Italy: Newsletter Abbatescianni October 2017

Last Updated: 26 January 2018
Article by Rosa Del Sindaco

~ LEGISLATION ~

Law of 4 August 2017 n. 124 – Yearly law on market and competition

Despite numerous amendments occurred in the course of the parliamentary works, the yearly law on competition has finally provided for the approval of the provisions set forth the draft bill presented by the Government in April 2015.

This piece of legislation affects the sectors of insurance, energy, professionals and postal services, as well as modifying the terms for notification of concentration operations with the purpose of granting more transparency in the market and better consumer protection.

  • As far as the insurance sector is concerned, the key amendments regard the following topics:
  • Witnesses in case of incidents implying exclusively material damages: art. 135 of the Private Insurance Code has been modified through the introduction of a provision implying that, in the event of incidents implying exclusively material damages, the identification of possible witnesses should result from the initial claim or anyway from the first formal deed of the damaged party towards the insurance. Except for the findings contained in the police reports, the identification of witnesses which takes place at a later stage shall imply the inadmissibility of such form of evidence in the proceedings.
  • Hypotheses of compulsory discount on the insurance premium: art. 132-ter of the Private Insurance Code introduces, among other provisions, one that obliges insurance companies to apply a discount on insurance users that have already installed or will install electronic devices aimed at tracking the activities of the car, commonly known as "black boxes".
  • Tables for the determination of compensation in the event of major non-material damages: the government is obliged, within 120 days from the coming into force of the yearly law, to arrange a unique table for the entire national territory, which is going to be updated upon variation of the ISTAT index, to be used as a basis for the determination of the amount of compensation in case of non-material damage, by keeping account of the principles elaborated in the case law of the Court of Cassation. The provision specifies that, in case the physical injury implies severe consequences with regard to the individual relational dynamics of the injured person, which are ascertained and documented, the amount of compensation for the damage calculated on the basis of the table can be increased up to a maximum of 30% by the judge through a fair and justified appreciation of the conditions of the injured person.

The amount of the so determined compensation is also regarded as exhaustive of the damage arising out of physical injuries.

  • As for the amendments in the professionals sector, instead, lawyers and notaries are the main categories to be affected.

Lawyers are now allowed to set up their practice by incorporation in the forms of a company, whether personal, capital or cooperative and registered at the special registry of the competent local registry, with the sole participation of equity partners.

What remains forbidden is the participation in a partnership through trusts or by interposition.

As far as the corporate structure is concerned, the law provides that

a) the partners, by at least two thirds of the equity capital and of the voting rights, shall be lawyers enrolled at the bar, or lawyers enrolled at the bar and professionals enrolled in their respective associatons; the ceasing of such enrollment shall cause the dissolution of the partnership, and the board of the bar association at which the company is registered shall proceed with the removal of the company from the registry except for the case where the company manages to re-establish a proportional majority of professional partners within six months;

b) the majority of members of the managing body shall be lawyers;
c) only partners shall be members of the managing body.
The management is not reserved to professionals only, so that it can be placed in the hands of a simple equity partner.

The legal practice, instead, can only be personally carried out by lawyers, whose suspension, cancellation or, disbarment constitutes an hypothesis of exclusion from the company.

Such companies should, in any case, abide by the norms of the Forensic Code of Conduct.

Another novelty with regard to lawyers is that introduced by the modification of the so called "Cresci Italia" Decree in relation to the estimate of fees.

The new article 9, comma 4, of Law Decree 1/2012 obliges lawyers to inform those who are conferring  a mandate upon them of the predicted costs of the legal services in a written form, by distinguishing their professional fees from the duties and the expenses (including lump-sum expenses), as well as by providing details with regard to potential degrees and specializations (the latter provision generally concerns professionals enrolled in professional associations).
 

As far as notaries are concerned, instead, the law introduces an obligation to set up a bank account in which the public official will have to deposit:

 a) all fiscal duties for which the notary is withholder or responsible, as well as all anticipated expenses with regard to registered deeds received or authenticated and subject to commercial or real estate publicity;

b) any other sum entrusted with him and subject to a duty of annotation in the registry of the sums and values in accordance with the law regulating the profession of notaries (Law of 22 January 1934, no. 64);

c) the entire price or compensation, or the interests balance, as well as the sums aimed at extinguishing burdens or unpaid expenses or other duties to be paid on the occasion of deed for the sale of property or assignment, constitution or termination of any other in rem right on real estate or companies, if required by a least one of the parties; in such cases, the notary shall refuse to render his services unless the parties provide the deposit, prior to or simultaneously with the signing of the deed, of the amount of the taxes, duties, and other expenses associated with the deed, except for the case of individuals admitted to pro bono legal aid. Once registration and publicity in accordance with the current provisions have taken place, and in the absence of burdens or prejudicial formalities further to those existing at the time of signing of the deed, or anyway arising out of them, the notary shall unduly proceed to release the deposited amounts in favour of those who are entitled to them.
 

The sums deposited in the bank account constitute separate assets and are therefore excluded from the succession of the notary and from the regime governing the assets of his family, they are not attachable by anybody and as not attachable is the credit concerning the payment of restitution o the sums contained therein.

This new piece of legislation also provides for an increase in the total number of notaries, which will grow from one on seven thousand inhabitants to one on five thousand inhabitants, further extending their territorial competence: the notary is now enabled to operate in the whole entire territory of the region where he is based.

  • With regard to postal services, the monopoly of Poste Italiane on judicial notifications and fines for road traffic offences has been abolished. From now on, these services will be provided also by those who obtain an individual license in light in accordance with the criteria that will be established within 90 days from the entry into force of the new law by the National Authority for Regulation indicated in Legislative Decree n. 261/1999.
  • Another important amendment concerns pharmacies.

Indeed, as a result of the amendment, capital companies have been enabled to be the owners of private pharmacies. The management of the pharmacies by such companies will in any case be reserved to pharmacists, as responsible for the business.

Doctors will be excluded from the ownership of the pharmacy in any case.

Incompatibility still remains between the role of manager of a pharmacy and that of pharmaceutical producer or representative.

  • With regard to the Energy sector, and as far as domestic consumption is concerned, the enhanced protection scheme ("servizio di maggior tutela") has been  permanently abolished.

 
Instead, with regard to the stock of energy products - as per regulation UE 1227/2011 of the European Parliament and Council of 25 October 2011 - the new law expressly provides for the validity of "close-out netting" clauses, even in case of commencement of a procedure for the economic and financial recovery or restructuring through liquidation, pre-bankruptcy or bankruptcy, which may or may not imply the disvestment of the debtor, with the sole exception of contracts concluded with the end client, regardless of his ability as consumer.

«Close-out netting clause» means "any clause of voluntary or automatic termination of the relations implying the subsequent obligation upon the party whose debt results to be of a bigger amount, to pay for the net balance of the obligations resulting from the compensation of the reciprocal duties which, in force of the present clause, have become immediately due and hence converted into an obligation to pay a sum equivalent to their current value - estimated by employing the criterion of commercial reasonableness - or extinguished and substituted by an obligation to pay such sum".

In case of commencement of a procedure for the economic and financial recovery or restructuring or liquidation in the form of a bankruptcy procedure providing for the disvestment of the debtor, the bodies involved in the procedure shall, within six months from the commencement of the procedure, indicate the violation of the criterion of commercial reasonableness in case the determination of the estimated value has taken place in the year preceding the opening of the bankruptcy procedure.

Such reasonableness shall, in any case, be assumed to be ascertained in case the contractual clauses that set out the criteria for the determination of the estimated value are coherent with the practices recognized by the international associations representing the sector or in case they provide for the employment of listings procured by one or more independent third parties acknowledged on the international plane.

The new law on competition additionally introduces a specific framework for leasing contracts, defined as contracts by which a bank or financial broker undertakes to purchase or procure a certain good upon indication by the user, who assumes all risks, thus including the risk of deterioration of the good, and renders the aforementioned good available for a determined amount of time in exchange of a determined price that keeps account of the purchase or construction prices as well as of the duration of the contract. At the expiry of the contract, the user has the right to acquire the ownership the good at a predetermined price or, in the event such right is not exercised, the user has the obligation to give the good back.
 

  • Finally, the new law reviews the turnover limits above which there is an obligation to notify an operation as concentration.

Pre-operation communications to the AGCM – the Authority for the protection of the competition and the market – become compulsory in case the overall turnover determined on the national scale by the group is above four hundreds and ninety two million Euro and in case the turnover individually determined on the national scale by at least two of the considered companies is above thirty million Euro. Such amounts will be increased on a yearly basis in reason of the increase in the index rate of the deflecting prices of the GDP.

~ CASE LAW ~

Courts of Rome, Office of the Judge for the Trade registry, decision of 20 July 2017 – Ban on company liquidation through heterogeneous transformation into a trust

The Courts of Rome, in their functions as judge for the Trade Registry, have issued a decision concerning the admissibility of the transformation of a limited liability company (s.r.l.) into a liquidation trust.
The decision comes at the end of an intense academic debate in the course of which it was questioned whether the hypotheses of heterogeneous transformation should be limited to those set forth the Civil Code (artt. 2500 septiesand 2500 octies), so being the transformation into a different form inadmissible, or if such hypotheses are to be intended as non-exhaustive.
Those is favour of further hypotheses for transformation than those expressly provided by the legislator have observed that the admissibility of such operations may be justified by reasons of efficiency in the negotiations. Indeed, they argue that if a certain result can be obtained through an indirect transformation, there is no reason for regarding the achievement of the same result through direct means as unlawful.
In accordance with such reasoning, the transformation should allow to operate a re-organization of the company by preserving the original earmark on the capital for the purposes of the relevant business.
Also, the absence of certain hypotheses in the text of the provision should find its justification in the fact that, being the enabling act for the reform of corporate law aimed at reforming the legal framework for capital and cooperative companies, the delegated legislator simply could not regulate additional hypotheses.
However, according to the Courts of Rome, such argument is unfounded.
Indeed, the judge for the Trade registry points out that article 2500 septies and 2500 octies contain a specific list of hypotheses that lets the reader presume that the intention of the legislator was that of excluding, besides specifically set out cases, further possibilities of transformation.
These hypotheses of heterogeneous transformation provided and regulated by the legislator must then be regarded as exhaustive, and hence the transformation of a capital company into a trust shall be regarded as inadmissible..
In the decision, the judge also observes that a necessary step for the cancellation of a company from the trade registry to take place is the filing of the approved and final financial statement of liquidation with the registry. So, for the purposes of proceeding to the cancellation of the company, the sole dissolution of the partnership is not sufficient, being necessarily required that the liquidation phase is completed in the terms indicated by the Civil Code.
In addition, the conferral of the goods in the trust would infringe the provisions of the Civil Code, as to impinge upon the rights of the creditors, who would lose every possibility of keeping the alienation of the assets of the company under control.
The liquidation through devolution of the goods to a trust therefore does not constitute a legitimate operation under the law, and for this reason it cannot be registered at the trade registry of the Chamber of Commerce.
With regard to the possibility of having the deed of transformation declared invalid after the registration at the trade registry, as provided by art. 2500 bis of the Civil Code, the judge observes that such provision is not applicable in this hypothesis: in fact, the deed to be registered would not subject to invalidity, as dictated by the above mentioned provision, but there would still be a clear discrepancy between the actual purpose of the deed and the one admissible under corporate law, for which the registration would be admissible.
It follows that the operation of transformation of a company subject to liquidation into a liquidation trust, provided that such possibility is not contemplated by the laws, would be subject to cancellation even after its registration in the trade registry, given that the provision of art. 2500 bis of the Civil Code would not apply.

Civil Court of Cassation, Section III, decision of 6 July 2017 n. 16646 – Sale and lease back, infringementof the prohibition on forfeiture agreements (patti commissiori)

The Civil Court of Cassation, in the above mentioned decision, treats the topic of possible infringements of the prohibition on forfeiture agreements, as set forth in art. 2744 of the Civil Code, in the context of a sale and lease back operation.
The latter expression, in the words of the judges, refers to a contract through which a "commercial or industrial company sells a good under its ownership to a financial entrepreneur who pays the purchase price, thus becoming the owner, and at same time proceeds to a financial rental (leasing) of the same good towards the seller, in exchange of the payment in periodic installments for the leasing on a determined amount of time, with the possibility of the seller to regain ownership by paying to the leaser a determined price for buy back at the end of the contract".
Such contractual form is characterized by a financial purpose, and not a guarantee one, being the contract aimed at granting the needing company with immediate cash through the sale of the good, while preserving both the possibility of using it, and of buying it back once the leasing is over.
The so described operation, according to the Court of Cassation, cannot fall within the hypotheses of violation of the prohibition on forfeiture agreements.
Indeed, such prohibition can be regarded as violated in case the cause of the sale with a buy-back agreement or sale-back is that of a guarantee.
The above-described operation could be regarded as fraudulent in case the following conditions are verified:
a) there is a precedent or contextual debt-credit relationship between the leasing company and the seller-user;
b) the seller is in such financial distress as to raise suspects with regard to the possible advantages acquired by the leasing company;
c) there is a disproportion between the value of the good to be sold and the actual sum paid as price.
Therefore, in case there is an effective cause of exchange at the base of the contract (as with regular leasing contracts), the contract shall be regarded as not falling within the hypotheses of violation of the prohibition on forfeiture agreements.
Hence, the sale and lease back is to be regarded as lawful anytime the coexistence of a plurality of contractual features that characterize it is clearly directed at a specific and actual interest in funding the selling company, and not in obtaining addition guarantees for the funding company through the ownership of the good

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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