October 21, 2019 Ecosystem

Simple Investment Company (SIS): the new investment structure for Italian start-ups and SMEs

The Decree Law No. 34, issued on 30 April 2019 (“Decreto Crescita”), introduced the regulation governing the Simple Investment Company (“Società di Investimento Semplice” or “SIS”), a new structure to support the development of Italian start-ups and SMEs.

In particular, the Simple Investment Company aims to directly support small and medium-sized enterprises not listed on regulated markets that are in the early stages of their development (testing, incorporation and start-up phase).

The SIS takes the form of a Closed-end Investment Company with fixed capital (“Società di Investimento a Capitale Fisso” or “SICAF”). Therefore, the SISs are subject, in general, to the same regulations provided for the AIFs (Alternative Investment Funds) under the AIFMD.

An Italian SICAF is a closed end AIF under the AIFMD, and:

1) it is a scheme established as a joint stock company (S.p.A.) with fixed capital;

2) it requires a registered office located in Italy;

3) it has, as its exclusive corporate purpose, the investment of the assets collected through the issue of shares (or other equity instruments), among a plurality of investors, managed as a whole in the interest of its investors and independently from them.

The establishment of a SICAF must be authorised by the Bank of Italy.

The main feature of the SIS are the following:

  • Its name must contain “società di investimento semplice per azioni a capitale fisso“;
  • It requires a registered head office located in Italy;
  • It is reserved for professional investors only (including business angels);
  • It must have a share capital of at least € 50 thousand, in line with the requirements of the Bank of Italy for the “below the threshold” SICAFs reserved for professional investors;
  • Its available capital must not exceed € 25 million;
  • According to its by-laws, the exclusive company purpose must be the investment in SMEs not listed on regulated markets that are in the early stage of their development (seed, start-up or early-stage financing);
  • It can purchase and subscribe the following assets:
    • financial instruments issued by SMEs, including equity instruments (e.g. shares of companies and other equity-like financial instruments of companies) and/or bonds, “minibonds” and other debt securities;
    • receivables and notes representing claims.
  • Under no circumstances may the SIS use the financial leverage.

Moreover, the SIS benefits from some simplifications in the supervisory regime: most of the obligations regarding

  • capital adequacy;
  • risk assessment;
  • information to be disclosed to the public;
  • corporate governance, administrative and accounting organisation;
  • internal audit system; and
  • outsourcing of important operational functions;

and implemented on the basis of precise regulations issued by the Bank of Italy and CONSOB on collective portfolio management, are not applicable to the SIS.

To avoid the risk of abuse in the use of this new structure, under no circumstances may one or more SIS be set up by:

  • an individual who controls a SIS, directly or indirectly through subsidiaries or parent companies or companies under common control, and has already invested more than € 25 million in one or more SIS;
  • individuals in charge of the administrative, management and control functions in one or more SIS.

The SIS has a tax regime similar to the Italian resident AIF: full exemption from income taxes of profits and gains realised by the SIS; the proceeds distributed to the SIS’s investors are taxable.

The possibility to apply the tax incentives provided for investors in innovative start-ups and SMEs is still under analysis.

The Decree Law No. 34, issued on 30 April 2019 (“Decreto Crescita”) is available in Italian at this LINK – see article 27