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Mergers - Italy

Updated 12/2010

Legal requirements

Objectives of the merger

Firstly, the typical aim of a merger, which brings about the unification of business complexes, is corporate concentration.

The merger brings about corporate concentration without, however, giving up the property of the company acquired in the operation.

Mergers can be a good way of expanding, when necessary, even with a lack of liquidity or during a company crisis.

In the case of a crisis, a merger with other companies can allow a more rational use of facilities and, as a result, a better distribution of fixed costs.

In the event of a financial crisis, a merger can bring about a redistribution of resources between the participating companies in order to rebalance the entity created.

Mergers are governed by the Italian Civil Code.

  • Italian Civil Code - On company mergers italiano
  • Common tax regulations applied to mergers italiano

Types of merger

There are two types of merger under Italian law (Article 2501 of the Civil Code).

  • Merger by incorporation: occurs by way of incorporation of a company into another, whereby the incorporated company ceases to operate. The incorporated company is completely absorbed, increasing the capital of the incorporating company as a result.
  • Merger by establishment of a new company: two or more companies are merged and completely lose their own identities, giving way to a new legal entity.

A merger by incorporation involves the merging of the assets of the corporate structures of all of the companies involved in the operation within the incorporating company. Furthermore, the incorporating company does not lose its identity.

In both cases, the assets of the merged entity are equal to the sum of the assets of the participating companies and its corporate structure is composed of all of the shareholders of those companies.

Buying an existing company, with an already established structure, can be a good way of expanding your business.

Administrative procedures

The merger process

The rules regarding mergers delineate a precise legal path in order to provide the various parties involved with clear and reliable information.

The initial phases of this procedure can be summed up as follows:

  • submission of the companies involved in the merger project to the Business Register (at least 30 days before the shareholders’ decision);
  • submission at the legal headquarters of the merger project, the management report, the experts’ reports, balance sheets of the last three business years and the asset situation (at least 30 days before the shareholders’ decision);
  • merger project approval decision (must be approved by all of the companies involved);
  • submission of the shareholders’ decisions to the Business Register (submission must be presented within 30 days of the decision by the shareholders if the resulting company is a corporation);
  • drawing up of the merger document (must be carried out within 2 months of the registration of the merger resolution in the Business Register, unless the creditors disapprove);
  • submission of the merger document to the Business Register (within 30 days of the stipulation of the merger document).

Merger plan

The merger plan must be drawn up by the administrative bodies of the companies involved and represents the formalisation of the agreements reached on the methods and the terms of the operation.

Merger document

Represents the final document of the procedure. Can only be drawn up two months after the registration of the merger resolution in the Business Register provided there is no opposition on the part of the creditors.

In practice, it is signed by the administrators of the companies involved as part of the role entrusted to them in the shareholders’ meeting.

The content of this document is strictly predetermined, reflecting the results of the shareholders’ deliberations. The administrators cannot, in fact, make changes to what has been decided by the shareholders’ meeting.

The merger document must be drawn up as a public document and submitted for registration to the Business Register where each of the companies involved are based. Registration is carried out by a notary or by the administrators of the company resulting from the merger or incorporation.

Fiscal aspects of mergers

As regulated by the first 3 items in Article 172 of Presidential Decree 917/86, for the purposes of direct taxation, merger operations are neutral, therefore do not constitute creation or distribution of capital gains or losses on the assets of the merged companies; furthermore, capital gains and losses revealed in the report of the asset situation as requested by Article 2504a of the Civil Code do not count as taxable revenue, as the asset situation concerned is “neutral” for tax purposes.

It should be noted that according to Article 37a of Presidential Decree 600/73, merger operations are included among the operations that can potentially be suspicious, as the operations themselves, being tax neutral, could be used in place of other operations which are fiscally relevant and from which could result taxable items (e.g. contributions, sales, etc.).

Programmes

Tax relief is available for setting up new businesses and expanding existing ones. Financial aid is also available and is aimed at supporting investment, management, training and technical assistance. The National Agency for inward investment promotion and enterprise development provides information and assistance and helps businesses explore the various financing opportunities.

Check also the legislation on this topic in:

  • References

    Legal texts

    • Italian Civil Code - Book five. On Labour. Title I, 'On regulating professional activities', Articles 2501 - 2505.3 italiano
    • Legislative Decree No 199 of 6 November 2007 - Implementation of Directive 2005/19/EC amending Directive 90/434/EEC on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (Official journal No 261 of 9 November 2007) italiano

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