On January 25^th 2015 Law Decree no. 3/2015, also known as “Investment Compact”, entered into force, in connection with the previous urgent measures about the compliance of Italian banking system with the European Standards, in order to make it more competitive and to facilitate the national economic development, promoting a greater capitalization of the small and medium-sized enterprises and their participation in the innovation processes of the production system.

 

The most relevant news introduced by the aforementioned Law Decree is the creation of a new type of small and medium-sized enterprises, the “ Innovative SMEs”, which were defined at Community level in the Recommendation 2003/361/CE; this definition flowed into the new subsection 5-undecies of Article 1 of the TUF (the Italian Consolidated Finance Act), which requires the possession of the following requirements:

1. residence in Italy or in one of the Member States of the European Union or in States participating to the EEA Agreement (European Economic Area), provided that the SMEs have a productive site or a branch in Italy;
2. certification of the last financial statement and of the possible consolidated financial statement edited by an auditor or by an auditing company enrolled in the Register of auditors;
3. absence of possession of listed securities on a regulated market or on Multilateral Trading Facilities;
4. absence of registration in the special register for innovative startups provided by the Law Decree no. 179/2012 (converted into Law no. 221/2012);
5. at least two of the following requirements: 

1. volume of expenditures in research and development for 3% or more of the greater amount between total costs and total value of the innovative SME’s production, excluding the expenses sustained for the purchase of real estate properties;
2. employment as employees or collaborators for any reasons, in a percentage of one-fifth or more of the total workforce, of individuals who earned a PhD or who are attending a PhD in an Italian or foreign University or in possession of a degree and who have carried out, for at least three years, certified research activity in public or private research institutes, in Italy or abroad, or of individuals in possession of a master degree, for a percentage of one-third or more of the total workforce;
3. ownership, even as depositary or licensee, of at least on patent or a registered software, directly pertaining to the corporate purpose and to the business activity.

 

The Law Decree provided, inter alia, to establish a dedicated special section in the Companies’ Register in which the innovative SMEs should be enrolled. 

 

The new type of business enterprise, the innovative SME, is designed to allow to the businesses which comply with the abovementioned features to access to the benefits provided towards the innovative startups and established by the Law Decree no. 179/2012, notwithstanding the current corporate law, in particular those concerning the reduction of taxes for the start-up of the business and the compensation based on financial instruments.

It should be pointed out that in order to avail themselves of the tax incentives to the investments provided by Article 29 of the Law Decree no. 179/2012, innovative SMEs should satisfy requirements that are different from those provided for the startups: the innovative SME shall be incorporated no later than seven years ago, and in compliance with the conditions and limitations provided by EU Regulation no. 651/2014.

 

Furthermore, the abovementioned Law Decree provides for the possibility for innovative SMEs to avail themselves of the legislation concerning equity crowdfunding, thanks to which the said enterprises shall be able to raise funds through online portals.

 

In its entirety, the legislative action has the clear purpose of promoting the boost of investments and the attraction of foreign businesses and funds on the Italian territory. It is inferable mainly by the personal scope of the preferential legislation, which is based on the SME’s residence criterion not only on the Italian territory but also to the whole EEA: it is clear the intention to incentivize also foreign companies to carry on part of their business activity in Italy.

 

The attempt to increase further the applicability of the legislation about equity crowdfunding is even more pervading to the same promotional objective. Currently, the raising of funds by means of online portals is accessible by innovative startups and SMEs, Undertakings for Collective Investment in Transferable Securities, which shall invest mainly in innovative startups and SMEs, and Limited Liability Companies, also on condition that they invest mainly in innovative startups and SMEs.

Thus, the access to investment in innovation becomes potentially open to public savings, both Italian and foreign, in a macroeconomic scenario characterized by a recovery, even if still slight, and in a phase of weakening of the Euro, of which non-EU investors could take advantage, promoting a greater movement of capital. 

 

Nevertheless, it should be pointed out that the new legislation did not introduce implementing mechanisms able to override the legal constraints that until now have prevented equity crowdfunding from moving a high number of “raising capital” operations: certainly the “democratization” of the investments in innovative businesses implies benefits concerning the economic development, but at the same time it exposes public savings to unpredictable risks. Thus, the reciprocal interference between the incentives to equity crowdfunding by means of online portals and the legislation that protects investors, provided by the same TUF, should be specifically regulated.