Art. 6 Law Decree of 8 April 2020, no. 23: notarial maxims and interpretative clarifications.
The Interregional Committee of the Tre Venezie Notarial Councils has recently provided clarification and guidance on the interpretation of Article 6 of the Liquidity Decree which introduced exceptions to the Civil Code provisions on the compulsory reduction of share capital and the dissolution of joint stock companies in the event of losses arising in the current financial year as of 31 December 2020 until the end of the fifth subsequent financial year: the article has generated some doubts of interpretation.
In particular, the Inter-Regional Committee of the Tre Venezie Notarial Councils has published six maxims on the nature (T.A. 1), the time frame (T.A. 2), the assessment (T.A. 3), and the cause (T.A. 11) of the losses covered by this provision, the accounting documents to be submitted to the shareholders’ meeting (T.A. 4) and the limits on the applicability of the suspension (T.A. 12).
As is known, Article 6 of the Law Decree of 8 April 2020, no. 23 (so-called “Liquidity Decree“), as amended by Article 1, paragraph 266, of the Law of 30 December 2020, no. 178 (so-called. “Budget Law 2021“), with the rationale of mitigating the negative effects caused by the Covid-19 outbreak, introduced some novelties within the framework of the regulations provided by the Civil Code in corporate matters, providing for derogations from the “ordinary” regulations, allowing the “freezing” of losses resulting in the financial year in progress as of 31 December 2020 until the fifth subsequent financial year.
In particular, the legislator provided for the waiver of (i) Articles 2446, paragraphs 2 and 3, 2447, 2482-bis, paragraphs 4, 5 and 6, and 2482-ter of the Italian Civil Code, concerning the reduction of capital for losses and the reduction of share capital below the legal limit (ii) Articles 2484(1), paragraph 4), and 2545-duodecies of the Italian Civil Code, on the dissolution of the company due to the reduction of the share capital below the legal minimum; (iii) Articles 2446(2) and 2482-bis, paragraph 4), of the Italian Civil Code, postponing the deadline by which the loss must be reduced to the fifth financial year following the one in progress on 31 December 2020.
Said Article 6 also provided that in the cases referred to in Articles 2447 and 2482-ter of the Civil Code, the shareholders’ meeting convened without delay by the directors may resolve to postpone decisions on the reduction of capital and the simultaneous increase of capital to an amount not less than the legal minimum within the end of the fifth subsequent financial year.
The Interregional Committee of the Tre Venezie Notarial Councils clarified in its T.A. 1 that the criterion for triggering the rule is financial and not capital. This means that the losses subject to suspension are the operating losses, i.e. the negative economic result of a single financial year (the one considered “anomalous” due to the Covid emergency), gross of any reserves able to offset or reduce it. It follows that the amount of losses subject to freezing is the total amount of losses shown in the profit and loss account of the financial statements for the year ending on 31 December 2020 and not only that part of losses affecting nominal capital as not absorbed by any equity reserves.
Notarial maxim T.A. 2 states that the time period taken into account by the rule, although coinciding for all companies with a single business year, is not the same for each of them but depends on the individual statutory choices on the date of the end of the business year. In particular: (i) for companies whose financial year coincides with the calendar year, the “frozen” losses are those arising in the period from 1 January 2020 to 31 December 2020; (ii) for companies whose financial year ends on 30 June each year, the “frozen” losses are those arising in the period from 1 July 2020 to 30 June 2021; (iii) for companies whose financial year ends on 30 April, the “frozen” losses are those arising in the period from 1 May 2020 to 30 April 2021.
With respect to the determination of losses subject to “freezing”, T.A. 3 explains that directors who are called upon to determine the net balance sheet, in order to ascertain whether the share capital has been reduced by more than one third, before the end of the financial year ending on 31 December 2020, must draw up interim financial statements in which the losses arising in that year (even if not yet closed) are identified separately from those arising in other years, and then exclude from the determination of the net balance sheet only the former, gross of any reserves.
A further clarification was provided by T.A. 4, on the accounting documents to be submitted to the shareholders’ meeting in case of losses potentially subject to “freezing”: it is not considered possible to disregard the formal recognition of losses arising during the financial year through the drafting of a specific accounting document, justifying its omission by the fact that they are irrelevant according to law.
Also, T.A. 11 deals with the irrelevance of the cause of losses for the purposes of Article 6 of the Liquidity Decree specifying that “frozen” losses arising in the financial year ending on 31 December 2020 are to be considered all those resulting from the profit and loss account for that year (as shown in accordance with Article 6, paragraph 4) of Law Decree no. 23/2020) regardless of whether they are attributable to the Covid emergency, “core business” or other causes.
Finally, the Notaries stated that the “freezing” of the losses arising in the financial year ending on 31 December 2020 operates exclusively for the purpose of suspending the obligations of capital reduction or recapitalisation provided for by Articles 2446, 2447, 2482-bis and 2482-ter of the Italian Civil Code, as well as the cause of dissolution provided for by Article 2484, paragraph 1, no. 4, of the Italian Civil Code. Consequently, such losses continue to be relevant in the determination of the net balance sheet in relation to the application of all other rules of law. They contribute, for example, to reducing the amount of the net balance sheet in order to identify the limit for issuing bonds pursuant to Article 2412, paragraph 1, of the Italian Civil Code, to allow the distribution of profits ex art. 2433, paragraph 3, Civil Code, to determine the amount of “distributable” or “available” reserves, and to determine the need to supplement the legal reserve.
The opinions of the Inter-Regional Committee of the Tre Venezie Notarial Councils have certainly helped to clarify certain doubts that have arisen with respect to the interpretation of Article 6 of the Liquidity Decree and to provide important application guidelines. However, the first commentators have already expressed the opinion that it is reasonable to foresee that, given the time span of application of the provision (limited to losses arising in the current year as of 31 December 2020) and the continuation of the emergency, the legislator will intervene further to regulate the management of losses arising after that period but still caused by the contingent situation. It remains to be seen how the legislator will decide to act on the rule in question.
The notice to comply and the preliminary contract for the transfer of shares.
The Court of Milan ruled on the validity of the preliminary contract for the transfer of shares and on the conditions for the effectiveness of the subsequent notice to comply transmitted by a lawyer. In the absence of a written power of attorney, the notice to comply is not suitable to produce the termination of the contract that has not been fulfilled.
According to the Court of Milan, Section Specialized in Business Matters (Decision No. 5310/2020), for the creation of a valid preliminary contract for the transfer of shares, it is not essential to indicate fully and in detail all the elements of the future contract, but it is sufficient that the parties agree on the essential elements, i.e. that they indicate:
– the parties;
– the promised good for sale;
– the overall agreed price;
– the deadline for the repetition of the preliminary contract in the notarial form and the deadline for the execution of the final transfer agreement.
Moreover, the Court of Milan pointed out that, in the absence of specific and explicit covenants or guarantees regarding the composition of the company’s assets, the undertaking of the promising seller is accomplished with the mere transfer of the shares to the promising buyer, with the consequence that the promising buyer cannot subsequently complain about the alleged lack of essential qualities of the good promised for sale whenever the size of the company’s assets is different from the expected.
With the same ruling, the Court of Milan also followed up the orientation already expressed by the Court of Cassation (Cass. S.S.U.U. No. 14292/2010 and, more recently, Cass. Section. II, No. 10860/2018) regarding the characteristics that the notice to comply the preliminary contract must have in order to produce the consequent effect of the termination of the contract that has not been fulfilled despite the notice.
In the present case, the notice to comply the preliminary contract for the transfer of shares was sent by the promising seller’s lawyer to the other party, without the explicit mention that the lawyer had received a power of attorney from his client.
According to the Court of Milan, the notice to comply – as a manifestation of a will that takes the form of a unilateral power to influence the contractual relationship – has a negotiating nature and must, therefore, come directly from the contracting party or its lawyer, subject to the granting of a suitable written power of attorney that must be mentioned in the notice (and, according to Cass. Section II, No. 10860/2018, brought to the attention of the other party “by suitable means”).
In the absence of explicit mention of the power of attorney received by the lawyer (not replaceable by generic expressions such as “Mr. … asked my assistance as to…”), the notice to comply sent by the lawyer cannot have the effect of self-protection negotiations, such as that of the termination of the contract, which is recognized only to the contracting party.
In conclusion, in the case of the purchase and sale of shareholdings, it must necessarily be borne in mind that even the conclusion of a private deed still incomplete of all the ancillary elements of the contract is capable of producing the effects of a preliminary contract (being sufficient to that end the mere agreement on the essential elements ) and that, if such preliminary contract ever remains not-fulfilled, the notice to comply must necessarily be signed by the contracting party in person and/or by the lawyer with a written power of attorney expressly referred to and attached to the notice.
The ABI scheme for bank guarantees vs. antitrust law: the case goes to the Joint Chambers of the Court of Cassation?
A judgment of the Joint Chambers of the Court of Cassation is finally expected on the validity of bank guarantees meeting the ABI scheme.
It is noted that in 2005 the Bank of Italy had ascertained that certain clauses contained in the ABI scheme for bank guarantees represent an agreement that restricts competition, where applied uniformly.
The clauses in question are the following:
– Article 2 of the Scheme, according to which the guarantor shall “reimburse the bank for any sums received by the bank itself in settlement of guaranteed obligations and which have to be repaid upon cancellation, invalidity or revocation of such payments, or for any other reason”;
– Article 6, according to which “the bank’s rights under the guarantee shall be enforceable to the full satisfaction of any bank’s claims against the debtor, irrespective of the fact that the bank shall enforce its rights against the debtor or the guarantor or any other debtor or guarantor within the time limit prescribed by Article 1957 of the Civil Code, which shall be regarded as waived;
– Article 8, according to which the guarantee is not affected by any invalidity of the obligation of the debtor towards the bank, specifying that “if the guaranteed obligations are found to be invalid, the guarantee shall nevertheless guarantee the debtor’s obligation to reimburse the sums he has received”.
Over the last years, a considerable case-law has developed in order to establish the rights of bank customers in case of guarantees containing such clauses.
This has led to various interpretations, pursuant to which the client has the right to obtain a ruling on the invalidity of the restrictive agreement and, therefore that he has the right to:
a) claim for a declaration of the complete invalidity of the guarantee;
b) claim for a declaration of the partial invalidity of the guarantee (limited to such clauses);
c) only bring an action for damages.
The Court of Verona (with decision No. 1534 of 6 October 2020) followed a completely different approach to these guidelines, arguing that the antitrust law does not apply to these guarantees.
By Ordinance No. 11486 of 30 April 2021, the First Section of the Supreme Court of Cassation has observed that the issue concerning the validity of contracts resulting from the execution of antitrust agreements has been examined by the Court of Cassation on several occasions, including by its Joint Sections, “although the conclusions adopted were far from being unanimous and no longer sufficient considering the extent to which the issue tends to arise and the many different aspects reached in the last few years”.
That is why the First Chamber has held that the numerous and frequent questions raised in the case-law set out a major issue which is so important as to justify remitting the case to the First President of the Court of Cassation, to assess the conditions for referring it to the Joint Chambers.
More specifically, the First Chamber has held the need that the Joint Chambers determine:
(a) whether or not the total or partial coincidence of the clauses of the guarantee with those contained in the ABI Scheme is grounds for declaring those clauses to be void or only entitles the guarantor to bring an action for damages;
(b) in the first case, what is the applicable rules for an action of invalidity, in terms of the nature of such invalidity and the person entitled to enforce it;
(c) whether or not it is appropriate to declare the partial invalidity of the guarantee, and
(d) whether or not, in addition to that coincidence, the investigation should address the intention of the parties to accept the guarantee anyway, that is to say to exclude a change in the balance of interests resulting from the contract.
Protocol for the digital surveillance of workers signed on 22 April 2021.
Following the pandemic and the consequent overwhelming and sudden increase in the use of smart working, the issue concerning the remote monitoring of workers has once again become an important topic of discussion. Moreover, it is the same regulation governing “flexible work” that refers to the need to regulate “the exercise of the employer’s power to control the activities performed by the worker outside the company premises in compliance with the provisions of Article 4 of Law No. 300 of 20 May 1970” (Article 21 – Law 81/2017).
Even with regard to on-site work, especially the activities performed “in a factory”, the matter is very current due to the use of technological tools aimed to limit contagion, to ensure distancing and/or contact tracing, including applications to be installed on wearable mobile devices or smartphones (so-called wearable technologies).
The national agency for surveillance in the field of labour and social legislation (Ispettorato Nazionale del Lavoro – ‘INL‘) and the Data Protection Authority (‘Authority‘) sought inspiration from the current social and economic context to sign a memorandum of understanding (‘Protocol‘) on 22 April 2021 aimed at launching a strategic cooperation between the two entities. Also, since it is likely that many of the newly adopted technological tools will continue to be used even after the emergency.
In fact, for the past few years albeit, from different but strongly connected perspectives, both the INL and the Authority have had to face the challenges resulting from the acceleration of digitalisation processes in the organisation of work.
Starting from the provisions of Article 4 of Law 300/1970 (“Article 4 of the Workers’ Statute“) – entitled “Audio-visual systems and other control instruments”, which imposes a ban on controls from remote on employees’ work activities – for some years there has been a strong need for a reform that considers the increasingly widespread technological innovation in the working world. This led to Legislative Decree 151/2015 which, among other things, by addressing Article 4 of the Workers’ Statute, partially extended the possibility of using technological tools in the workplace, provided they meet clearly identified needs and comply with precise conditions.
Briefly, the employer may legitimately install and use audio-visual systems and other tools that may also be used to remotely monitor workers’ activities:
(i) only if justified by organisational and productive requirements, work safety and protection of the company’s assets;
(ii) subject to adequate information to the employee and always in compliance with the legislation on the protection of personal data (EU Reg. 679/2016);
(iii) provided that a trade union agreement is reached (with the RSA or RSU, if any, or with the most representative trade unions at national level) or, in the absence of a trade union agreement, subject to authorisation by Labour Inspectors (Territorial or National, depending on the location of the production units concerned).
Therefore if geolocation systems installed on company vehicles for security reasons (e.g. for employees who must go for work in isolated or remotely accessible places) can be legitimate if agreed upon and authorised as mentioned above, there is no reason why INL should deny the existence of a need for workers’ safety in the employer’s request to wear a geolocation bracelet which vibrates if one or more colleagues violate the distancing rules stated in the protocol shared between the Government and Social Partners containing the “measures to limit and contain the spread of COVID-19 in the workplace.
Similarly, with regard to smart working, it is evident that a working method based on greater flexibility in the choice of space and working hours, through tools that enable working from remote – hopefully with more accountability for results – requires a particularly careful examination of the functions of the technological tools used when these can incidentally allow the employer a digital surveillance of the employee’s activities.
The issue is even more topical in view of the recent EU recommendation requiring Member States to provide for practical arrangements to ensure that employees can exercise their right to disconnect from technological tools and IT platforms, by setting up an objective, reliable and accessible system which allows the daily working time performed to be measured, avoiding employer retaliation (see also Article 2, paragraph 1b, Law no. 61/2021).
Attention: while on the one hand the use of an application that merely records the connection and disconnection of the employee working remotely may be considered lawful, the opposite conclusion would have to be reached if the same application also permitted the recording of the activities performed.
In fact, Article 4 of the Workers’ Statute itself provides for the legitimate use of those ‘instruments used by the worker to perform work’ and those ‘to record access and attendance‘, without the need for prior agreement or administrative authorisation. Put simply, it is legitimate to install an instrument that is necessary for the worker to work.
On the other hand, in order to limit the risk of misuse of employers’ technological tools justified by the fact that a given technology is simply useful to perform the work (e.g. PC, tablet, smartphone), the Ministry of Labour was quick to clarify that changes were not allowed (e.g. by adding location or filtering software). Otherwise, the prior trade union agreement or prior ministerial authorisation continues to be a condition of lawfulness for their installation (Press Release Ministry of Labour dated 18 June 2015).
Given the complementary and synergistic competences of ITL and the Authority in the field of digital surveillance of workers, with the recently signed Protocol the two entities have committed themselves to:
– adopt shared guidelines;
– cooperate and provide consultancy on issues falling within their respective competence;
– to organise periodic meetings, even from remote, on matters of common interest, at least every six months;
– promote joint information campaigns and training activities, with a view to share and disseminate good practices and prevent processing of personal data that do not comply with data protection regulations and regulations on remote monitoring of workers;
– identify opportunities to remain updated on issues of common interest, also through distance learning.
Joint measures by the ITL and the Authority will undoubtedly be useful to support employers in distinguishing the often, uncertain boundary between lawful and unlawful conduct when it comes to the use of technological tools for work performance. In the meantime, it is worth pointing out that, in the absence of lawful conditions provided by the labour and personal data protection rules, the installation of devices which may incidentally result in the monitoring of work activity is unlawful and criminally sanctioned.
The representative office of a foreign company is not a withholding tax agent.
In the absence of a permanent establishment in Italy, non-resident companies are not required to apply the withholding taxes on payments made to their employees in Italy. Such principle has been expressed in the Ruling of the Italian Revenue Agency, no. 297 of April 27th, 2021.
Ruling no. 297 of April 27th, 2021 clarified that the salary received by an employee assigned to an Italian representative office of a foreign company is not necessarily subject to withholding tax.
The aforesaid conclusion is in line with previous administrative guidelines (see note no. 12/649 of July 8th, 1990, answer to ruling no. 312 of July 24, 2019 and answer to ruling no. 379 of September 11, 2019) indicated by the Italian Revenue Agency.
Indeed, art. 23, paragraph 1 of Presidential Decree no. 600/1973 also includes foreign companies in the list of the Italian withholding agents.
However, as specified in the Circular letter of the Ministry of Finance no. 326 of December 23rd, 1997, non-resident companies and entities qualify as withholding agent only when the relevant income is paid by their permanent establishment or a fixed base in Italy.
The conclusion is based on the theory of lack of territoriality of such compliance obligation.
Therefore, it results that in the absence of a permanent establishment, foreign companies are not required to operate withholding taxes on the sums paid to their employee in Italy.
However, in line with the principle expressed by the Italian Revenue Agency with the guideline no. 8 of February 12th, 2019, if the non-resident entity intends to operate the withholding taxes on the salary paid to its employee in Italy – and in fact the entity applies them – it will be consequently required to fulfill all other formal and substantial obligations connected therewith.
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