Legal framework for innovative start-ups

In 2012, with the Decree-Law 179/2012 (the “Startup Act”), an extensive regulatory framework was introduced to support innovative enterprises with high technological value (the “innovative start-ups”).

For the definition of innovative start-up read: Innovative start-ups and SMEs: definition for the Italian law

The main measures introduced in 2012, and updated with subsequent Budget Laws (including the 2019 Budget Law), are the following:

  • Incorporation and statutory modifications using standard models and digital signature: innovative start-ups can choose to establish the company and update the deed of incorporation by using standard models (and therefore avoiding Notary services).
  • Exemption from the payment of certain fees and duties: i.e. stamp duty and fees owed to the Business Register; annual fee owed to the Chambers of Commerce; compliance visa for the compensation of VAT credit, etc.
  • Flexible corporate management: possibility to create categories of shares with specific rights; to carry out financial operations on their own shares; to issue participative financial instruments; to offer capital shares to the public.
  • Tailor-made labour law: innovative start-ups can hire employees through fixed-term contracts of any duration, which can be renewed unlimited times, for a maximum employment duration of 36 months. After 36 months, the contract can be renewed only once, for additional 12 months, leading to an overall employment duration of 48 months. By the end of the 4-year period, the fixed-term contract is automatically converted into an open-ended one. 
  • Flexible remuneration system: in addition to the fixed component, workers can be remunerated with a variable component linked to the performance of the company, and through stock options andwork-for-equity schemes.
  • Stock options and work for equity schemes: companies can offer capital shares to their collaborators, employees, suppliers and consultants, as additional remuneration, which are tax deductible for both fiscal and contributory purposes.
  • Tax incentives for investors: individuals can benefit a taxable income (IRPEF) reduction equal to 30% of the invested capital till the maximum amount of € 1 million; legal entities can benefit a taxable income (IRES) deduction equal to 30% of the invested capital till the maximum amount of € 1.8 million. These incentives can be applied to both direct and indirect investments (carried out by participated companies that predominantly invest in innovative start-ups and innovative SMEs), which must to be held for at least 3 years. The 2019 Budget Law introduced, for legal entities (IRES tax payers), a tax reduction equal to 50% of the capital invested for acquiring the full ownership of an innovative start-up; the participation must be held for at least three years.
  • Possibility to raise capital through equity crowdfunding platforms.
  • Fast-track, simplified and free-of-charge access to the SME Guarantee Fund, a public fund that guarantees up to 80% of the bank loans granted to innovative start-ups, till the maximum amount of € 2.5 million per company.
  • Italian Trade Agency (“ICE”)provides ad hoc services to support innovative start-ups in international markets (mainly legal, corporate and fiscal services).
  • Extension of the terms for covering losses: a 12-month extension is applied to innovative start-ups for covering losses that reduce the share capital by over 1/3.
  • Exemption from regulations on dummy companies(non-operational companies and companies experiencing systematic losses).
  • “Fail fast” procedure: start-ups are exempted from the standard bankruptcy procedure, in order to facilitate bankruptcy arrangements.

SOURCES:

You can find more info on the Italian legislation on innovative start-ups at the following links:

https://www.mise.gov.it/index.php/en/2014-06-27-15-07-23/2025221-new-italian-legislation-on-start-ups

https://www.mise.gov.it/images/stories/documenti/Executive-Summary-of-Italy-s-Startup-Act-new-format-23_02_2017.pdf