Regulations

Current legislation on innovative startups and crowdfunding

Italy is the first country to have specific and organic legislation related to the institution of equity crowdfunding.

"Innovative" startups were introduced into our legal system by Decree Law No. 179 of October 18, 2012 (converted into Law No. 221 of December 17, 2012) on "Further Urgent Measures for the Growth of the Country" (also known as the "Growth bis Decree") in Articles 25-32.

They were, initially, granted the possibility of raising capital from the public through the institution of equity crowdfunding by making use of special portals authorized by Consob to raise capital online.

With the amendments introduced to Consob Regulation 18592/2013, Consob has gradually expanded the number of entities authorized (the 'Offerors') to use the instrument of online capital raising through authorized portals .

As of today, therefore, the Offerors, i.e., those who can conduct online Offerings of financial instruments on authorized portals are (Article 2 paragraph 1 letter c of Consob Regulation):

  1. small and medium-sized enterprises (SMEs), as defined in Article 2(1)(f), first introductory sentence, of Regulation (EU) No. 2017/1129 of June 14, 2017, organized as a company under the law of a member state of the European Union or a party to the agreements on the European Economic Area;
  2. the innovative start-up company, including the start-up with a social vocation, as defined in Article 25, paragraphs 2 and 4, of the decree and the start-up tourism provided for in Article 11-bis of Decree Law No. 83 of May 31, 2014, converted with amendments by Law No. 106 of July 29, 2014;
  3. the innovative small and medium-sized enterprise ("innovative SME"), as defined by Article 4, paragraph 1, of Decree Law No. 3 of January 24, 2015, converted with amendments by Law No. 33 of March 24, 2015;
  4. thecollective investment undertaking ("CIU") that invests predominantly in SMEs;
  5. corporations that invest primarily in innovative SMEs;

1. The small and medium-sized enterprise (SME)

The small and medium-sized enterprise referred to in Article 2(1)(f), first introductory sentence, of Regulation (EU) No. 2017/1129 of June 14, 2017 is the company that meets at least two of the following three criteria: average number of employees during the fiscal year of less than 250, balance sheet total not exceeding €43,000,000, and annual net sales not exceeding €50,000,000.

2. Innovative Start-Up

Can be established as an Innovative Startup, the corporation (Srl, Spa, Scrl, Sapa, simplified Srl or a resident European Company) that:

  • has the exclusive or prevalent corporate purpose, the development, production and marketing of innovative products or services with high technological value;
  • has not been formed by a corporate merger, corporate demerger or as a result of the sale of a company or business unit;
  • has been incorporated and carrying on business activities for not more than sixty months;
  • has its principal place of business and interests in Italy;
  • starting from the second year of the Startup's activity, the total annual production value, as shown in the last approved financial statements within six months of the end of the financial year, does not exceed 5 million euros;
  • does not distribute, and has not distributed, profits;

and meets at least one of the following additional requirements:

  • expenses in research and development incurred in each year are equal to or greater than 15 percent of the greater of cost and total value of the innovative start-up's production;
  • employment as employees or collaborators in any capacity, in a percentage equal to or greater than one-third of the total workforce, of personnel who hold a doctoral degree or who are pursuing a doctorate at an Italian or foreign university, or who hold a bachelor's degree and who have carried out, for at least three years, certified research activities at public or private research institutions, in Italy or abroad
  • employment as employees or collaborators in any capacity in a percentage equal to or greater than two-thirds of the total workforce, of personnel holding a master's degree pursuant to Article 3 of Ministerial Decree No. 270 of October 22, 2004;
  • is the owner or depositary or licensee of at least one industrial patent relating to an industrial invention, biotechnological invention, semiconductor product topography or new plant variety;
  • is the holder of rights to an original computer program registered with the Special Public Register for Computer Programs, provided that such privations are directly related to the corporate purpose and business activity.

Start-ups for life?

The regime for innovative start-ups remains for a period of 5 years (60 months) after incorporation and provided that the parameters set by the standard are maintained.

The aforementioned term of the innovative startup status was extended by an additional 12 months by the Relaunch Decree (DL No. 34 of 19.05.2020).

At the end of the five-year period of registration in the special section of the Register of Companies reserved for innovative startups, or earlier in the case of early loss of the requirements, the relevant rules cease to apply.

However, term contracts already in existence on the date and until their expiration remain valid, and the special clauses introduced in the articles of association in favor of holders of particular types of shares as well as those relating to financial instruments with patrimonial and administrative rights continue to operate, limited to the rights already subscribed.

Read more about tourism startups link Article 11-bis of Decree Law No. 83 of May 31, 2014, converted with amendments by Law No. 106 of July 29, 2014

https://www.mise.gov.it/index.php/it/impresa/competitivita-e-nuove-imprese/start-up-innovative

2.a The Startup Tourism

The Startup Tourism was introduced by the legislature by Article 11-bis of Decree Law No. 83 of May 31, 2014, converted with amendments by Law No. 106 of July 29, 2014.

The provision stipulates, n summary, that "companies that have as their corporate purpose the promotion of the national tourism offer through the use of technologies and the development of original software, in particular, acting through the provision of services aimed at tourism businesses" can also be considered "innovative startups," and have access to the related benefits

Tourism startups can also be established in the form of a simplified limited liability company under Article 2463-bis of the Civil Code.

If tourism startups are established by individuals who have not reached the age of 40 at the time of the establishment of the same company, they are exempt from registration tax, royalties and government concession fees.

Read more about tourism startups link Article 11-bis of Decree Law No. 83 of May 31, 2014, converted with amendments by Law No. 106 of July 29, 2014.

http://www.gazzettaufficiale.it/eli/id/2014/07/30/14A06063/sg

http://www.gazzettaufficiale.it/eli/id/2014/07/30/14A06063/sg

3. The small and medium-sized enterprise innovative SME

Innovative SMEs are corporations, also established as cooperatives, that meet the size limits of small and medium-sized enterprises and parameters regarding technological innovation.

They must meet the following requirements:

  • headquartered in Italy or in an EU or EEA (European Economic Area) state with a production site or branch in Italy;
  • less than 250 employees and collaborators;
  • annual turnover not exceeding 50 million euros;
  • not be listed on a regulated market;
  • have already filed audited financial statements;
  • not be registered with the Register of Companies as innovative startups.

They must have at least two of the following requirements:

  • research and development expenses greater than or equal to 3 percent of the greater of cost and total value of production;
  • at least 1/3 of employees or collaborators with master's degrees or 1/5 of doctoral, PhD or graduate students with at least three years of certified research activity;
  • at least one patent or industrial patent.

Learn more about innovative SMEs on the MISE website's page dedicated to innovative SMEs.

https://www.mise.gov.it/index.php/it/impresa/piccole-e-medie-imprese/pmi-innovative

4. Collective investment undertakings (CIUs) that invest primarily in innovative startups and innovative SMEs

Article 2 paragraph 1 letter e-ter of Consob Regulation 18592/2013 defines the CIU that invests predominantly in small and medium-sized enterprises: the collective investment undertaking that allocates at least 70 percent of the capital raised in small and medium-sized enterprises.

Article 1 of Legislative Decree No. 58 of Feb. 24, 1998 (Consolidated Law on Finance , abbreviated, "TUF") provides all the definitions needed to understand what is meant when it comes to UCITS :

"......

(i) "società di investimento a capitale variabile"(Sicav): the open-ended OICR established in the form of a joint stock company with variable capital with registered office and general management in Italy having as its exclusive object the collective investment of the assets raised through the offering of its own shares;</em >

(i-bis) "società di investimento a capitale fisso"(Sicaf) means the closed-end Oicr constituted in the form of a società per azioni a capitale fisso with registered office and general management in Italy having as its exclusive object the collective investment of the assets raised through the offering of its own shares and other participatory financial instruments;</em >

(j) "mutual fund" means an Oicr constituted in the form of autonomous assets, divided into units, established and managed by a manager;</em >

(k) "Collective investment undertaking"(CIU): the body established for the provision of collective asset management service, whose assets are raised among a plurality of investors by issuing and offering units or shares, managed upstream in the interest of investors and autonomously by them as well as invested in financial instruments, credits, including those disbursed from the assets of the CIU, participations or other movable or immovable assets, according to a predetermined investment policy10;</em >

(k-bis) "Open-ended UCI" means an UCI whose unitholders have the right to request redemption of units or shares out of the assets of the UCI in the manner and at the frequency prescribed by the rules, bylaws, and offering documents of the UCI;</em >

(k-ter) "Closed Oicr" means the Oicr other than open-ended;</em >

(l) "Italian Oicr" means mutual funds, Sicavs and Sicafs;</em >

(n) "collective asset management": the service that is performed through the management of Oicr and related risks;</em >

o) "savings management company"(Sgr) : the joint stock company with registered office and general management in Italy authorized to provide the service of collective asset management;</em >

....."

5. SGRs investing primarily in innovative startups and innovative SMEs

Article 2 paragraph 1 letter e-quater of Consob Regulation 18592/2013, as amended, defines capital companies that invest predominantly in small and medium-sized enterprises as capital companies whose financial assets, recorded in the latest filed financial statements, consist of at least 70 percent of financial instruments of small and medium-sized enterprises.

The institution of raising capital through online portals '(equity crowdfunding)

In the overall design of the legislature, the raising of capital through online portals l'(equity crowdfunding) is seen as a tool that can foster the development of entrepreneurship and innovation through rules and methods of financing that can exploit the potential of the internet.

The Ccrescita bis Decree introduced in the Consolidated Law on Finance (Legislative Decree No. 58 of February 24, 1998) the necessary amendments to activate the legal institution related to the raising of capital through online portals and, in particular, art.50 quinquies " Management of portals for the raising of capital for small and medium-sized enterprises and social enterprises and art.100- ter "offers through portals for the raising of capital."

As a result of the regulatory delegation received, based on the aforementioned articles of the TUF, Consob adopted by resolution No. 18592 of June 26, 2013, the "Regulation on the raising of venture capital through online portals," updating it by subsequent supplementary and/or amending resolutions, up to the text currently in force. The Regulations (referred to in the pages of this website as "Consob Regulations") represent the reference implementing text for regulating the raising of capital through online portals in Italy.

The following is a list of the main legislative and regulatory measures and other relevant documents on raising capital through online portals.