Abstract
This chapter will address the main legal issues in structuring, establishing and placing interests in Italian venture capital investment schemes with domestic and international investors. Some initial remarks will help clarify the main focus of this work and its underlying options.
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Although the chapter is based on a strict cooperation between the two authors, paragraphes from 3.2 to 3.5.9 is attributed to Jonathan de Lance Holmes and paragraphes from 3.6 to 3.9 to Enzo Schiavello.
Only capital gains could be distributed without any time restriction during the funds’ life.
EC Directive 90/435. As applied to the investment schemes considered here, this Directive may enable corporate EU investors to earn capital gains and other investment income with virtually no taxation in the jurisdiction of the distributing corporate vehicle and in their own jurisdiction.
An analysis of the current regulation of Italian closed-ended funds will be provided in paragraph 3.7 below.
In relation to the capital requirements that licensed management companies (socalled SGRs) must meet.
Due to the need to obtain an autorization from the Bank of Italy.
The Italian association of the firms involved in the investment industry (Associazione Italiana degli Investitori Istituzionali nel Capitale di Rischio).
For instance, large corporates and high net worth individuals were not included.
See footnote 4.
Regulatory powers were also delegated to CONSOB, but these are of no relevance here.
These are intended to supplement the minimum contents set out by section 39.2 of Legislative Decree 58/98.
The contents and general criteria to be followed in the drawing up of fund documents — as set forth by the Bank of Italy Regulations of 1 July 1998 — are to some extent influenced by certain provisions of Law 344/93 which ceased to have effect only when new rules were issued by the Ministry of Treasury and the Bank of Italy in 1999 under Legislative Decree 58/98. Hence, the rules dealing with fund documents set forth by the Bank of Italy Regulations of 1 July 1998 and the rules subsequently issued by the Ministry of Treasury and the Bank of Italy do not appear to be perfectly co-ordinated. These latter rules should prevail in the event of any inconsistencies, as indirectly confirmed by a release of the Bank of Italy dated 14 September 2001 which is commented on in paragraph 3.7.3.
Indeed, these funds may derogate frrom the prudential rules on risk limitation and diversification established by the Bank of Italy — see the Ministry of Treasury’s regulatory powers under paragraph 3.7.1.
These distributions are effected through a pro-quota reduction in the investors’ interests in the fund whereas capital gains are payable to investors as distribution of fund income.
See Section 14.2 of the Ministry of Treasury Decree no. 228 of 24 May 1999.
See the Bank of Italy Regulations of 1 July 1998, point 12.
See the Bank of Italy Regulations of 1 July 1998, points 9.1 and 9.2.
See section 36.8 of Legislative Decree 58/98.
Individuals declaring to have specific competence and experience in securities transactions are required to undertake a commitment amounting to not less than Euro 250,000.
See footnote 12.
See footnote 7.
Converting into law decree-law no. 351 of 25 September 2001.
See article 11 of Law 344/93 as amended by article 8, paragraph 3, of legislative decree no. 461 of 22 November 1997 and legislative decree no. 505 of 23 December 1999 as amended by law no. 342 of 21 November 2000.
These costs are substantially reduced in respect of the SGRs governed by the Bank of Italy Regulations of 23 July 2001 (see paragraph 3.7.3).
The approval process can take up to 4 months from filing of the fund documents with the Bank of Italy — see section 39.3 of Legislative Decree 58/98.
Fonds communs de placement à risque bénéficiant d’une procédure allégée.
The Commission des Opéerations de Bourse.
To be made in accordance with the rules set forth by the Bank of Italy.
See section 36.8 of Legislative Decree 58/98. In recent instances the Bank of Italy has interpreted this requirement in a more liberal fashion, de facto allowing the creation of fund interests carrying different rights for the managers. Yet it is not certain that these fund interests will enjoy the same tax treatment as those in the investors’ hands.
Contained in section 31.2 of CONSOB Regulations No. 11522 of 1 July 1998, as amended implementing section 30.2 of Legislative Decree 58/98.
For example, individuals qualify as professional investors solely if they are able to document that they meet the competence requirements set forth by the Ministry of Treasury Decree no. 468 of 11 November 1998 to hold the position of director, executive or auditor within a licensed investment firm, whereas they are treated as qualified investors whenever they declare in writing to have specific competence and experience in securities transactions.
The contractual documents must include a notice indicating this right of the investors. Failure to include this notice gives investors the right to claim that the agreements are null and void.
This requirement does not apply when contacts are made by mail or other means of communication not allowing customized communication and immediate interaction with investors — see section 76 of CONSOB Regulations No. 11522 of 1 July 1998, as amended.
These include investment firms and banks licensed to place securities in Italy as well as EU investment firms and banks licensed to place securities in their own jurisdiction and enabled to carry out this business in Italy under the rules implementing the applicable EU Directives on the so-called single passport.
Also provided are the definitions of mutual investment funds which are respectively “open” and “closed” illustrated in letters k) and 1) of said section 1.1. The former is “a mutual investment fund whose participants have the right to request, at any time, redemption of the units pursuant to the procedures established by the rules of the fund”. The second is “a mutual investment fund in which the right to request redemption of the units may be exercised by participants solely at predetermined maturities”.
Under Legislative Decree No. 86 of 27 January 1992 (repealed by Legislative Decree 58/98) an authorization procedure was required in respect of any offer to the public in Italy of “shares or units of undertakings for collective investment on transferable securities” not falling within the scope of EU Directives. These undertakings are broadly defined by Directive 85/611 and encompass all types of statutory or contractual vehicles carrying out such business.
Approximately Euro fifty million.
All transactions relative to the same issuer effected in the preceding twelvemonth period are taken into account to establish whether the relevant amounts are exceeded.
CICR (or Comitato Interministeriale per it Credito e it Risparmio) is a governmental committee endowed with supervisory and regulatory powers on banking matters.
Supervisory Guidelines for banks issued by the Bank of Italy — see Title IX, Chapter I, Section I, paragraph 3 (April 1999/January 2002).
See this paragraph 3.8 above for a definition of these terms.
Pursuant to the Istruzioni di Vigilanza these shares are exempt from the notification requirement (and outside the scope of the Bank of Italy’s powers) discussed above if the relevant undertakings for collective investment have been authorized under section 42.5 of Legislative Decree 58/98.
Under certain conditions, after completion of the relevant transaction a notice is due to the Bank of Italy merely for statistical purposes.
This requirement is set forth by section 106 of Legislative Decree 385/93 and applies to a number of financial activities including the acquiring of equity holdings which — as set forth by a decree of the Ministry of Treasury dated 6 July 1994 — is aimed at their later divestment and is characterized, in the holding period, by “measures aimed at business reorganization or product development or meeting the financial needs of investee companies also by resort to third parties’ equity funds”.
This requirement is set forth by section 107 of Legislative Decree 385/93.
Commission 97/C 209/04 published in the EU Official Gazette no. 209, of 10 July 1997.
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Schiavello, E., de Lance Holmes, J. (2004). Legal Issues for Italian Venture Capital Investment Schemes. In: Caselli, S., Gatti, S. (eds) Venture Capital. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-24829-3_14
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DOI: https://doi.org/10.1007/978-3-540-24829-3_14
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