The notary has various functions in company law. A couple of examples as follows:

- Establishments, modifications, dissolutions of companies

- Shareholder transfers

- Mergers, demergers, conversions

- Bidding consortium’s, network contracts

- Lease agreements, transfer of companies and branches

- Family business succession

Our legal system regulates various types of companies, which differ according to the type of management as well as the type of liability of the company members.

Therefore it is very important to understand which type of company is best suited to the specific needs of the case and to the achievements of specific goals.

The notary helps to take a prudent and appropriate decision, collecting and analyzing all necessary and relevant information.

Essentially we distinguish between partnerships and corporations.

Even though partnerships are legal subjects, they do not have their own legal personality. For that reason, all or single partners are liable for the obligations of the company, also with their own private capital.

Corporations are characterized by their own legal personality: exclusively the capital and the assets of the company can be subjected to the obligations of the company - but not the private capital and the private assets of the members.

 

The following company structures are to be considered as partnerships:

- The Simple Partnership

- The General Partnership

- The Limited Partnership

 

The following company structures are to be considered as corporations:

- The Stock Company

- The Limited Partnership by Shares

- The Limited Liability Company 

 

The choice of the company structure is connected to various elements, such as, the type of business (commercial or agricultural), the amount of company capital to invest, the establishment and administrative costs, the general business risks.

 

THE ROLE OF THE NOTARY in the establishment of a company

It is recommended to call in a notary to be advised on the opportunities and consequences associated with the choice of a certain company model – as well as regarding risks and liability aspects.

In company establishment proceeding the notary takes on a fundamental role. The preparation of a professional notarial formation deed and statute is extremely important for the longevity, legitimation and organization of the company and it provides a guarantee for the solving of issues in potentially difficult situations in the future. Therefore the company can focus more on their business and avoid any disputes. 

In the year 2000 the judicial control “omologa” for the establishment of a company was abolished. Consequently the notary took over the preventative control of the legitimation and is therefore responsible and liable. For this reason, a corporation can, for example, start their business fairly quickly, within a matter of days, as the judicial control and the associated waiting period of 150 days was abolished. In Italy company law legal disputes are extremely rare. Furthermore, the company will be registered almost immediately at the Chamber of Commerce whilst depositing all necessary documents. This Chamber of Commerce is a control authority “in second instance” and contributes to the preventative control of legitimation.

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The liability of the company member/associate is strictly connected to the company structure choice. The risks and the liability changes significantly accordingly to the chosen type of company.

The liability can also change in reference to certain other circumstances, as for example, the company member’s position, the company member’s actions or in accordance to certain liability limitation agreements between company members “patti contrari” (if legally allowed).

In partnerships the company members are generally liable for the company obligations. If the company assets are not sufficient, for example, to pay debts, the company members have to pay out of their own pockets. Regarding civil law, creditors can resort to the private assets of the members in case the funds of the company are not enough to pay the debts. The company members are liable with all present and all future assets in reference to the company debts.

Corporations function in a different way: The company assets are strictly separated from the private assets. Creditors can only resort to the company assets but not to the private assets of the members. In the worst case the company member can lose all of the the assets which they contributed to the company, but not more than this. 

As an example for partnerships, in this particular case a simple partnership, it is stipulated by law that the liability is not limited to the company for their obligations, but is extended also to the company members, with their own private assets, who act in the name of and on behalf of the company and furthermore – unless otherwise specified in the regulations – also to all other company members who are not part of the management (art. 2267 c.c.). As a result of this legal regulation, a company member, even if not part of the management, is liable for the obligations assumed by other company members, with all his private assets. Nevertheless the possibility of limiting the liability for company members who are not part of the management is admitted by means of an internal company agreement. Legally this limitation of liability must be publicly disclosed in order to be effective against third parties.

Regarding corporations and, more specifically, limited companies, it is provided by law that the company member is not liable with his own private assets for company obligations. Those have to be covered by the company assets. In cases in which the corporation is established only by one company member, the civil law provides for the loss of the condition of limited liability under certain particular circumstances.

 

THE ROLE OF THE NOTARY in the choice of the right company structure 

The notary knows the pros and cons of every company model, also in reference to the associated risks and liability aspects and provides essential advice for all kinds of business activities. 

The modalities of a company dissolution are connected to the chosen type of company model. 

It is important to distinguish between partnerships and corporations.

Partnerships can be dissolved in the following cases (art. 2272 c.c.):

- by deadline expiration;

- by achievement of the business purpose or in case of impossibility to achieve the business purpose;

- by the will of all the company members;

- by the lack of the majority of members, if the majority is not restored within 6 months;

- under other circumstances specified in the company contract or partnership agreement.

With the dissolution the respective liquidators start with the formal liquidation of the company. The purpose of the liquidation process is to satisfy the company creditors and to distribute remaining company assets among the members (if there are any remaining assets). Afterwards the company will be removed from the register of the Chamber of Commerce.

Contrary to corporations, partnerships are not mandatory subjected to the liquidation process in the case that there are no remaining assets or liabilities.

In both cases the company dissolution is declared with a public deed or a notarized private deed.

 

Corporations are dissolved in the following cases:

- by deadline expiration;

- by achievement of the business purpose or in case of impossibility to achieve the business purpose;

- by impossibility to manage further the company or by a persistent inactivity of the general assembly;

- by a reduction of the company capital under the minimum provided by law.

In the case of corporation dissolution the liquidation process is mandatory, as a guarantee for the creditors. For that reason, the general corporation assembly has to nominate a liquidator (in the majority of cases a person from the management board or the control & advisory board is nominated), with the mission to settle all outstanding debts as well as recovering all company credits. Only after the liquidation balance sheet is approved, the company can be removed from the Chamber of Commerce Register.