Under Italian laws, companies can be established in various legal forms, with the most common being “società per azioni” (S.p.A., or joint-stock company) and “società a responsabilità limitata” (S.r.l., or limited liability company). Both types fall under the broader category of “corporate entities” (società di capitali), which means that they are legally recognized as separate entities from their shareholders. Unlike partnerships (società di persone) – in which the founders have unlimited personal liability for the obligations of the company if the assets of the latter are not sufficient to fulfil the relevant obligations – this structure creates a legal separation between the company and its shareholders, which means (except in extraordinary circumstances) that the company’s creditors can only pursue the company’s assets, not those of the shareholders, in case of default or liability.
Below are the key differences between an S.p.A. and an S.r.l.:
Legal structure and corporate capital.
- S.p.A.: requires a minimum share capital of € 50,000, which is divided into shares.
- S.r.l.: has a significantly lower minimum capital requirement of just € 1, making the incorporation significantly less expensive and more accessible for startups and smaller businesses. Ownership in an S.r.l. is represented by quotas rather than shares.
When incorporating either an S.p.A. or an S.r.l., the law requires that at least 25% of the capital contributions shall be paid upfront. The remaining amount is treated as a receivable owed by the shareholders to the Company. However, for S.r.l. with corporate capital lower than €10,000 and for both S.p.A. and S.r.l. companies with a single shareholder, contributions must be fully paid at the time of incorporation.
Capital Contributions.
- S.p.A.: contributions must be in the form of money, assets, or receivables.
- S.r.l.: allows for greater flexibility, permitting contributions in the form of future services or work performances (conferimenti d’opera o servizi). This means a shareholder can commit to provide specific services to the company as a form of capital contribution, provided that these contributions are secured by an insurance policy or a bank guarantee.
Governance.
- Control body.
- S.p.A.: the appointment of a control body is mandatory, enhancing oversight and accountability.
- S.r.l.: only requires a control body if certain thresholds (in terms of size and financial criteria) are exceeded.
- Shareholders’ decisions.
- S.p.A.: although shareholders’ intentions can be expressed not only during shareholders’ meetings but also outside of formal meetings, either directly through postal vote (voto per corrispondenza) or indirectly through voting proxies (deleghe di voto) or voting syndicates (sindacati di voto), it is not possible to adopt resolutions entirely outside of a shareholders’ meeting.
- S.r.l.: the company’s by-laws may provide that certain resolutions are made by the shareholders through a more streamlined procedure, either via written consultation or based on written consent (consultazione scritta o consenso espresso per iscritto), provided that each quotaholder is given the opportunity to participate in the decision-making process.
- Shareholders rights.
- S.p.A.: shareholders are usually granted with classes of shares, with each class having specific and different rights. Consequently, it is not the individual shareholders who possess special rights, but rather the classes of shares they hold.
- S.r.l.: there is a greater emphasis on the role of the individual quotaholder and more private autonomy. This is also expressed in the possibility that the by-laws may provide for the granting to individual quotaholders of special rights (diritti particolari) concerning the governance of the company, the distribution of proceeds or other matters. These rights are assigned directly to the person of the relevant quotaholder, so in the event the quota is transferred, they do not automatically transfer to the buyer (unless otherwise provided by the by-laws).
Status of shareholder.
- S.p.A.: maintaining a shareholder ledger (libro soci) is mandatory, as it serves to inform about the actual composition of the share capital, identifying all the shareholders.
- S.r.l.: Italian laws have removed the requirement to maintain a shareholder ledger (libro soci) as of 2008, meaning that the status of a quotaholder is determined solely by registration with the Companies’ Register (Registro delle Imprese).
Shares vs. Quotas.
- S.p.A.: depending on whether shares are represented by share certificates or not, their transfer can occur through various methods. When shares are incorporated into share certificates, the transfer takes place via endorsement (girata). In this type of transfer, the dual record-keeping process is handled by different parties: the endorsement on the certificate is made by the seller before the notary, while the annotation in the shareholders ledger is performed by the company. For shares not incorporated in share certificates, the transfer occurs through a notarial deed, followed by the corresponding annotation in the shareholders ledger.
- S.r.l.: the typical way for transferring quotas is through a notarial transfer deed. The transfer of shares must be registered with the Companies’ Register in order to be enforceable against third parties.
Innovative SMEs (PMI Innovative).
In addition to the traditional S.p.A. and S.r.l. structures, Italy also offers a special category for innovative small and medium-sized enterprises (PMI innovative). These companies benefit from various incentives and simplified regulatory requirements aimed at fostering innovation and growth. To qualify as a PMI innovativa, a company must meet specific criteria related to innovation, such as investing a certain percentage of its revenue in research and development, employing highly qualified personnel, or owning registered patents. This type of company must be registered in a special section of the Companies’ Register dedicated to innovative SMEs. Similarly to the shares in S.p.A.s, the by-laws of an innovative SME can provide special categories of quotas with different rights.
In light of the above, the legal form typically used for the incorporation of an Italian Startup is the S.r.l. since it typically offers greater flexibility and lower initial capital requirements, making it a suitable option for newly established startups. On the other hand, an S.p.A. may be more appropriate for a rapid growth or for seeking substantial investment. Additionally, if the startup is focused on innovation and meets the criteria, considering the PMI innovativa status could provide additional benefits and support for the business.
It also important to consider that in the context of sustained growth rounds, investment funds require that the company convert into a joint stock company, in order to meet certain own governance requirements.