ILN: ESTABLISHING A BUSINESS ENTITY: AN INTERNATIONAL GUIDE

[ESTABLISHING A BUSINESS ENTITY IN ITALY] 276

coordinated company in order for the mother-company to limit its direct liability. With the aim of limiting this practice, the Reform has introduced general provisions aimed at guaranteeing higher protection of third parties’ credit rights. The general rule introduced by the Reform states that: (i) any reimbursements of financing made available by the shareholder(s) to the participated company are subordinated to the actual payment of any other debt of the company, and that (ii) any reimbursement of such financing occurred in the year preceding the declaration of bankruptcy of the participated company shall be revoked (by the trustee of the bankruptcy proceeding). However, it should be pointed out that this general rule applies only for those loans and financing granted to the company at a time in which there was an excessive difference between the net equity of the company and its indebtedness (i.e., equity/debt ratio), or it would have been more reasonable to execute a direct equity contribution rather than granting loans. 3.3 Branches – Permanent establishment Unlike a representative office, a foreign branch in Italy operates as an extension of the parent company and conducts commercial activities. It does not have a separate legal identity, meaning that the parent company assumes complete responsibility for the branch's activities and liabilities. Foreign companies that establish one or more branch offices with permanent representation within the Italian territory are subject – for each of such branch offices – to file in the Corporate Register legalized copies, furnished with sworn translations of (i) the Foreign Company’s incorporation deed and articles of association (in case of an EU foreign company, the articles of association

can be substituted by a certificate issued by the competent register of companies); (ii) a notarized copy of the minutes of the Foreign Company’s competent body that has resolved to establish the branch office(s), filed with an Italian Public Notary; (iii) the name, place and date of birth, residence in Italy of the person(s) who permanently represent(s) the company and the power assigned to such person(s). Until the above-mentioned formalities have been fulfilled, the person(s) who act in the name and on behalf of the company has/have unlimited liability, jointly and severally with the company for its obligations, despite the limited liability of the company in the country of residence. The ongoing activity of the branch implies the duties of filing the annual financial statements of the foreign company, and the profit and loss account of the branch. The branch must file with the Italian tax authority the tax return pertaining to the income produced in Italy. The branch has no minimum capital requirement, rather it is generally provided by the foreign company with an endowment fund. 4. Steps and Timing to Establish 4.1 Brief overview of steps to incorporate/constitute each. 4.1.1 S.p.A. To incorporate a S.p.A., the shareholders – either in person or by proxy – shall appear before a Notary Public who is required to draft the public deed of incorporation, which must contain the following main information (i) name of the founding shareholders and their respective equity; (ii) name of the company and municipality where the headquarter is located; (iii)

ILN Corporate Group – Establishing a Business Entity Series

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