Business Law (prof. P. Smirne)

BUSINESS LAW

Two topics:

Società

1. Partnership (small shop in which you buy)



2. Company (Apple, Fiat)

Sole trader one person



Partnership typically a structure for one person only



Main question: Is it economic efficiently?

Law is not something crushing you, is something that sustain you.



Entrepreneur the person who is doing business

 Companies (società di capitale) can be listed or not listed



SOLETRADER:

- Without empoyees

- With employees.

PARTNERSHIP: in Italian is “società di persone”

Simple partnership società semplice

 

General partnership società in nome collettivo (s.n.c.)

 

Limited partnership società di accomandita semplice (s.a.s.)

 

COMPANY: “società di capitali”

Private limited company (Ltd) S.r.l.

 

Public limited company (Plc) s.p.a.

 

- can be listed

- cannot be listed

(Example of S.p.A. is Fiat)

Trademark: it serves to identify a product or service with a specific company. One of

the main purposes of having a product trade market is to protect the product from

being used without permission of the source company (example can be Coca-Cola).

Sole trader does not have the right for the profit. It is not fixed. Only one person can

gain the profit or be affected by the losses. He is risking everything but he can decide

everything.

Employees: they get always the same amount.

Partnership and company in Italy is under the same group. The main element that

change is that partnership and companies normally has more than one person: so

more than 1 person are risking, are gain profits and decide.

Big listed corporation (Fiat): more invest, more share capital to invest. Company law, is

one way to sold with majority principle.

Capitalistic principle: the more you invest, the more you count.

Società cooperative: are very strong in Italy.

the aim is different, the solution is completely different. They do not care about how



many shares you have, and how much capital you have.

How can you avoid conflicts? Just with the principle of: the more you invest, the most

share capital you have.

Sole trader vs Partnership and Companies: 1 person vs more than one person.

The simplest form is the sole trader; the most complex is the company.

3 types of Partnership:

- società semplice: (in England they don’t have this type of partnership)

- società in nome collettivo

- società in accomandita semplice

2 types of Company:

- Società responsabilità limitata/private limited company: designed for

potentially small number of investors. Private it means that we choose each

other.

- Società per azioni /public limited company: is designed for potentially large

number of investors. You can also have pld with only one shareholder.

(Example can be Vodafone, Fiat)

Ferrero is not a listed company, but you could ask privately for it.

(Example: in a company, person A has 1% of vote, Mr. Agnelli has 30%, is more

important the person or the capital? The capital, he is exactly a person as A.)

Società per accomandita per azioni: there is no equivalent for UK or US.

Partnership limited by

We will call it, according to the most currently used translation:

shares.

About each type of company we will analyze:

1. Number of members of that type

2. Who has managerial power

3. Profits and losses distribution

4. Liability. Key words: limited liability, unlimited liability.

Main sources of law for companies, mainly:

- Civil code (1942)

Civil code Napoleon code (1804)



Another model is Germany code (Book of private law)

Italian Civil Code, came later than others, with a French influences. It is a

model, completely written.

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- As amended by D. lgs 6/2003 (the so-called Company Law Reform).

Other possible forms of entrepreneurs (hints only):

- Cooperative companies (economic but non lucrative goal)

- Consortia (to cooperate the work of entrepreneur) entities invented to



coordinate the word “entrepreneur”. 99% of Italy has small companies, or

families companies.

- Associations and foundations (non-for-profit) if they act as entrepreneurs:

they try and solve new problems. Social economy work.

1 6th law, approved in 2003

Charity can be sustainable, can create jobs, and so create wealth.



European models are starting to emerge:

1. EEIG (in italian GEIE): European economic interest grouping.

2

Regulation (EC ) 2137/85. In Italy D.Lgs 240/91: for cooperation between

 enterprises and professionals of at least 2 different Member States

(MS).

2. Societas Europaea (SE):

Regulation (EC) 2157/2001 (+ directive 2001/86/EC for employees)

 Purpose: to incorporate under one juridical umbrella activities spreading

 in more than one MS.

There are more or less 2000 in the EU.

 It is a public limited liability company (S.p.A.)

 They must be formed starting from already existing national entities

 (instead national companies are created from scratch).

Source of law:

 - EU regulation – national law on SE;

- integrating the EU regulation – national law on Plc

Minimum share capital: €120.000

 Registered office and central administration must coincide; to prevent

 

abuse of law (excessive forum shopping). Abuse of law is one of the

major problem of EU law. Is allowing you to get some advantages that

you do not have.

3

One company can use the same law in all the states.

3. European Cooperative Society

Regulation (EC) 1435/2003 (+ Directive 2003/72/EC for employees)

 Minimum share capital: € 30.000

 Entities forming it must come from more than one MS.



CREATION OF A COMPANY

1) There are two forms of company creation:

a. Simultaneous incorporation: the most commonly used

b. Incorporation by public subscription (rarely used): 4

Promoters: there is a project that is kept by a Notary : promoters

 start scouting for investors (and this takes some time) and only if

they raise the resources set out in the project of the company, then

can be created.

Purpose of this form of company’s creation: resources pooling.



2) A formal deed is required: it is executive by a Notary

To execute a deed we means to a sign a formal document. The Notary prepare

the documents and performs: (formal

a) A control of regularity of documents control):

2 European company

3 as noted during the lesson, this use of the word “society” is uncommon in company law,

where the word “company” is used instead.

4 the purpose of the project being kept by the Notary is that the project than becomes

unmodifiable: it is paramount to ensure this, as the project contains that rules of the

investment. It would not be possible to allow promoters to lure investors into an investment

and than allow promoters to change the rules of that investment after having received.

5

F.i.: authorization required to create/register/run the Co: are they

present? legal abidance (substantial

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b) And a control of control).

This double control, once performed by Courts, is now performed by the Notary

(it used to take a few months, now it only takes a few days or hours). In case of

notarial refusal, appeal in front of a Court is still possible. It is called in Italian

“omologa”.

Examples of control of legal abidance:

The word “bank” must not be used in the company’s name, unless the

 company to be created is indeed a financial institution.

Therefore, there are 3 steps that lead to the valid creation of a company:

Signing

1. the deed prepared by the Notary, who signs it himself;

control

2. Formal and substantial by the Notary (“omologa”);

Register of Enterprises 7

3. The Notary registers the company in the :

The company does not exist until registered: constitutive notice.

This means that there is a 3-step process:

- Until all 3 steps have been taken, the company is not born yet;

- After they have all been taken, the company is born and acquires “legal

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personality” .

Mind: the same rules apply when the company modifies its bylaws, through a special

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resolution of a General Meeting . So: Notary

1. there will be the intervention of a that takes (and later signs)

minutes of the meeting (“verbale di assemblea straordinaria”);

formal and substantial validity

2. and he will then check the of what the

assembly decided (“omologa”); inserted into the RE 10

3. if the controls are passed, the minutes are .

3) The formal deed that gives birth to a company is composed of two documents:

that day

1. deed of incorporation (photo of what happened in front of the

Notary: its importance, as time passes, is only that of a historical fact: it is

therefore not modifiable, as all facts are); “atto costitutivo”.

2. bylaws (rules of the company: made to last and therefore modifiable, with

the system above seen); “statuto”.

The two documents complete each other and the bylaws prevail in case of conflict.

4) The Civil code states the essential elements of the deed: The most important ones:

5 We need authorization to establish the company, without it we cannot sign.

We could sign the company, we can register the company within 20 days, but you necessary

need authorization.

6 I’m writing rules. Are these rules concerning the law?

7 In the UK it is called Companies House.

8 I.e. it becomes fully detached from its founders and thus: 1) answers for its debts, only with

its assets; 2) doesn't answer for the shareholders' debts.

9 Akso called resolution of an 1) Extraordinary General Meeting (EGM), as opposed to Annual

General Meeting (AGM) or 2) Extraordinary Shareholders Meeting (ESM).

meeting

Mind: Italian terminolgy focuses on the type of (assemblea ordinaria o

straordinaria), where the resolution is adopted; the UK terminology, instead, focuses on the

resolution

type of (ordinary or special) adopted during the meeting: CA, § 301 e ss, especially §

307 (2), which distinguishes between AGM and “any other case”.

10 Art. 2436 c.c. states that “the resolution doesn't produce effects until registered into the

RE”: thus, some scholars have debated that the effect should be that of “constitutive notice”,

but the most common opinion is that we here have a case of “constructive notice”.

name of shareholders;

 name of the company (a legal person has a name!);

 the field in which the company wants to operate: objects clause; f.i.

 manufacturing and selling of cars;

share capital (which must respect the minimum for that type of company);

 management organ;

 control organ (if any).



REVIEW

sole trader

A (individual entrepreneur) is the only person in charge and the only

person liable for the company.

Partnerships and companies (collective entrepreneurs) designed for more than one

person.

Companies can exceptionally be a one-man company, but that’s a very rare case.

Why collective?

1. Created for more than one investor

2. Can always welcome more than one investor, even if it is a one-man company

today.

3. It is listed

Sole Trader

1. Not a form of company with only one investor

2. It is listed

3. Not necessarily a one man company

Civil Code

1. Emended in 2003 for business law.

EU 1. 27 different common law

There is no US company Law because corporate law and business law isn’t a federal

issue, meaning that they have 50 company law (one for each state)

Managers try and work in companies where they aren’t liable for anything.

Here notaries are public officials, which means that the oath has been take towards

the state, not the people. Notaries have to filter and understand the needs of a client

given the law around them.

CREATE A COMPANY:

To execute a deed

1. sign something formal.



2. The notary prepares the documents and performs:

a. Control of regularity of documents (formal control)

b. Control of a legal abidance (substantial control)

Examples of control of legal abidance:

a. The word “bank” must not be used in the company’s name, unless the company

to be created is indeed a financial institution.

b. Object a clause can a company that sells cars also sell car insurances? Yes.

c. Administration clause can directors of a SPA(plc) be appointed for life? No.

Everybody can be able to buy shares and eventually remove you.

However, in private one a CEO can be appointed for life because it is private.

For Example, FIAT shareholders change every day, and they want to be able to

potentially change things in the company. Changing the CEO is the most

important decision.

When is the company born? (If not all the steps are completed the company doesn’t

exist)

1. Singing the deed prepared by the Notary, who sings it himself;

2. Formal and substantial control by the Notary;

Register of Enterprises;

3. The notary registers the company in the

The 3 steps are taken wither when you create a company or when you modify it.

The company does not exist