Chapter 1: Introduction to Italian Business Law, University Presentation

History of Italian Business Law

CHAPTER 1: INTRODUCTION HISTORY OF ITALIAN BUSINESS LAW

• 1942 Rocco Code (civil + commercial law)

  Codice Civile is composed of 6 "books":

  1. individuals and families;
  2. successions;
  3. property;
  4. obligations and contracts
  5. work and rules on governing enterprises and companies;
  6. protection of rights
• 1974 institution of CONSOB (commission for companies and the stock exchange);
• 1998 TUF (Testo unico delle disposizioni in materia di intermediazione finanziaria);
• 2003 reform for international competitiveness (D.L. 6 del 17/1/2003 - "Riforma del diritto societario").

Introduction to the Business Chain

SLIDES (1) INTRODUCTION The Business Chain has 3 components:

• the subject: the entrepreneur/ partnership/ company
• the business means: the azienda
• the economic activity: production or exchange of goods and services

Competition Law Overview

SLIDES (2) COMPETITION LAW Objective: competition law promotes and ensures optimal market functioning by regulating competition and preventing anti-competitive practices by companies. Although directed at companies, these laws benefit both companies and consumers.

Regulatory Authorities in Europe

• National Authorities: Italian Competition Authority (AGCM: Autorità garante della concorrenza e del mercato)
• European Commission: Handles cases involving transnational businesses within the EU

Relevant Market Types

1. Product Market: producers of identical or similar products or services that compete with each other.
2. Geographic Market: Defined by cases where businesses operate within specific geographic areas.
3. Time-Related Market: Applies when the temporal dimension is crucial to defining the relevant market.

Market Share: represents the percentage of total purchases of a product or service attributed to a single company.

Abuse of Dominant Position

While there are no laws prohibiting monopolies outright, laws prevent the abuse of a dominant market position. Definition: a dominant position is defined as an economic strength that grants power over other companies and consumers, allowing independent action to a significant extent.

• Art. 103, TFEU (Prohibition): A position of economic strength that enables a company to prevent effective competition in the relevant market and behave independently of competitors and consumers.
• Quantification: Typically involves a market share exceeding 50%. For shares below 50%, additional factors are considered to assess dominance.

Anti-Competitive Agreements

Anti-competitive agreements are arrangements, often unwritten, between two or more companies aimed at gaining market advantage.Horizontal Agreements: Between companies at the same production and distribution level. Vertical Agreements: Between companies at different levels of the production and distribution chain.

Competition law targets specific anti-competitive behaviours:

1. Prohibition of Anti-Competitive Agreements (collusions and cartels).
2. Prohibition of Abuse of Dominant Position (dominance and monopoly, but not the position itself).
3. Control of Concentrations (mergers and acquisitions).

These objectives are governed by Articles 101 and 102 of the TFEU (Trattato sul funzionamento dell'Unione europea) and Regulation EC No. 139, issued on January 20, 2004.

Anti-Competitive Agreements Prohibited by Art. 101

Art. 101, 1(a): Production limits or output restrictions. Art. 101, 1(b): Price-fixing. Art. 101, 1(c): Market sharing.

Exemption (Art. 101, 3): An arrangement may be exempt if it:

• Improves production, distribution, or technical/economic progress.
• Provides consumers a fair share of resulting benefits.
• Imposes only indispensable restrictions for achieving these goals.
• Does not allow elimination of competition in a substantial part of the affected goods or services.

Single and Collective Dominance

In certain markets, particularly oligopolistic ones with few players, collective dominance may occur.

Concentrations (Art. 3, EUMR - European Union Merger Regulation)

Note: The TFEU does not directly regulate concentrations; they fall under Regulation 139/2004/EC Definition: Concentrations occur when two or more previously independent companies (or parts thereof) merge, or when control of one or more companies is acquired directly or indirectly (through securities, assets, contracts, or other means).

Concentration Procedure

When a concentration has a Union dimension, it must be notified to the European Commission, which must make a decision within 25 working days.

First-Phase Decision: The concentration does not fall within the regulation's scope and raises no serious doubts regarding compatibility with the internal market -> Resolution.

• If there are serious doubts about compatibility with the internal market -> Second-Phase Decision.

Entrepreneur Definition and Law Sources

SLIDE (3) ENTREPRENEUR

Law Sources

1. CCI: Italian Crisis Code (Codice della Crisi d'Impresa)
2. CPC: Code of Civil Procedure (Codice di Procedura Civile)
3. IR: Issuers' Regulations (Regolamento Emittenti)
4. TUF: Consolidated Law on Finance (Testo Unico della Finanza)

Definition of Entrepreneur: an entrepreneur is defined as a person who "professionally carries out an organised economic activity for the purpose of producing or exchanging goods or services" (Article 2082, Civil Code). This activity must be conducted with economic efficiency, organisation, and professionalism, all of which must be objectively apparent externally.

Distinction: The entrepreneur differs from companies and partnerships, which are forms of collective enterprise.

Requisites of the Entrepreneur

1. Activity (# activities of mere enjoyment), that must aim at the production or exchange of goods and services. The entrepreneur must perform a coordinated series of acts, both legal and material, linked by a unitary function.
2. Economicity Revenue from the sale of produced goods or rendered services must at least cover the costs incurred. The activity must be directed to the market.
3. Organisation The entrepreneur must coordinate elements for production, namely capital and labour, and holds directive power over employees.
4. Professionalism he entrepreneur must perform the productive, economic, and organised activity with professionalism (habitually, though not necessarily continuously or exclusively).

Distinction: Entrepreneurs # Intellectual Professionals (who exercise intellectual professions requiring registration in special registers as per Art. 2229).

Types of Entrepreneurs by Activity

(CLASSIFICATION) Types of Entrepreneurs By Activity: Agricultural / Commercial

Agricultural Entrepreneur (defined by Article 2135, Civil Code): Engages in one of the essential (or main) agricultural activities, such as: Cultivation of land; Forestry; Animal farming and related activities; Activities directed at the care and development of a biological cycle or one of its phases

Specific Rules for Agricultural Entrepreneurs

• Must register in a special section of the companies register (declaratory effect).
• Exempt from insolvency procedures like "concordato preventivo" (Art. 84 et seq., I.C.C.) and judicial liquidation (Art. 121 et seq., I.C.C., replacing bankruptcy).
• Access other procedures to manage over-indebtedness crises.
• Exempt from keeping accounting records (Art. 2214 et seq., Civil Code), although some tax-related requirements apply.

Commercial Entrepreneur (as per Article 2195, Civil Code): Engages in activities such as: Industrial production of goods or services Intermediation in goods circulation Transport (land, sea, air) Banking or insurance Ancillary activities

Types of Entrepreneurs by Business Size

By Business Size: Small / Medium-Large

Small Entrepreneurs (Art. 2083 are): Farmers (small agricultural entrepreneurs); Artisans (craftsmen); Small traders (small commercial entrepreneurs); Those mainly relying on their own or family labour

Specific Rules for Small Entrepreneurs

• Not required to register in the Companies' Register; if they do, it is with an informative effect.
• Exempt from accounting records, even if conducting commercial activities.

Minor Enterprise: Defined by the Italian Crisis Code as one with: Annual assets not exceeding EUR 300,000 for three consecutive years Revenue not exceeding EUR 200,000 within the same period Debts not exceeding EUR 500,000 (including non-due debts) Exempt from insolvency procedures.

Types of Entrepreneurs by Ownership

By Ownership Type: Individual / Collective; Private / Public

Third Sector Organizations

Third Sector (Terzo Settore) Organizations Regulated by Legislative Decree No. 117 (3 July 2017). Includes: Voluntary organisations, social promotion associations, philanthropic organisations, social enterprises (including social cooperatives), mutual aid companies, foundations, and other private organisations (non-corporate), all aimed at socially useful purposes through activities of general interest. Profit distribution is prohibited.

Criteria for Acquiring Entrepreneurial Status

1. Formal Criterion: Using one's name in business activities confers the status of entrepreneur. However, this alone is insufficient to address abuses where enterprise activity and attribution are disconnected.
2. Substantial Criterion: The person for whose benefit the business is conducted is the entrepreneur, regardless of their external representation as owner.

Theories of Entrepreneurial Status

Two Theories

• Hidden Entrepreneur Doctrine: If other partners with unlimited liability are discovered after a company's bankruptcy, bankruptcy proceedings extend to them. However, courts require proof of a corporate link to justify this extension.
• Flanking Enterprise Doctrine: Activities by a hidden entrepreneur for a primary enterprise could create a secondary enterprise, entitling the hidden entrepreneur to be declared bankrupt if the flanked enterprise becomes insolvent.

Requisites for Incapacitated Persons

If a person cannot legally perform acts (e.g., minors, interdicts, or incapacitated persons):

• Business may continue under guardianship, with court authorization. The guardian may appoint an agent if necessary.
• For minors and interdicts, Article 320 prohibits acts, with business conducted by the parent or guardian, subject to court authorization for extraordinary acts.

Incompatibility for Business Activity

Incompatibility Certain roles (e.g., state employees, lawyers, notaries) prohibit business activity due to office or profession. Violations incur administrative sanctions and aggravated criminal penalties for bankruptcy in cases of judicial liquidation (Art. 322, I.C.C.).

Beginning and End of an Enterprise

Formal Rule: Begins and ends with registration and cancellation in the commercial register. Effectiveness Principle: Commencement and termination align with the first act performed and the cessation of activity.

Intellectual Property Rights

SLIDES (4) IP RIGHTS

Distinctive Signs: enable market identification of an entrepreneur

• are governed by the Industrial Property Code (Legislative Decree No. 30, 10 February 2005).

General Principles for Distinctive Signs

1. Exclusivity Principle: Exclusive rights are granted to the sign holder.
2. Relativity Principle: Exclusive use is generally limited to the sector and territory of the entrepreneur's activity, except for well-known trademarks.
3. Freedom of Choice Principle: The sign must meet truth, novelty, and distinctiveness requirements.
4. Transferability Principle: Signs may be transferred, provided it does not mislead consumers.