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It is estimated that there are about 8,000 companies in Italy whose capital is owned by public administrations (State, Regions, Provinces, Municipalities, etc.…).

Ultimately, the need for spending review has led the Italian Government to intervene (again) in this sector of the Public Administration, by issuing Legislative Decree No. 175/2016 (“the Decree”), which follows other reforms promoted by Minister Marianna Madia pursuant to Law No. 124/2015.

The Decree aims at regulating the participation of public administrations in the share capital of companies, in order to rationalize the number of public companies and make sure that they are duly managed.

First of all, as a general rule, public administrations are not allowed to create companies, or purchase shares in companies, directly or indirectly, whose corporate purpose is not strictly related to their institutional tasks (Art. 4.1). This means that, for example, a municipality is not allowed to hold shares in a corporation that produces sugar.

Moreover, the Decree specifies the kind of activities of public interest, which justify the participation in the share capital of companies (Art. 4.2):

a) services of general interest, including the management of the relevant infrastructures;

b) public works based on a programme agreement between public administrations or a public-private partnership agreement;

c) production of goods and services in favour of the shareholders;

d) public procurement.

The deliberation to found a company or buy shares in a pre-existing one has to be analytically motivated, with particular attention to the economic sustainability and the compliance with EU law on state aids. Said deliberation is then sent to both the Court of Auditors and the Antitrust Authority (Art. 5).

The Decree also draws a line between companies that are controlled by public administrations (“società a controllo pubblico”) and companies in which they are solely involved (“società a partecipazione pubblica”). There is “public control” when a public administration exercises a dominant influence, either by ownership rights or through shareholders’ agreements (Art. 2.b); there is “public participation” when a public administration vests the quality of shareholder or exercises management rights due to the possession of financial instruments (Art. 2.f).

The aforementioned distinction is important because it entails different legal regimes.

In fact, companies under public control are subject to stricter rules, since they are presumed to operate more like public entities rather than private companies.

For instance, companies under public control must have a sole administrator, unless there are specific reasons justifying the appointment of a board of directors, which nevertheless shall consist of no more than five members (Art. 11.2-11.3). The sole administrator and the members of the board must possess the requirements of good reputation, professionalism and independence, as indicated in a future decree by the President of the Council of Ministers (Art. 11.1).

When the directors are also employees of the shareholder administration, they are obliged to transfer their remuneration back to the company, since they already get a wage from the State (Art. 11.8). The remuneration of administrators, directors and employees of said companies shall not exceed 240,000 Euros (Art. 11.6).

External controls are strengthened: companies under public control must comply with the provisions of Transparency Decree No. 33/2013 (Art. 22) and any shareholder administration may file a lawsuit for the ascertainment of irregularities by the directors, independently from the percentages established by Article 2409 of the Civil Code (Art. 13). In case of corporate malpractice, the directors and the employees of the company are subject to the jurisdiction of both civil courts and the Court of Auditors (Art.12).

The Decree also contains provisions regarding public-private companies and in house companies.

With reference to former category, the private partner is chosen through a public tender procedure and must possess no less than 30% of the share capital (Art. 17.1). With reference to the latter, in house companies are subject to a control by the shareholder administration which is similar to that which it exercises over its own departments (Art. 16.1): these companies must provide goods and services almost exclusively in favour of the controlling administration (80% of the income - Art. 16.3); when purchasing goods and services, they must use public tenders, so as not to bypass the rules of public evidence (Art. 16.7).

As previously established by the majority of court rulings, both controlled companies and participated ones are now subject to bankruptcy proceedings in the event of default (Art. 14). Furthermore, the Decree prohibits the shareholder public administrations to create new companies for the management of the same activities of bankrupt companies for five years starting from the declaration of bankruptcy (Art. 14.6).

That said, it needs to be noted that there are considerable exceptions to the application of the Decree: associations and foundations; special purpose companies created by law for the management of specific public interest services; and listed companies, which may opt to comply with the new rules, but are not obliged to do so; plus a variety of exemptions from single provisions.

In conclusion, Decree No. 175 has achieved the result of providing public companies with a common legal framework. However, given the lack of precision of key provisions and the number of exemptions, the effectiveness of such provisions will be eventually determined by the interpretation of the courts of law.


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