Better Late Than Never: The Start Up in Italy

   For many years Italy was not considered to be at the forefront of innovation and inducement of new business opportunities; therefore, many young Italians with brilliant ideas were forced to leave the Country to pursue their dreams. Fortunately, since the former Prime Minis-ter Mario Monti began to enact laws to stimulate the de-velopment of the Country's economy, this negative trend has changed. Just a few months after his nomination, on January 24th 2012, Mr. Monti issued a Decree Law named "Provisions for the Development of Infrastructures and the Competitiveness" ("Disposizioni urgenti per la concorrenza, lo sviluppo delle infrastrutture e la competi-tivita."), which contained a set of urgent measures to pro-mote the economic growth and competitiveness of Italian enterprises. Article 3 of this Decree introduced a new cor-porate form into the Italian legal system, called "Societa a responsabilita limitata semplificata" (Simplified limited liability company) under new article 2463-bis of the Italian Civil Code. This provision, titled "Accesso dei giovani alla costituzione di societa' a responsabilita' limitata" (Ac-cess of young people to the establishment of simplified limited liability company), allows people under 35 to incorporate a company with a share capital of not less than 1 euro (the minimum share capital for common Limited Liabil-ity Companies is 10.000,00 Euros). These companies are incorporated under standard articles of incorporation is-sued by the Ministry of Justice and are exempted from the notary fees and duties for the inscription at the Chamber of Commerce. According to the new provision, when the members reach their thirty-fifth birthday, the company is transformed into a Limited Liability Company.

   Subsequently, Mr. Monti's government, on June 22nd 2012, enacted a new decree n. 83 called "Decreto Svi-luppo" (i.e., Development Decree-Law), introducing another corporate form that allows persons over 35 to incorporate a company more easily. The new corporate form, called "Societa a respon_sabilita limitata a capitale ridotto" (Lim-ited liability company with reduced capital), was governed along the lines of the aforesaid simplified limited liability company with few significant differences: the power of management could be conferred to non-members, the articles of incorporation could not adhere to the govern-ment standards and the company could not benefit from any fees waiver or tax exemption connected with its incorporation. Both company forms mentioned above had a further constraint; members' contributions had to be made in cash.

  The conversion law of the Development Decree (Law n. 134/2012) introduced a further benefit for young people who wanted to incorporate a limited liability company with reduced capital: the Minister of Economy, in order to facilitate access to credit for young entrepre-neurs, promoted an agreement with the Italian Banking Association to provide credit at favourable conditions.

   The coexistence of the two forms of company men-tioned above did not last for a long time. Decree Law n. 72/2013 removed the limited liability company with re-duced capital from the Italian company law, consequently entitling young people over 35 to incorporate a simplified limited liability company.

   In April 2012, while the aforementioned reforms of the corporate law were being introduced, Mr. Passera, Minister of Economic Development in Mr. Monti's Cabi-net, entrusted a group of experts in innovation to issue a report on the current state of start-ups and possible future developments (the "Task Force"). The Task Force began its work under the slogan: Restart, Italial. The Task Force defined the concept of innovative start up as a company that

i. is not listed on the stock exchange;

ii. is owned or controlled (51% at least) by individu-als;

iii. has been running for no longer than 48 months;

iv. is having a turnover not exceeding 5 million Eu-ros;

v. does not distribute dividends;

vi. does not use cash; and

vii. has as a corporate purpose aimed at the develop-ment of goods and services having a high techno-logical value.

   According to the Task Force, the most important is-sues that needed to be addressed were taxation, employ-ment, access to credit and bureaucratic streamlining.

   A few months after the publication of the Restart, Italia! report, the Italian Government, prompted by the excellent work done by the Task Force, issued additional provisions to promote the establishment of start-ups in Italy, namely Law Decree n. 179/2012 "Ulteriori misure urgenti per la crescita del Paese" (Further urgent mea-sures for Italy's economic growth), also known as "Decreto Crescita 2.0" (Development Decree 2.0), converted, with amendments, into law n. 221/2012 and subsequently amended by Labour Law Decree (Decree Law n 76/2013). Articles 25 to 32 of the Decree contain specific provisions for start-ups. The first article of the Decree clearly defines the scope of application of the provisions, underlining that they refer to a business linked to innovation and technology fulfilling the following requirements:

a. established for no longer than 48 months;

b. principal place of activity and interests in Italy;

c. no turnover or a turnover not exceeding 5 million €;

d. does not distribute dividends;

e. scope of activity must consist of innovative goods and services of high technological value; and

f. does not originate from a merger, demerger or disinvestment process.

   Moreover, a new business may be defined as an in-novative start-up if:

i. 15% of its costs are related to Research & Develop-ment;

ii. at least one third of the team is made up of people who either hold a PhD or are PhD candidates at an Italian or foreign University or have conducted research work for at least three years;

iii. at least two-thirds of the team is made up of people holding a Master's degree; or 

iv. it is the owner or the licensee of a patent or regis-tered software. 
   The start-ups having the aforementioned require-ments must also register in the special register of the Chamber of Commerce and, moreover, they are exempted from the payment of registration fees.
   The actual advantage that the start-ups can benefit from are related to employment terms, taxation and ac-cess to credit. The start-ups, in fact, can hire personnel through fix-time contracts, which last for at least 6 months and no longer than 36 months. During this period, con-tracts can be renewed more than once. After three years the contract can be further renewed for an additional year; although the total duration of the contract must not exceed 48 months. After this period, the employee must be employed under a permanent contract. The new entrepreneurs may remunerate their employees through stock options and the providers of external services under a "work for equity" scheme.
   Regarding taxation, the Italian Government in-troduced different benefits for corporate and personal investments in start-ups for the period between 2013 and 2016. Art. 29 of the Decree Law n.179/2012 allows indi-viduals and companies, investing directly or indirectly in start-ups, to deduct from their taxable income respec-tively 19% and 20% of the amount invested in start-ups, provided that the investment is lower than € 500.000 for individuals and € 1.800.000 for companies and that the investment will be maintained for at least two years.
   One of the most important novelties introduced by Law 221/2012 is the possibility for start-ups to raise ven-ture capital via an online portal operated by professional managers registered in a special register maintained by CONSOB (Italian Securities and stock exchange commis-sion) or by bankers. On June 2013 CONSOB published the "Regolamento sulfa raccolta di capitali di rischio da parte di start-up innovative tramite portali on-line" (Regulations on the collection of risk capital by innovative start-ups through online portals) in order to provide guidelines for equity crowd funding. Italy is therefore the only European na-tion to have a uniform set of rules on this matter. A few ,months after the CONSOB Regulation was issued, several platforms became available for this type of fund raising.
   The last but not least incentive for start-ups to be reviewed is the fast-track, simplified and free of charge access to the "Fondo Centrale di Garanzia," the Govern-ment fund supporting access to credit thought guarantees on bank loans. The guarantee covers up to 80% of the loan provided by the bank to a start-up, with a maximum of 2,5 million Euros. Moreover, the Italian Trade Promotion Agency (ICE) supports start-ups looking to international markets by providing a 30% reduction on its assistance services, which include legal, fiscal, corporate and real estate issues. 
   As evident from all of the above, the Italian government is focused on inducing and supporting Italian start-ups and this positive trend is being supported by the new Italian Prime Minister, Mr. Matteo Renzi, as one of his first official visits to one of Italy's most prominent incubators.