Italian Companies for Foreign Investors: the sub-forms of SRL

Italian Companies for Foreign Investors: the sub-forms of SRL

In my previous post, I described how a società a responsabilità limitata (“SRL”) works under Italian law pointing out incorporation requirements and corporate governance structure. If you did not have the chance to read it, I suggest you to do so because the present short post relies on the information provided last time.

Guide to Italian Companies for Foreign Investors and CEOs: the sub-forms of SRL

The SRL may be established in sub-forms: the società a responsabilità limitata semplificata (simplified limited liability companySRLS”) and SRL with low share capital (“Low Capital SRL”).

Common elements with SRL

SRLS and Low Capital SRL share with SRL the following elements:

  • legal entities status
  • shareholders are not liable for the debts of the company
  • incorporation before a Notary Public
  • regulated by the Italian Civil Code and the Articles of Association/By-Laws
  • governed by the shareholder assembly and the managing body

The similarities end here.

The share capital matters

SRLS and Low Capital SRL have limitations to the share capital which is required to meet the following criteria:

  • value between € 1,00 and € 9.999,99;
  • contribution allowed only in money;
  • entirely paid-in at the incorporation of the company.

Both such sub-forms are supposed to facilitate youth entrepreneurship. Reality is that the “existence costs” (certified public accountant, taxes, Registrar of Companies) might consume the share capital in a couple of years. Also, banks and multinational companies may not consider reliable doing business with SRLS and Low Capital SRL.

The limits of the SRLS

SRLS has further limitations on shareholders and corporate governance which render this type of company unfit to foreign investors:

  • the shareholders must be individual persons;
  • the structure and content of the Article of Association/By-Laws are standard and mandatory.

The above means that a foreign investor which is a legal entity is forbidden to establish a SRLS and that the By-Laws can not be adjusted to the shareholders needs.

Conclusions on SRL and its subforms

The standard SRL is widely adopted in Italy, it is flexible and adjustable to the shareholders’ needs. Therefore I believe that it is the best way forward for foreign investors willing to enter into the Italian market.

The low capital SRL is suggested only for test purposes in order to keep the expenses at minimum level, but it is unfit for lasting commercial activity.

The SRLS is not adequate for foreign investments.

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Keep following the blog because next post will be about joint-stock company: società per azioni a.k.a. S.p.A., the most advanced form of Italian company.

About the Author: Raffaele Battaglini (LLM. at The University of Edinburgh) is a lawyer expert in international contracts, innovation, M&A deals and start-ups.

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