIQUIDATION Compulsory Administrative Liquidation (Liquidazione Coatta Amministrativa) is a special liquidation procedure designed specifically for insolvent enterprises involving large public interests, such as insurance companies and banks. This procedure is supervised by an administrative forum rather than a Court of law. PRELIMINARY COMPOSITION WITH CREDITORS Preliminary Composition with creditors (Concordato Preventivo) is a type of liquidation procedure that a debtor experiencing financial distress or otherwise insolvent can apply for. This procedure consists in the implementation of a Court-approved restructuring proposal that, if accepted by the creditors holding the majority of the debt, binds all creditors, including those that did not accept it. The Preliminary Composition with creditors is supervised by a Court which examines the proposal accompanied by the opinion of an expert and assesses whether the proposal and the restructuring plan are feasible. If the Court finds that the plan is not feasible, the proposal may be rejected or refused and the debtor is not admitted to Preliminary Composition even if the creditors accepted the proposal. In these cases, the debtor will be declared bankrupt. The actions of creditors, pending the mentioned proceeding, are endured. During the implementation of the composition plan, the company is managed by the debtor 21

22 under the surveillance of a Court-appointed commissioner and of a Court officer. RESTRUCTURING AGREEMENTS Restructuring Agreements (Accordi di ristrutturazione dei debiti) are an alternative measure to bankruptcy aimed at saving a company that is experiencing financial distress while preserving the rights of its creditors. The debtor is entitled to enter into an agreement with creditors representing at least 60% of the aggregate amount of the indebtedness. Therefore, the main creditors either waive part of their rights or accept to postpone the payments of their credits or decide to convert part of their receivables into equity thus becoming stake-holders of the company. Upon execution, the Restructuring Agreement must be filed with the Company's Register and the competent Court along with a business plan, updated financial statements and a report carried out by an expert. From the date of the filing with the above mentioned Register such agreement becomes effective and binding for the company and the creditors that have signed it. The debtor cannot be sued before a Court by creditors for the enforcement of their receivables for 60 days. Should the creditors not oppose or the Court not reject it, the Restructuring agreement becomes final and binding. EXTRAORDINARY ADMINISTRATION Extraordinary Administration (Amministrazione straordinaria), is a special procedure conceived for saving large corporations from bankruptcy. Specifically, Extraordinary Administration is aimed at recovering an insolvent company that, not withstanding the situation of financial distress, possesses the necessary means to continue its business and has potential to pick up financially. 22

23 To be admitted to this procedure, a company is required to have at least 200 employees during the year before the commencement of the procedure, and a debt equal to at least 2/3 of the total assets of the company and 2/3 of the total income achieved by sales and services for the last financial year. Extraordinary Administration differs from bankruptcy proceedings as its final goal is to re-establish a company s productivity while finding a feasible solution for the satisfaction of the company s creditors. INTELLECTUAL PROPERTY TRADEMARKS ITALIAN TRADEMARKS Trademarks fall under the provisions of Legislative Decree no. 30 of 2005, also known as the Industrial Property Code, and are regulated also by some provisions of the Italian Civil Code. A trademark is a sign that is attributed to goods or services, in order to differentiate those protected by similar ones and to allow identification by customers. A mark may consist of any sign capable of being represented graphically, in particular words, personal names, designs, letters, numerals, the shape of goods or of their packaging. In order to be eligible for registration, a mark must be original, lawful, not deceitful and have a distinctive character. The authority competent for registration is the Italian Patent and Trademark Office (Ufficio Italiano Brevetti e Marchi). Official trademark registration is usually issued within two to three years of the filing date, although trademark protection starts running once the application is filed. Protection is granted for 10 years from the filing date. Trademark registration lapses if the registrant fails to use the trademark for a continuous period of three years. This three-year period does not apply in the event that the European trade mark law is governed by national law in the countries which make up Europe and European Law within those European countries which are also EU member States. Marks may be registered within individual countries (Italy), or across the whole of the EU by means of a Community trade mark. Within EU member States national law implements EU Directives so that the law in each jurisdiction is more or less equivalent, the goal being harmonisation of trademark law within the EU 23

24 owner of the trademark is currently using other similar trademarks to distinguish the same product. COMMUNITY TRADEMARK The European Union Trademark is regulated by EU Regulation No 2015/2424 of the European Parliament and the Council, entered into force on 23 March Applications for the Community Trademark shall be filed directly with the EU Office called European Union Intellectual Property Office (EUIPO) based in Alicante. European Union trademarks are valid for a period of ten years from the filing date of the application and may be renewed for additional periods of ten years. LITIGATION GENERAL OVERVIEW In Italy, litigation matters are regulated primarily by the Code of Civil Procedure. In first instance, cases are heard by the justice of peace ( Giudice di pace ), or by the tribunal ( Tribunale ), depending on the case at issue. Both exercise their power over a limited geographical area. As a general principle, justices of peace are competent in lawsuits involving moveable goods with a value not exceeding 5,000, and claims for damages arising from the circulation of vehicles and ships, with a value not exceeding 20,000 while tribunals are competent to hear claims whose value exceeds the above thresholds, or when the value may not be determined by the parties. ARBITRATION Italian law permits contracting parties to resolve most conflicts through arbitration, with the exception of issues relating to civil status, marital separation and various other 24

25 disputes which, even if they are of a private nature, have an overriding public interest (e.g., child custody issues). There are certain other types of agreements, including agency and employment agreements, which may be submitted to arbitration only if specifically provided for in applicable collective bargaining agreements and the parties retain the right to submit the dispute to a judicial authority. Italy is also a signatory to various conventions regulating international arbitration on commercial matters (including the Geneva Protocol on Arbitration Clauses, also known as 1923 Geneva Convention and the European Convention on International Commercial Arbitration) and on the recognition and enforcement of foreign arbitral decisions (including the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards known as the "1958 New York Convention"). These conventions allow for the application of each signatory's domestic law for matters which cannot be subject to arbitration under these conventions. Under Italian law, a valid arbitration clause must be agreed to in writing. Pursuant to article 810 et seq. of the Italian Code of Civil Procedure, arbitrators shall be appointed by the parties by means of a formal notice served by a process server in which each party discloses to the other the name of the arbitrator/s that the party has appointed and inviting the other party to do likewise. The party receiving such an invitation has 20 days to notify the name and details of his chosen arbitrator/s. Failure to comply with this term means that the party that has complied may petition the president of the Court of the district of the arbitration venue requesting that arbitrators be appointed. If the parties have not established an arbitration venue, then a petition may be submitted to the president of the Court where the contract or arbitration has been entered into and to which the arbitration clause refers or, if the venue is abroad, the president of the Court of Rome. The president, after having consulted the other Italy is also a signatory to various conventions regulating international arbitration with respect to commercial matters (Protocol of Geneva of 1923, Geneva Convention of 1961), and on the recognition and enforcement of foreign arbitral decisions (Geneva Convention of 1927 and New York Convention of 1958) 25

26 party, should this be required, shall issue an order that is final and binding. The same provision applies even if the appointment of one or more arbitrators by contract or arbitration shall be made by a judicial authority or by a third party, in the event that the latter has failed to do so. DEBT COLLECTION Under Italian law, a creditor has various means for collecting money due. There are several judicial procedures that a creditor can employ to accelerate or facilitate the collection process as long as the debtor is either located in or has assets in Italy. Creditors may avail themselves of the proceedings described below to recover outstanding amounts from their debtors. ORDINARY ACTION The ordinary action allows the parties to provide extensive evidence of their claim, also by examining witnesses, and to submit documents in later stages of the proceedings. An ordinary action is usually brought to assess the existence of a debt in those cases when the creditor does not possess all the documents necessary to prove his/her claim (such as a copy of the contract under which an invoice was issued or documents proving the existence of a debt). The plaintiff commences the proceedings by serving a summons on the defendant. After 10 days, the plaintiff shall file the original summons with the clerk s office of the court along with additional documentation proving the existence of the debt. The plaintiff shall grant the defendant a term of no less than 90 days prior to the hearing indicated in the summons to allow the defendant to file its reply brief. Hence, there may be a minimum period of 3 months between the date of service of the summons and the first 26

27 hearing. In this respect, please note that the court might decide to postpone the date of the first hearing, depending on its workload. Subsequently, during a first stage, the parties shall provide evidence supporting their claims and counterclaims. In limited cases and under strict conditions, evidence of the existence of a contractual relationship under which an invoice was issued may be given by examining witnesses. More generally, documents are filed to prove the existence of the debt. In the next stage of the proceedings, the court may authorize the parties to submit defence briefs better specifying and summarizing their claims and counterclaims. Lastly, the court will issue its decision. The average length of the first instance proceedings is approximately 3 years starting from the date when the summons is served, but it may vary depending on the requirements of the court. Under Italian law, a creditor has various means for collecting money due. There are several judicial procedures that a creditor can employ to accelerate or facilitate the collection process so long as the debtor either is located in or has assets in Italy In order to commence proceedings, it is necessary to pay court fees (the so-called Contributo Unificato ) for an amount proportionate to the amount of the claim. Further expenses are the costs necessary to serve the summons and those arising during the proceedings in addition to the fees for legal assistance. INJUNCTIVE DECREE An Injunctive Decree (Decreto Ingiuntivo) is a means for a creditor to obtain an order for the debtor to pay in a summary proceeding. Injunctive decree proceedings are based on a petition submitted by a party and the court s summary examination of written evidence demonstrating that the claimed credit is immediately due and payable and that the creditor is entitled to receive such payment. 27

28 The injunctive decree becomes enforceable automatically within 40 days unless the debtor files an opposition against such measure. In order to commence injunctive decree proceedings, it is necessary to pay court fees for an amount equal to half of the amount that would have been paid for an ordinary action. Further expenses are the costs arising during the proceedings plus the fees for legal assistance. The time necessary for the obtainment of an order for payment is approximately 2 or 3 months. If the debtor files a timely motion opposing the injunctive decree, a trial on the merits will commence. At the initial stage of such trial, there are two possibilities depending on the nature of the evidence submitted by the debtor in support of its motion. If the opposed injunctive decree has been admitted to temporary enforcement, the trial will continue but, if the risk of an unfair prejudice to the debtor is grounded, the court will suspend the temporary enforcement. Conversely, if the motion in opposition is supported by written evidence, the trial will continue but court will reject the creditor s request for the temporary enforcement of the Injunctive Decree against the debtor. Instead, if the motion is not supported by written evidence, the trial will continue and the court may authorize the temporary enforcement of the injunctive decree against the debtor. The enforcement of an injunctive decree or other monetary award is generally subject to the prior payment by the creditor of a general registration tax of 3% of the value sought to be collected. This tax can be recovered, together with the principal and interest, at the time of collection of the debt. If the order for payment is objected by the defendant, the length of the proceedings could extend for the following reason: the time necessary for the obtainment of the order for payment (2 or 3 months approximately) should be added to the time necessary for the termination of the ordinary action commenced as a consequence of the 28

29 objection (approximately 3 years from the date of the hearing indicated in the defendant s opposition brief to the payment order). ATTACHMENT PROCEEDINGS The Judge will generally grant an attachment order ( Ordinanza di Sequestro ) when there is a reasonable risk that the debtor will not pay the creditor and that the collateral represented by the debtor s assets will disappear unless immediate action is taken. The attachment procedure effectively freezes the debtor s assets and encourages the debtor to settle rather than endure a potentially lengthy and expensive legal proceeding. The judge will issue an attachment order only if, after examining the evidence, it determines that the claimant has proved its right and demonstrated to be entitled to request the issuance of the order. Such order is issued only if the delayed protection of the right poses an immediate and concrete risk of serious and irremediable damage to the creditor. The risk must be real and not just hypothetical and the damage must be substantial and difficult to recover. Any form of evidence (i.e., documents, official records or certificates, witnesses) may be submitted before the competent authority, which shall decide without the need for a full investigation. The attachment order may be rendered either as a result of a public discussion and cross-examination of the two parties or as a result of a prima facie review of the supporting evidence, without the intervention of the defendant. The latter will not be held if it is the judge s opinion that the immediate intervention or participation of the defendant would create a substantial risk to the execution of the order. Should the court accept the petition filed by the plaintiff, a claim on the merits of the case must be filed within the deadline fixed by the judge and in any case not later than 29