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Exceptional operations

Exceptional operations

The transformation, merger and division are exceptional operations of corporate reorganization that allow one or more companies to change their legal status (transformation), to unite themselves (merge), to separate each from other (division) and to create legal structures more adequate than what the market requires and to change according the needs.

These operations do not pay taxes as there is no transfer of assets but there a real change in the deed of incorporation. These are operations that fall within the microsystem. The mentioned “microsystem” assures that the set of rules that regulate this discipline of operations are autonomous in the sense that they are independent and do not require the existence of other rules. The primary rule that represents that it is an autonomous microsystem is the invalidity of the resolution because it provides that these operations where declared invalid cannot be declared such after registration in the business register. Here, the advertising prevails over reality.


Before the 2003 reform the government stated that the transformation is defined as the change of one type of institution to another corporate body. After the reform, the transformation provides for the possibility to transform into non-corporate bodies. The transformation is subdivided into:

  • HOMOGENEOUS TRANSFORMATION is defined as the transition to/from one type of lucrative companies such as s.p.a. s.n.c. s.r.l. s.s. s.a.p.a.
  • HETEROGENEOUS TRANSFORMATION is the transition from a lucrative company into a casually different entity (non-profit which turn to cooperations, foundations, associations) or vice versa.

The transformation can be defined as the change of the legal status. The function of the transformation is to allow the adaptation of the organizational model of the company towards new needs bypassing the double path, i.e. there is no need to liquidate the entity and then create a new one entailing new costs.

The fundamental rule governing the Transformation process is the Art. 2498 PRINCIPLE OF CONTINUITY. The principle of continuity of transformation provides that the transforming body retains and pursues all the rights and obligations in the relationship to the entity that carry out the transformation.

Whenever a transformation occurs, there is no transfer but continuity. Since there is no transfer there is no transcription with declarative effectiveness but simply a transcription for news advertising purposes in the absence of a mere transfer.

Art 2500 c.c. The law provides that if there is a transformation from a partnership to a capital company, which must result from a public act. Since these companies can only be established by a public deed they must comply with this formula and the formal/substantial rules of the type of arrival. The law states that the rules of the companies of “arrival” must be respected in case the “departure” companies do not have them.

2nd paragraph: According to this paragraph, the SPA must be advertised as it deserves. On the one hand, the order states that everything continues on the other side of society. In reality, it should be published that the starting company does not exist, but it must be publicized like it continues. So the legal reality follows that of the ordering: the third parties must be informed that the company does not exist and that it continues in another company.

3 paragraph: provides that the transformation has an effect only after registration in the public register of companies. It should be noted that it’s not necessary to have two advertisements on the same extinction of the company, but only single one.

  • Homogeneous transformations, that is the passage from one type of society (partnership) to another type of society (of capital), and vice versa, can be:
  • PROGRESSIVE TRANSFORMATION – refers to the transformation between a partnership and a joint-stock company. The legal system recognizes it progressive one as the transition to the LLC is perceived as a favor.
  • Article 2500-ter provides that progressive transformations require a majority to facilitate the transition to more complex legal forms but the contract could provide that the transformation is decided unanimously. The majority is calculated according to profit sharing because it is closer to the majority capitalist criterion of the target companies. The shareholder who does not agree with the transfer (protection for minority shareholders) to a more complex structure has the right of withdrawal, i.e. the liquidation of the share at the real value and if the company does not have liquidity, the company can revoke the resolution of progressive transformation to cancel everything. We have moved from a real protection to a mandatory protection for minority shareholders.

2 ° paragraph 2500-ter Furthermore, the law provides that the capital resulting from the transformation must be determined on the basis of current values, elements of liabilities and assets and must result from an estimate report prepared in accordance with the specific rules.

For the transformation it is necessary that the capital is equal to the legal minimum, if it is greater there is the right to charge the legal minimum to the capital and the remaining part in the form of reserves. If it is lower, the members must pay the amount necessary to reach the legal minimum, otherwise it can be transformed into another type of company.

The problem of liability: When the company is transformed into a capital company, it passes from a regime of unlimited liability to a limited liability regime, to safeguard the creditors and to favor the transition to complex legal forms the legislator in art. 2500-quinquies provides that the transformation does not free the members from the liability of the obligations arisen before the transformation if it does not appear that the creditors have given consent. The consent of the creditors is presumed, if the creditors to whom the transformation is communicated by registered mail or PEC do not refuse it within 60 days. After 60 days have passed the status of unlimited responsibility is lost.

If there is a transformation from a partnership of persons to another partnership (from snc to sas) the resolution must be taken unanimously; the 2500-ter is a law aiming to facilitate the legal evolution of a capital company, not for all the others.

Article 2500 quater 1st paragraph: The rule provides that each member upon the transformation will have the right to the assignment of a number of shares or a quota depending on whether it is spa or srl, proportional to its participation in the partnership.

b. REGRESSIVE TRANSFORMATION: means the transition from a capital company to a partnership, it regresses from a more complex society to a simpler one. With the reform of 2003 the discipline has changed and the art. 2500-sexies provides that the resolution will be adopted by majority, but the consent of the shareholders is required, which with the transformation have assumed unlimited liability. The law also in the last paragraph provides that the members who assume unlimited liability also answer for the obligations prior to the transformation none excluded. Those who do not have the right to vote must also give their consent because the consent is different from the right to vote.

2. The heterogeneous transformations, that is the transition from a lucrative to a non-profit organization, and vice versa, is governed by 2 norms:

    • Art. 2500-septies concerns the transformation between joint-stock companies and non-corporate bodies;
    • Art 2500-octies concerns the transformation between non-corporate bodies and limited companies;

The most widespread hypothesis of this type of transformation is the transformation in company communion to a company or vice versa where, by communion, we mean the set of two or more people who are co-owners of a company and subsequently transformed into a company.

If the transformation from spa to company communion as soon as the transformation produces its effects, the risks that run the owners of the communion is that a de facto company is born and is subject to unlimited responsibility and to failure. The peculiarity in this case is that the co-owners of the communion will not have to exercise the activity but will rent it. So it assumes to grant a rent otherwise it becomes an unlimitedly responsible partner.

If it transforms from communion to spa as soon as the transformation produces its effects in order to avoid the creation of a de facto company as soon as the inheritance is received, the members provide for the transformation into a joint-stock company (art 2500-septies).

2nd paragraph 2500-septies: states that the 2500-sexies applies as compatible. That is, the consent of unlimited liability and the relationship applies.


MERGER is technically the union of two or more companies in one.

Art 2501 c.c. contains the definition of a merger and establishes that the merger is carried out either by setting up a new company or by incorporation into one or more companies.

There are 2 types of merger:

    • MERGER IN STRICT SENSE also called OWN MERGER is a merger that is carried out through the establishment of a new company. In this situation all the other existing companies are extinguished. (Eg if a, b, c merge into D a, b, c, do not exist);
    • MERGER BY INCORPORATION also called IMPROPER MERGING is carried out by incorporation into one company of the other or the other. In this case all the incorporates are extinguished and only the incorporate remains alive. This type of merger is the most used in practice.

The essential feature of this transaction is that according to which the shares or shares of the company that emerges from the merger (own or improper) are assigned to the members of the company involved in the merger.

Example if Alfa eats beta, beta members become alpha partners and will receive alpha actions. So alpha will be constituted not only by old members but also by those of beta.

The merger does not involve any transfer of assets and there is no succession from one company to another and there is neither legally nor technically the extinction of the company. Neither in its own merger is the establishment of a new company, but in reality it is the previous company that has modified the statute and therefore are the same companies that survive in a new organizational structure. Although there is no transfer of assets, a defined property advertisement must be implemented. Legal advertising with an information function for third parties for the purpose of continuity.

The EXCHANGE RATIO means tell me how many shares of Alfa (incorporating) will have to receive the members of Beta (incorporated) in place of their canceled shares or shares and usually this ratio is calculated considering the company’s assets i.e. it relates to the REAL WEALTH. In reality, market expectations are not compared, but an economic assessment is made which is negotiation.

The merger can also take place between different corporate bodies so not only 2 SRL in a SRL but that an SRL eats a SNC or vice versa. In this case the rules on transformation apply. This type of merger is called TRANSFORMATION MERGER. If

it deals with a merger between SNC and SRL it is necessary to implement the rules concerning PROGRESSIVE TRANSFORMATION and the rules on MERGER it is necessary to mix everything.

The problem is posed if a HETEROGUE MERGER is possible. The answer is affirmative because the merger is always a modification of the constitutive deed so if we can adopt a heterogeneous transformation we can proceed to the heterogeneous merger always applying to the discipline of heterogeneous transformation.

The MERGER PROCESS consists of three phases:

    • Project of a Merge;
    • Decision to Merge;
    • The conclusion of the Merger deed

Art 2501-ter 1 st paragraph: The norm provides what must contain the MERGER PROJECT:

    • The type, name or company name, the registered office of the companies involved in the merger;
    • The deed of incorporation of the new company resulting from the merger or the merging one, with any modifications deriving from the merger;
    • The exchange ratio of the shares or quotas, as well as any adjustment in cash;
    • The procedures for the allocation of shares or shares in the company resulting from the merger or the merging one;
    • The date on which these shares or units participate in profits;
    • The date from which the operations of the companies participating in the merger are charged to the financial statements of the company resulting from the merger or the merging company;
    • Any treatment reserved for particular categories of members and holders of securities other than shares;
    • The particular advantages eventually proposed in favor of the subjects responsible for the administration of the companies involved in the merger

3rd paragraph: Once drafted, this project must be published in the company register of each company. Alternatively, the project can be published on the website in ways that guarantee the security of the site, the authenticity of documents, certainty of a certain date.

4th paragraph: Between the registration or publication on the Internet site of the project and the date fixed for the decision regarding the merger, at least thirty days must elapse, unless the members renounce the deadline with unanimous consent. The legislator expects 30 days to pass, so members can get information by reading the documentation they take cognizance of how the operation would be set up and eventually consult with their consultants to decide how to behave.

From the decision without 30 days, other documents must be produced between the project and the resolution. The documents to prepare are the following:

    • BALANCE SHEET Article 2501-quater;
    • REPORT OF THE ADMINISTRATIVE BODY Article 2501-quinquies;
    • REPORT OF THE EXPERTS Art 2501-sexies;

Art 2501-septies: The documents must be filed in copy at the offices of the companies participating in the merger, or published on their website, during the 30 days preceding the resolution, unless the shareholders waive the deadline with the unanimous consent. This waiver can be performed during the resolution.

The documents to be presented are the following:

    • The merger plan with the directors’ report, report of the experts where drafted;
    • the financial statements of the last three financial years of the companies involved in the merger;
    • Patrimonial situations where drafted.

With these documents, members have the right to review and obtain a copy for free and upon request by the members the copies must be transmitted electronically.

Once deposited the phase of the MERGER PROJECT closes, which in reality does not concern only the project but all the other documentation that assists the project.

Thus we arrive at the RESOLUTION or MERGER DECISION:

For the SPAs, the rule provides that the extraordinary assembly deliberates with the favorable vote of half unless a higher majority is required, the quorum cannot be lowered. Minority shareholders can be protected by the merger resolution through:

    • THE RIGHT OF WITHDRAWAL is provided only for partnerships and for SRL but not for SPAs; the withdrawal affects the Spa only in case of transformation.
    • PROVISIONAL PROTECTION ONLY FOR SPA QUALIFIED MAJOR CRITERION establishes that if the first call is not approved in the second call, the favorable vote of more than one third of the capital is required. This majority is foreseen for the resolutions related to the transformation and extends to the transformative merger.

The MERGER RESOLUTION produces the effects from the moment of registration in the business register. The doctrine highlights how in reality the act is a formal passage, that is to say an almost due executive behavior, even if it could refuse where there are profiles of responsibility. The law establishes that the withdrawal is for members who have not participated in the resolution of the merger.

It is possible that after the shareholder has exercised the right of withdrawal the merger resolution is cancelled. Therefore, the right of withdrawal does not start from the moment when the deed is registered but when it is decided. Both the recession applies to all types of merger that involve transformation, both on the estimate report, and on the loss of unlimited liability, and on the assumption of responsibility.

Art. 2502-bis, the law establishes that the merger resolutions must be filed for registration in the register of companies together with the merger plan with the directors’ report, report of the experts where drafted; the financial statements of the last three financial years of the companies involved in the merger, the balance sheets where they have been drawn up. With the publication of the documents in the business register, the creditor takes note of the merger transaction and from there the creditors are protected.

Art 2503 c.c .: the creditors that can be protected are those prior to the publicity of the project. The law states that the merger can be implemented only after 60 days of the last registration unless there are 4 exceptional cases, i.e. in some cases it can be stipulated before 60 days that this case is called EARLY MERGE. These hypotheses are:

    • Consent of the creditors of the participating companies, if the creditors give consent before enrollment, the merger will proceed without the 60 days having elapsed;
    • Payment of creditors who have not given consent, at the time they are paid, they lose the right to be creditors;
    • Deposit of sums to be used for creditors at a bank;
    • The report of an expert for all companies is drawn up by a single auditing firm, which assigns with responsibility that the company’s financial and equity situation does not require guarantees to protect creditors.

2nd paragraph: if one of the exceptional hypotheses does not occur, creditors within the 60-day period may oppose and apply 2445, i.e. where the court provides that the opposition is groundless or that the company has provided a suitable guarantee the transaction is executed despite the opposition.

Furthermore, there are two types of ALTERNATIVE MERGE:

    • Simplified merger
    • Aggravated merger

The Simplified Merger (art 2505) is mainly in one case when the acquiring company is wholly owned (the incorporating company owns 100% of the subsidiary). If the parent company holds 100% of the subsidiary, the rule establishes that the exchange ratio, the method of allocating shares and the allocation of profit shares are not applied, nor does the relationship between directors and experts apply. The operation is summarized on a material level in a single thing the cancellation of the shares of the merged company no longer exist and as there is no redistribution or increase, no relationships are required because the exchange ratio is null . In practice, what is called SURROGATION (substitution) is accomplished. This merger produces a substitution with the assets of the merging company because the shares of the merged company are replaced with the assets of the merged company.

This discipline can be applied in all those cases where the exchange ratio is irrelevant and precisely cannot give rise in that case to the change in the shareholdings of the members. It can be verified:

    • INVERSE MERGER: it is usually the incorporated parent company that eats the acquiring daughter but there are cases in which it is the incorporated daughter company that eats the incorporating parent company. This happens when the assets of the parent company are contained in the daughter company. Instead to reinstate the assets to the parent company, a reverse merger takes place. The remaining company will be the daughter who will have to distribute the shares to the parent company but there is essentially no exchange ratio because the balance of power remains unchanged there is substantially an allocation of the shares material because the proportions of the shares despite intervening the merger the proportion of members does not vary. In this merger, he realizes the hypothesis of simplified merger and applies that discipline. Thesis supported by the doctrine and also by the Maximima del Triveneto.
    • MERGER OF COMPANIES OWNED BY THE SAME MEMBERS IN THE SAME PROPORTIONS: It is assumed that there are 2 Alpha companies with 2 partners holding 75% and 25% of the shares, Beta composed of two members owning 75% and 25% respectively, if they decide to merge the exchange ratio is null because the shareholders maintain the same proportions on the shares.
    • SIMPLIFIED MERGER FOR THE WILL OF MEMBERS: Members can renounce everything, that is to documents, to the administrative body, to the expert report, but the only thing that cannot be renounced is the exchange ratio because it is mandatory. In order for this merger to take place, a resolution is required with the unanimous consent of all the subjects.
    • MERGER BY INCORPORATION OF 90% OWNED COMPANY: Art 2505-bis where the need is to diminish the shareholder who owns 10% of the shares. The law states that the parent company that merges with the subsidiary and the subsidiary, however, owns 90% because there is actually someone in the subsidiary who holds something the exchange ratio should be there because the subsidiary has the right to have something. If the project provides for the possibility for the shareholders of the acquiring company to acquire the shareholdings of the shareholder who owns less than 10% (to have the minority shareholder acquire the right of option), he will obtain 100% of the amount that is witch of the recess. If this logic is implemented on the one hand, the minority shareholder’s interest is disassociated because it counts little and cannot prevent the operation but on the other hand the only possibility granted is the exit of the company giving as a consideration the withdrawal therefore an economic protection, thus favoring the realization of the operation. The second paragraph of the law states that the bylaws may provide for the possibility that the merger by incorporation of a 90% owned company is decided by the administrative body is adopted this delegation because it is considered a management and not necessarily deliberative act of the assembly as long as they are respected the conditions of Article 2501-septies and that the publicity of the project is made at least 30 days before the merger date. In order to protect the shareholders, the rule provides that the shareholders of the merging company (minority shareholders) that the decision is made by resolution through the meeting preventing the directors from proceeding autonomously.

The aggravated merger also called a debt consolidation is a rather unusual merger. This type of merger occurs when a company decides to buy another company but does not have the money to complete the operation and is funded by a bank. Subsequently the new company merges with the old one at that point the payment of the debt of the financing institution will take place using the assets of the old company. This is the debt merger and the target company is also referred to as an embedded target company. This operation is carried out by leveraging the assets of the merged company. It is expected:

    • The project must indicate the financial resources required to meet the obligations of the companies resulting from the merger;
    • The report of the administrative body must indicate the reasons justifying the operation and contain an economic and financial plan with an indication
  • sources of financial resources and the description of the objectives to be achieved.
    • The expert report must acquire the reasonableness of the statements contained in the project which are those contained in the financial report.
    • A report must be attached to the project by the person in charge of the Legal Audit of the Target company.

The documentation required by the debt consolidation is mandatory.

We have arrived thus in the merger act:

Art 2504 c.c .: After having drawn up the project, drafted the documents and filed them, the resolution and the related documents have been approved and transcribed and 60 days have elapsed and no one has opposed the MERGER ACT.

The merger act is a contract that is made by public deed drawn up by the directors of the companies that intend to merge.

Art 2504-bis: The merger deed produces the effects since the last registration of the deed is affixed to it, which must be entered in the register of companies of all the companies involved in the merger. These inscriptions have the effect of constitutive advertising. The merger deed technically is a contract signed by the administrative bodies of the company. It is a real agreement that carries out a modification of the deed of incorporation where the legal relationships of the companies are set up, which in implementation of the decisions implement the merger. The law states that the company resulting from the merger or the merging company assumes the rights and obligations of the companies involved in the merger by continuing its relations. This is the principle of continuity of financial statements, i.e. when the company is merged its financial statement values ​​must be translated into the company without inventing different data.

Division or Demerger:

The demerger is a symmetrical operation to the merger, in the sense that while the Merger creates a grouping of companies, the Demerger creates a dismemberment of the company that is the split-off company. The definition of demerger is contained in art. 2506 c.c. and it can be deduced that the division can be:

    • TOTAL the division assigns the entire assets to several companies, if a total division is implemented, the assets must be at least assigned to 2 other companies because at least 2 other companies must be born from a company. The total division can be:
  • Strict: if the beneficiary companies are newly established;
  • By incorporation if the companies eligible are pre-existing.
    • PARTIAL when a company allocates part of its assets, it is possible that only one branch of the assets is divided to another company and the members of the demerger remain such while the partners of the beneficiary company become both the old members of the beneficiary company plus the shareholders of the spun-off company which will now also become shareholders of the beneficiary company. The company which assigns a portion of the assets is defined as the beneficiary company. Even the partial one can take place by incorporation or strictly speaking.

The fact that the beneficiary company assigns its shares to the shareholders is an imperative element of the division and makes this operation different from the spin-off.

The spin-off occurs when the company that wants to split, the division rather than proceed with the partial demerger operation takes the branch and confers it in another company.

The differences between divisions and spin-offs are:

  • From the subjective point of view, the company itself will become a member of the transferring company, which will subscribe the increase and not the shareholders of the conferred;
  • Being a conferment it is necessary to take advantage of the expertise instead in the division it is not said that there is necessity that depends on case by case.
  • Being a transfer involves the transfer of assets with all the fiscal, civil and planning consequences while the demerger is a modification of the deed of incorporation do not apply all those rules.

The division has the function of allowing the separation both at the level of patrimony (OBJECTIVE DISSEMINATION) and to make a separation at the level of members (SUBJECT DEPARTMENT) all this allows to avoid the double passage of the liquidation of the division and the establishment of the new company between the same and if in the event of a partial demerger, the capital should first be reduced by the assignment of assets and subsequently conferred and constituted in another company. In fact the norm

foresees (3rd paragraph) that in the event of a complete demerger, the dissolution is carried out without liquidation if its activity is continuous.

The demerger does not involve any transfer. Even if the principle of continuity is not explicitly mentioned, the prevailing doctrine holds that the same considerations of transformation and merging are valid for the division, i.e. there is no transfer, there is no succession, there is no extinction of society. The beneficiary company to which part of the assets is assigned carries out a continuation of the activity that was previously carried out by the demerged company, which likewise continues its activities by identifying itself in part with the beneficiary company.

As in the case of merger, the splitting operation can give rise to a transformation, in this case it is called a transformative division. For the beneficiary company, there is no transformation but it involves the transformation of only the spun-off company. For example, if a spa divide partially in favor of a company, the division does not involve a transformation for srl but for the spa. The demerger that involves transformation applies not only the discipline of the division but also that of the transformation: on the relationship of esteem of the assets, on the unlimited liability of the members in case it divisions into partnerships, on the right of withdrawal.

At the time of the spin-off, if the shares of the beneficiary company are assigned to the members of the demerger in proportion to the shares of the share capital, this is referred to as proportional division.

It is possible that the shares of the beneficiary will be allocated to the members of the demerger in a non-proportional measure which includes:

    • Non-proportional division
    • Asymmetric or subjective division

Non-proportional division (Article 2506-bis 4th paragraph) means non-proportional legal and non-economic proportion, in the sense that it is not proportional to the assignment in the beneficiary companies, but the distribution of the total values ​​that takes place through the division respects a principle of economic proportionality. The non-proportional economic division is not admissible because it hides the transfer, the donation of participations to the members. There is a non-proportional juridical division when all the members of the demerger are holders of shares of the beneficiary company only that these proportions do not take place with the same proportion of departure. It should be noted that non-proportionality only concerns participation in individual beneficiaries and that the lower proportional shareholding in a company must be offset by a greater proportional participation in another company. The non-proportional division can be resolved by a majority but in case of disagreement the corrective of the right of withdrawal is foreseen (individual right to leave the company) by buying shares to someone who must be indicated and the exit price must be equal to market power. So the rule in the case of violation does not provide for a right of veto i.e. I do not give you consent but an economic right in case the member does not agree. This right can be waived with the unanimous consent.

Asymmetrical or subjective division (Article 2506 2nd paragraph): Asymmetric division is understood to mean that it is permitted with unanimous consent that some shareholders are not allocated shares or shares of the beneficiary company but only of the demerger. There is talk of a partial division in the norm because it talks about shares or shares of the spun that are assigned. With this type of demerger to the demerged company rather than assigning shares of the beneficiary company, the participation of the demerger is increased. The unanimous consent of all the members is required because for the various partners their position is being deconstructed not only their position to vary but the participation in some companies is being deprived.

ESSENTIAL element for the non-proportional and asymmetric division is economic neutrality, ie it does not matter if the participation is proportional in each company or if the participation is more in one or the other but what matters is that it is proportional to the starting point, there is a different distribution of the company, if it is not economically neutral, there is talk of non-economic proportionality that is not admitted.

Negative division: consists of assigning negative assets. That is, it is possible in the event of a demerger by incorporation while it cannot be adopted in the event of a proper demerger, i.e. with the establishment of a new beneficiary company in which case it may be treated as a loss or is offset against the beneficiary’s reserves and re-evaluate when it falls below 1/3 of the capital.