Assets Destined To A Specific Business

The recent so-called Reform of the Italian Corporate Law (i.e., Legislative Decree no. 6 of January 17, 2003), introduced a new way to provide a corporation with the benefit of a further limited liability in addition to the general one derived from the corporation's status.

More specifically, the Reform added a new subparagraph (sections 2447-bis through 2447-decies) in the newly amended Title V of Book V of the Italian Civil Code, designating the so-called "asset destined to a specific business."

Two aspects of this legal institution are expressly regulated:

1) Section 2447-bis, 1st paragraph, letter a) states that a corporation may exclusively link part of its assets to the realization of a specific business, subject to certain conditions specified in sections 2447-ter through 2447-novies;

2) Section 2447-bis, 1st paragraph, letter b) states that a corporation may enter into a financing agreement for a specific business, and repay the debt exclusively (or primarily) by all or part of the profits generated by the business itself, provided that the requirements of Section 2447-decies are met.

Linking assets to realization of specific business

If all legal requirements are met, assets linked to a specific business constitute a segregated portion of the whole corporation's assets. As a consequence, general creditors of the corporation do not have any rights vis--vis such assets nor vis--vis the profits generated by the specific business other than those pertaining the company. Also, creditors for obligations stipulated for the realization of the specific business, unless otherwise resolved by the relevant board resolution (as analyzed below), cannot attach the corporation's assets not included in the segregated portion in case their credits are originated by a contractual relationship. If such credits are derived from a tort liability in the realization of the specific business, then no limited liability may be opposed to them and the company also is responsible for its residual assets. Creditors for stipulated obligations also cannot attach assets that are linked to other specific businesses.

In any case, the segregated portions in relation to one or more specific businesses cannot exceed 10 percent of the total company's net asset.

To obtain this benefit, the law provides for several requirements:

1. First, the board of directors must resolve the segregation of assets with the absolute majority of its members. The relating resolution must be filed with the Registrar of Enterprises. This public notice is necessary to ensure that the corporation's creditors learn of the thinning of the company's total assets, which constitutes the primary guarantee of their credits. It must be noted that the corporation still owns the segregated assets, but its powers of disposal are reduced as they relate to the specific business. Such creditors, which are known as general creditors, have the right to...