Italian venture-backed start-ups almost invariably adopt a corporate form, and the overwhelming majority choose the limited liability company (società a responsabilità limitata S.r.l.). The data are unambiguous: out of more than 2,100 start-ups financed in 2019 –2020, 99.3 per cent were incorporated as S.r.l., with only 0.7 per cent opting for a joint-stock company (società per azioni S.p.A). The S.r.l. remains the preferred vehicle because it is more flexible and less burdensome – minimal capital requirements, reduced formalities and lower costs – while still offering, following the reforms introduced by Decree-Law No. 179 of 18 October 2012, the ability to create classes of quotas with tailored rights, functionally comparable to U.S.-style preferred stock. In later-stage rounds or in anticipation of an exit, companies may convert into an S.p.A. (for example, to facilitate stock option plans or a potential IPO). That said, the modern Italian S.r.l. is broadly capable of accommodating the structural needs of venture capital financings.

Italian VC-backed start-ups tend to replicate the architecture of standard NVCA terms when allocating investor rights and protections. Venture investors typically subscribe for convertible preferred quotas (or shares, where the company is an S.p.A.) featuring liquidation preferences, veto rights over key matters, weighted-average anti-dilution, enhanced voting thresholds, drag-along and tag-along rights, and reserved-matter vetoes.

The main divergences from U.S. practice concern technical implementation under Italian law—for example, statutory limits on the use of convertible notes (reserved to qualified investors) or the cap of three votes per multiple-voting share. Nonetheless, the regulatory trajectory is toward closing the gap. Today, the legal environment—bolstered by the Statute on innovative start-ups—permits tools that were once considered incompatible with Italian corporate law, such as work-for-equity mechanisms, convertible notes, and multiple-voting quotas. As a result, the contractual architecture of Italian VC deals is now substantially aligned with international standards, even if market scale still limits their widespread use.

Despite the fact that smaller start-ups often do not adopt these structures, significant venture transactions increasingly rely on documentation (term sheets, articles of association, and shareholders’ agreements) that incorporates international best practice. NVCA-style clauses are commonly embedded directly into the by-laws to ensure erga omnes enforceability, which in turn enhances the reliability of the investment package for both domestic and foreign investors.

In this area, investors typically rely on the direct acquisition of equity interests (share deals) and, to a lesser degree, on the purchase of assets or business units (asset deals). In a share deal, the investor—whether a venture capital fund or a corporate strategic—acquires equity in an innovative start-up incorporated as an S.r.l. or, less frequently, as an S.p.A. The transaction results in the investor’s entry into the company’s ownership structure and in the acquisition of economic and governance rights, including any special rights embedded in the articles of association under the simplified regime available to innovative start-ups, such as classes of quotas or shares with differentiated rights.

The legislative framework for innovative start-ups offers procedural shortcuts compared to the ordinary regime. Corporate amendments – such as capital increases reserved to professional investors – can be implemented with significantly reduced formalities. On the tax side, the legislator has introduced sizeable incentives. Article 29 of Decree-Law No. 179 of 18 October 2012 provides tax incentives for investors (deductions/deductions), rather than capital gains exemptions, operating in some cases as an alternative to the standard rules on capital gains taxation and the substitute tax under the Italian Income Tax Code (TUIR). Investors may also benefit from income tax deductions up to a specified percentage of the invested amount, subject to compliance with the statutory requirements on innovative status and eligibility.

Although less frequent – both within the start-up ecosystem and in the Italian market at large – asset deals do serve a strategic purpose, particularly in acqui-hiring scenarios or in selective transfers of intangible assets such as software, patents, or technology licences. These transactions are governed by the general rules on business transfers (Articles 2555 et seq. of the Italian Civil Code), supplemented by the start-up regime’s provisions safeguarding employment contracts and ensuring continuity of contractual relationships with third parties. For tax purposes, the acquirer may capitalise and depreciate the purchased assets, while the transferor may benefit, in relation to any realised capital gain, from the favourable tax treatment available to innovative start-ups pursuant to Decree-Law No. 179/2012 and the TUIR, as clarified by ministerial guidance.

In Italy, letters of intent (LOIs) and term sheets are widely used across corporate acquisitions, business transfers, and real estate deals. Although not governed by a dedicated statute, they rest on the principles of contractual autonomy (Article 1322 Italian Civil Code) and the duties of good faith in negotiations (Articles 1337–1338 Italian Civil Code) and are treated as preparatory agreements.

In practice, LOIs are generally non-binding. Their purpose is to frame the transaction and guide the negotiation phase, without obliging the parties to execute the final agreement. At the same time, it is standard for LOIs to include binding provisions—confidentiality, exclusivity, no-shop clauses, escrow mechanics and break-up fees—designed to ensure disciplined negotiations and deter conduct inconsistent with good faith.

A breach of these obligations, or an abrupt and unjustified withdrawal from negotiations, may trigger pre-contractual liability under Articles 1337 and 1338, without prejudice to tort liability under Article 2043 of the Italian Civil Code.

A recent decision of the Court of Venice (No. 996/2023) treated an LOI concerning the transfer of equity interests as a “preliminary of a preliminary agreement”, meaning an agreement by which the parties commit not to sign the definitive contract immediately but to execute, at a later stage, a further preliminary agreement governing ancillary terms. Doctrine has consistently stressed that the legal character of an LOI depends on the parties’ actual intent and the completeness of the document: a high-level summary remains non-binding; a fully articulated document identifying subject matter, price, timing and obligations may instead operate as a true preparatory contract.

In any event—binding or not—LOIs routinely clarify that both parties remain free not to enter into the final agreement (absent fraud) and that a good-faith withdrawal will not give rise to claims. Exclusivity commitments and break-up fees require careful drafting: excessive exclusivity periods or punitive penalties can drive a seller away, whereas the absence of any binding undertakings may expose the purchaser to competitive shopping around.

Regarding break-up fees, their use in Italy remains relatively limited compared to more mature M&A markets such as the UK or US. While not prohibited, break-up fees are not customary in most private M&A transactions and are rarely negotiated at the LOI stage.

In some acquisitions, part of the consideration is paid not in cash but in shares issued by the purchaser—a so-called paper deal. The structure is common where the acquirer is a larger company, often listed, and offers its own equity to the start-up’s investors in exchange for their participation. Paying with shares is entirely permissible and often efficient: sellers gain exposure to the purchaser’s future growth, while the purchaser preserves liquidity. The structure, however, carries specific corporate and regulatory implications.

On the corporate side, a purchaser paying in shares must implement a capital increase reserved to the sellers, unless it already holds treasury shares. In practice, the purchaser issues new shares and allocates them as in-kind consideration. For a S.p.A., this requires: a shareholders’ resolution approving a capital increase with exclusion of pre-emptive rights under Article 2441 of the Italian Civil Code, supported by a clear corporate-interest justification; and an independent expert valuation under Articles 2343 and 2440 of the Italian Civil Code. Comparable rules apply to S.r.l., which must approve the capital increase and obtain an appraisal under Article 2465 of the Italian Civil Code. Share-for-share structures of this kind are standard in integration-driven transactions involving innovative start-ups.

If the purchaser is a listed company, issuing new shares constitutes an offer of securities. The EU Prospectus Regulation (Regulation (EU) 2017/1129) provides several exemptions typically applicable in private M&A, such as offers to a limited number of investors or below certain monetary thresholds. Nonetheless, the new shares may still require admission to trading, and listing rules may trigger disclosure duties or shareholder approvals depending on the size and features of the issuance.

Paper consideration usually comes with lock-up arrangements. Purchasers commonly restrict sellers—now new shareholders—from immediately selling their shares, both to avoid pressure on the stock and to maintain alignment post-closing. These restrictions are purely contractual but interact with market-abuse and blackout rules where the purchaser is listed. If unlisted, the sellers are generally bound by a shareholders’ agreement or by transfer limits embedded in the articles.

In cross-border deals, the issuance and allocation of shares may activate regulatory requirements in other jurisdictions. The analysis must therefore be adapted to the relevant foreign law and cannot assume equivalence with the Italian framework.

In Italy, earn-out clauses—mechanisms that make part of the purchase price contingent on the target’s future economic or financial performance—are widely used in M&A. They are particularly common where the target is newly formed or where its ability to generate stable, predictable results is uncertain.

Italian practice typically recognises three main structures:

a. Economic earn-out: contingent consideration is paid if the target reaches predefined economic results, usually measured through accounting metrics such as EBITDA.

b. Performance earn-out: payment depends on achieving operational or industrial objectives, or on the occurrence of specified events.

c. Reverse earn-out: the price adjusts downward if agreed thresholds are not met or if adverse events undermine the target’s economic or financial position.

Earn-out disputes are frequent, largely because the final purchase price is not definitively fixed at closing. Common areas of conflict include:

• a. Accounting interpretation: disagreements over the application of accounting standards—IFRS, Italian GAAP, or group consolidation rules—may lead to divergent calculations of the contingent amount.
• b. Opportunistic conduct: purchasers may, through post-closing strategic or operational choices, hinder achievement of the targets. Typical issues include reduced investment, cuts to operations, shutting down business lines, or forced integration measures that distort performance.
• c. Information access: sellers may argue that they lacked full visibility over the relevant data or that the purchaser imposed constraints preventing a proper assessment of whether the earn-out conditions were satisfied.

In acquisitions involving venture-backed start-ups, the purchase-price mechanism is usually one of the most delicate items on the table. These companies may have strong growth potential, but their valuation depends on variables—market traction, product adoption, technology cycles, and the resilience of their financial structure—that make any fixed price unrealistic.

The structure most commonly used is the closing-accounts adjustment. The logic is simple: the price agreed at signing is recalibrated once the actual financial position at closing is known. This avoids a gap between the valuation assumptions and the target’s real condition when control is transferred.

In practice, the purchase price is first calculated on the basis of an estimated financial situation and then adjusted against closing accounts drawn up under the accounting rules set out in the SPA. Several adjustment tools are typically combined:

– Net Working Capital Adjustment: ensures that the company is delivered with a level of working capital adequate for ordinary operations. The SPA sets a target working-capital level, based on historical performance or market benchmarks. If actual working capital at closing is below target, the price is reduced; if above, the seller receives a corresponding uplift.

– Net Debt Adjustment: focuses on net financial position at closing. The purpose is not to deliver a debt-free company, but to ensure that indebtedness matches the assumptions underlying the valuation. Excess net debt triggers a price reduction; a lower-than-expected level increases the price. In start-up deals, this adjustment typically weighs more than working capital, given limited cash-flow stability and the central role of liquidity.

– Cash Adjustment / Cash Free–Debt Free Adjustment: used where the start-up has a minimal balance sheet or limited financial debt. Here the focus is solely on net cash at closing, to ensure sufficient post-closing liquidity.

Alongside these quantitative mechanisms, conditional pricing models—primarily earn-outs—are increasingly used, as noted above.

Lock-box structures, by contrast, are rarely suitable for start-up acquisitions. A lock-box fixes the price using a historical reference balance sheet and excludes post-closing adjustments. Start-ups, however, show volatile balance sheets, uneven cash flows, and often require new financing rounds. Identifying a reliable lock-box date is therefore difficult. For this reason, in VC-backed transactions purchasers tend to favour flexible structures—closing-accounts adjustments or earn-outs—that allow the consideration to reflect real performance and subsequent developments.

The principal types of equity-based incentive instruments commonly adopted in Italian practice for start-ups and innovative companies encompass a broad range of structured plans designed to ensure the engagement, retention, and alignment of interests of management, key executives, and, more generally, strategic employees, with the company’s growth objectives and value-creation goals. Among these instruments, particular relevance attaches to Stock Option Plans, Restricted Stock Units (RSUs) and Employee Stock Purchase Plans (ESPPs).

Stock Option Plans constitute the most traditional and widely used mechanism. They confer upon beneficiaries the right, subject to the completion of a specified vesting period, to subscribe for or purchase shares of the company at a predetermined price (the strike price), generally corresponding to or close to the market value at the time of grant. These plans are grounded in Articles 2349 and 2441 of the Italian Civil Code and are conceived as medium- to long-term retention tools aimed at incentivizing executives to remain with the company while ensuring their continued contribution to value creation. In line with prevailing practice, vesting periods typically extend over three to four years, and the plan regulations govern scenarios of employment termination through “good leaver” and “bad leaver” clauses, which determine the rights of the beneficiary in the event of lawful cessation or cessation attributable to the employee.

Restricted Stock Units (RSUs) represent an additional form of conditional equity-based incentive. They grant the beneficiary a right to receive company shares free of charge upon the completion of a specified vesting period or upon achieving certain performance objectives, as defined in the plan rules. RSUs serve objectives similar to those of stock options, namely retention and alignment of the beneficiaries’ interests with those of the company, while additionally ensuring the effective transfer of economic value without requiring immediate payment by the beneficiary.

Employee Stock Purchase Plans allow employees to acquire company shares under favorable conditions, often through payroll deductions. Although less prevalent in the Italian context, ESPPs are primarily employed in larger companies or multinational groups, where participation plans aim to strengthen a sense of ownership and to enable employees to share directly in the company’s economic success.

Overall, the adoption of each of these categories of plans must be carefully tailored according to the company’s size, stage of development, presence of institutional investors, and the statutory and regulatory constraints applicable to innovative start-ups, with particular attention to compatibility with the provisions of Decree-Law No. 179/2012 and the proper integration of contractual clauses into the company’s bylaws and incentive plan regulations.

Equity-based incentive plans for Italian start-ups and innovative companies cover a fairly broad range of instruments designed to secure retention, alignment, and long-term engagement of managers and key employees. In practice, the most commonly used models are Stock Option Plans, Restricted Stock Units (RSUs) and, in larger groups, Employee Stock Purchase Plans (ESPPs).

Stock Option Plans remain the standard tool. They give beneficiaries the right—after a vesting period—to subscribe for or purchase shares at a predetermined strike price, usually aligned with the market value at grant. The legal basis lies in Articles 2349 and 2441 of the Italian Civil Code. These plans operate as medium- to long-term retention mechanisms and typically vest over three to four years. The plan rules normally address employment termination through “good leaver” and “bad leaver” provisions, which define whether and to what extent the options remain exercisable.

Restricted Stock Units (RSUs) provide a conditional right to receive shares free of charge once the vesting period is completed or specified performance objectives are met. The rationale mirrors that of stock options—retention and alignment—while offering the added benefit of delivering value without requiring immediate payment by the beneficiary.

Employee Stock Purchase Plans (ESPPs) allow employees to buy shares on favourable terms, often via payroll deductions. They are less common in Italy and are mainly used by larger or multinational companies that want to build a stronger ownership culture and share economic upside with employees.

The choice among these structures depends on the company’s size, stage of development, investor base, and the regulatory framework applicable to innovative start-ups. Particular attention is required to ensure consistency with Decree-Law No. 179/2012 and to embed the necessary provisions in the by-laws and in the plan rules. If the company expects VC investors, alignment between incentive plans and shareholder agreements becomes essential to avoid governance and dilution issues.

In Italy, workers’ representation and industrial relations are shaped primarily by the Workers’ Statute (Law No. 300/1970) and, at EU level, by Legislative Decree No. 113/2012, which implements Directive 2009/38/EC on European Works Councils (EWCs). Within companies, trade unions that are parties to the collective bargaining agreement applied by the employer may establish company trade union representatives (RSA). Alongside them operate unitary workplace representatives (RSU), elected by the entire workforce—regardless of union membership—according to the procedures set out in inter-confederal agreements.

Both RSA and RSU are involved in company-level collective bargaining, the protection of individual and collective rights, and the information and consultation processes required by law.

• RSA: created by unions that sign the applicable collective bargaining agreement;
• RSU: elected by employees under interconfederal rules and representing the whole workforce.

In practice, these representative bodies are seldom present in venture-backed start-ups or, more generally, in the technology sector. Several factors explain this:

• companies are usually small, with organisational models built on lean structures and rapid decision-making;
• the workforce often falls below the dimensional thresholds at which the Statute of Workers triggers the strongest protections for internal union bodies;
• start-ups frequently use flexible or non-standard work arrangements;
• the prevailing corporate culture tends to emphasise horizontality and direct communication between founders, management and employees.

By contrast, in larger or more mature tech companies—scale-ups, high-growth businesses or subsidiaries of multinational groups—RSU or RSA are more common. Where statutory thresholds and cross-border presence are met, European Works Councils may also be established, particularly in connection with restructurings, M&A transactions, or broader organisational changes with implications across multiple jurisdictions.

In short, although fully recognised and protected under Italian and EU law, company-level union bodies are relatively uncommon within innovative start-ups and VC-backed tech companies. They typically emerge only once the organisation reaches a certain level of scale, structure, or international integration, or when the company is engaged in complex workforce-management processes.

In Italy, the tax treatment of retention mechanisms and equity-based incentives for founders and key personnel of innovative start-ups is governed by a dedicated favourable regime introduced by Article 27 of Legislative Decree No. 179/2012. The provision carves out an exception to the general principle of comprehensive employment income (Article 51 TUIR): the value of equity instruments granted as remuneration to individuals who maintain an employment, quasi-employment or management relationship with the start-up is excluded from taxable income, both for tax and social-security purposes.

The regime applies to shares, quotas, options and participatory financial instruments issued by the innovative start-up or by its subsidiaries, provided they are granted while the company retains its “innovative start-up” status (five years from incorporation). The rationale is straightforward: promote direct equity participation by founders and strategic personnel, supporting growth without an immediate tax or contribution burden.

Allocation phase: the grant of these instruments is tax-neutral, as long as the underlying work or management relationship continues.

Eligible instruments: shares, quotas, options and similar participatory instruments issued by the start-up or its controlled entities.

On exit, the favourable framework is complemented by Article 14 of Legislative Decree No. 73/2021 (“Decreto Sostegni bis”), which provides a full exemption from capital-gains taxation for disposals by non-entrepreneur individuals of participations in innovative start-ups. The exemption covers participations subscribed between 1 June 2021 and 31 December 2025, provided they are held for at least three years. Gains realised on disposal are therefore not subject to the ordinary 26% substitute tax applicable to capital gains on equity participations (Articles 67–68 TUIR, Legislative Decree 461/1997).

The exemption also applies where the capital gain is reinvested, within one year, in new innovative start-ups or innovative SMEs, provided the reinvestment occurs through capital subscription by 31 December 2025. The measure, however, requires prior EU Commission authorisation and does not apply to investments made under the “de minimis” regime benefiting from the 50% personal income tax deduction under Article 29-bis of Legislative Decree No. 179/2012.

Overall, the Italian tax framework is particularly favourable to founder-retention structures and to equity-based incentive plans. The allocation of participatory instruments is not taxed, and—subject to the statutory conditions—the disposal of the resulting participations may also benefit from full exemption. Although there is no statutory mechanism that converts retention bonuses into capital gains “by default”, the combined effect of Article 27 of Legislative Decree No. 179/2012 and Article 14 of Legislative Decree No. 73/2021 produces a similar outcome in practice: remuneration tied to continued service and corporate performance is treated, for tax purposes, as participation-based capital gain, with no taxation at grant and, in qualifying cases, none at exit.

shareholders, third parties, and administrative authorities.

Non-compete and non-solicitation covenants are widely used in relationships with founders, key employees and senior executives, especially where the business relies on strategic know-how, proprietary processes, customer relationships or personnel that are critical to the company’s competitive position. Their purpose is straightforward: prevent individuals with access to sensitive information or strategic relationships from engaging in competitive activity or from soliciting employees or clients once the relationship ends.

Non-compete clauses are governed, in general, by Article 2596 of the Italian Civil Code. The rule is simple: the restriction must be in writing, must be limited to a specific area or activity and cannot exceed five years. Any longer duration is automatically reduced to five years.

For employees, Article 2125 of the Italian Civil Code applies. The covenant must be in writing, must offer adequate compensation proportionate to the restraint and must specify object, duration and territorial scope. Case law consistently caps the duration at three years for standard employees and five years for executives, and it requires that the restraint does not unreasonably prevent the individual from pursuing a compatible professional activity. Breach triggers contractual liability under Article 1218 of the Italian Civil Code and may also activate a penalty clause under Article 1382 of the Italian Civil Code.

These employee-specific rules apply only to subordinate employment. For self-employed individuals or collaborators, the general regime of Article 2596 of the Italian Civil Code applies.

For commercial agents, Article 1751-bis of the Italian Civil Code provides a specific framework: the non-compete may extend beyond termination, but for no more than two years.

Non-solicitation covenants – typically prohibiting the diversion of clients, employees or collaborators – rely on contractual autonomy under Article 1322 of the Italian Civil Code. They must be limited in duration, proportionate in scope and justified by a legitimate business interest. Breach gives rise to contractual liability and, where agreed, enforcement of a penalty clause.

In practice, these covenants are essential tools for safeguarding a company’s strategic assets. Their enforceability, however, depends on compliance with statutory requirements and on proportionality, good faith and reasonableness standards that courts routinely apply when assessing the validity and fairness of the restrictions imposed.

In acquisitions of VC-backed start-ups, the period between signing and closing is rarely frictionless. For this reason, the SPA typically includes a set of closing conditions and interim-period covenants designed to ensure that the company delivered at closing corresponds — economically and operationally — to the one valued at signing.

The standard closing conditions in this context include:

• Regulatory clearances: receipt of all mandatory approvals, such as antitrust clearance (AGCM), foreign-investment approval under the Italian Golden Power regime (where relevant), and any sectoral authorisations. Failure to obtain an essential approval by the long-stop date generally allows the parties to walk away without penalties.
• No legal impediments: no law, injunction or administrative measure may prohibit the closing. This “no injunction / no prohibition” condition is straightforward but essential.
• Bring-down of representations and warranties: the sellers’ representations must be true and accurate at closing, often subject to a materiality qualifier (e.g., immaterial deviations do not prevent the closing). This protects the purchaser against material changes uncovered after signing.
• Compliance with interim covenants: the sellers must have complied with pre-closing obligations, typically to operate the business in the ordinary course and to refrain from significant actions – taking on material debt, dismissing key employees, changing strategy – without the purchaser’s consent.
• Third-party consents and business-critical confirmations: where contracts contain change-of-control clauses or where specific key employees or founders are essential to the post-closing plan, the SPA may condition the closing on obtaining those consents or on the execution of new employment or retention arrangements.

Alongside these conditions, the vast majority of transactions include a Material Adverse Effect (MAE) condition. The function is simple: if, between signing and closing, the target suffers an event that materially and adversely affects its business, financial position, assets, results or prospects, the purchaser may refuse to close. The definition is generally negotiated: purchasers want broad coverage; sellers seek to carve out macroeconomic or sector-wide events (market downturns, regulatory changes, pandemics) unless they disproportionately affect the target. In technology and VC-backed transactions, MAE definitions often include targeted triggers – loss of a key founder, cancellation of a core IP right, or failure of a critical technology.

Although the MAE condition is common, invoking it is not trivial. The purchaser must show a substantial and lasting impact, not a temporary fluctuation. For this reason, parties sometimes specify quantitative thresholds to reduce uncertainty.

Overall, the closing conditions serve a single purpose: protect the purchaser from acquiring a company materially different from the one evaluated at signing, while giving the seller a clear and predictable framework within which the closing must occur. In VC-backed acquisitions, a combination of regulatory approvals, bring-down protections, interim-covenant compliance and a tailored MAE clause is standard practice.

A recurring issue is how far seller-provided information limits the purchaser’s ability to bring warranty claims. SPAs usually state that R&W apply “except as disclosed”, with carve-outs listed in Disclosure Schedules or a Disclosure Letter.

In Italy, especially in mid-market deals, parties often treat the entire data room as disclosed. If a document flags an issue, the purchaser cannot invoke a breach on that point. Purchasers, however, prefer specific disclosure tied to each warranty. The practical compromise is a short Disclosure Memorandum linking key data-room documents to the relevant R&W. The balance is plain: the seller protects itself on known issues, and the purchaser accepts the risks that have been clearly surfaced.

Knowledge qualifiers limit certain warranties to what specific seller representatives actually know (or should reasonably know). They shift the risk of true unknowns to the purchaser. Purchasers push for unqualified warranties on fundamentals (i.e. title, authority, capitalization), while sellers seek knowledge qualifiers on areas where absolute certainty is unrealistic (i.e. compliance, IP). The allocation is pragmatic: the seller is liable only for what it knew or should have known; the purchaser carries the rest.

Risk allocation depends on how warranties are drafted: broad, unqualified warranties place historical risk on the seller; narrow or knowledge-qualified warranties leave it with the purchaser. Disclosure also plays a role: full data-room disclosure shifts more risk to the purchaser; specific disclosure keeps more exposure with the seller. In practice—especially with W&I insurance—Italian SPAs tend to adopt reasonably broad warranties and then manage exposure through caps, baskets and, where needed, special indemnities for identified risks.

The agreement follows a structure that is familiar in transactional practice and is organised around three elements: the scope of coverage, the limits on liability, and the survival of representations, warranties and covenants.

As to coverage, the sellers’ indemnity extends to a wide range of consequences. The wording is broad enough to include losses, costs and liabilities of various kinds — legal fees, penalties, taxes, contingent items, loss of profits — whenever they arise out of: (i) breaches of representations and warranties made in the agreement or in connected documents; (ii) breaches of covenants or undertakings; (iii) pre-closing liabilities of the target, whether or not known at signing; and (iv) pre-closing liabilities of entities controlled by the sellers. The logic is straightforward: the purchaser receives a company that is economically consistent with the assumptions made at signing.

On limitation of liability, the agreement applies a cap broadly aligned with the purchase price. The usual exceptions remain: no limitation operates in cases of wilful misconduct or gross negligence, and the cap does not apply to title, tax and employment-related warranties.

Indemnification is framed as the exclusive monetary remedy post-closing, unless the contract provides otherwise. The purchaser may set off indemnifiable amounts against sums payable under earn-out mechanisms or other contingent arrangements. Nothing unusual here, but the structure is coherent.

As for survival, the clause mirrors statutory limitation periods, which avoids unnecessary ambiguities. General warranties survive usually for forty-eight months. Tax warranties track the limitation periods under tax law, including extensions and suspensions. Employment warranties generally survive for five years. Title warranties — and those affected by fraud, bad faith or criminal conduct — have no contractual time limit but remain subject, in any event, to the statutory bars under Italian law. Covenants not otherwise specified survive for ten years, while the purchaser’s obligations survive according to their nature.

The overall architecture is linear and reflects a common approach in Italian M&A: broad coverage, liability capped save for the usual carve-outs, and survival aligned with statutory horizons.

The indemnification regime rests on the general rules of contractual liability set out in Articles 1218 et seq. of the Italian Civil Code. The structure is well known: the debtor — here, the seller — is liable for losses arising from non-performance or defective performance unless it proves that fulfilment was impossible for reasons not attributable to it.

Under Article 1223 of the Italian Civil Code, recoverable damages include both the actual loss and the loss of profit, but only where the damage is the immediate and direct consequence of the breach. The clause in the agreement mirrors this framework: it expressly includes loss of profit as compensable damage, which is consistent with the case law that requires full restoration of the injured party’s patrimonial position, while excluding any form of overcompensation. The point is clear: hypothetical gains, valuation “multiples” or future profits that remain uncertain do not fall within the notion of immediate and direct loss and therefore cannot be claimed.

Article 1225 of the Italian Civil Code further restricts recoverability to damages that were foreseeable at the time of the contract, save in cases of fraud; this is an additional reason why speculative or projection-based claims are excluded.

Article 1227 of the Italian Civil Code applies as well. The purchaser must mitigate the loss and cannot recover damages caused — even in part — by their own negligent conduct or by failing to adopt reasonable measures to limit the effects of the breach. The mandatory nature of this rule sets a boundary: indemnification covers what could not have been avoided with ordinary diligence, nothing more.

Finally, Article 1229 of the Italian Civil Code prevents parties from excluding or limiting liability for wilful misconduct or gross negligence. In practice, this statutory constraint shapes the negotiation of indemnification, as caps or exclusions cannot shield the seller from such conduct.

W&I insurance has become increasingly common in Italian M&A transactions, particularly in mid-to-large cap deals. Originating in cross-border and private-equity transactions, it is increasingly used in domestic deals as well. In VC-backed start-up acquisitions, its adoption is selective but not unusual: venture investors often seek a clean exit, and purchasers — particularly corporates and listed groups — may insist on insurance to avoid relying on seller recourse or escrow mechanisms.

Insurers may require a due-diligence record that is sufficiently robust and may be reluctant to underwrite risks that the target cannot substantiate. Where corporate documentation is incomplete, IP provenance not fully tracked, regulatory compliance uneven, or financials not properly tested, coverage tends to narrow or become unavailable.

Tax coverage can be obtained, provided that a proper tax review has been carried out. If the target’s tax processes are immature or rely on non-standard arrangements, insurers generally restrict the scope of coverage or adjust terms to reflect the uncertainty.

Exclusions follow a predictable logic. Insurers tend to exclude what cannot be sensibly diligenced: known issues, matters already highlighted during the process, IP positions that are not documented in a credible way, regulatory exposures never examined, and areas dependent on forward-looking assumptions. In substance, what the insurer cannot verify does not enter the perimeter.

Retention levels usually mirror the contractual basket, and premiums have stabilised at market-standard ranges. For sellers — in particular funds — the benefit is the ability to exit without long-tail exposure. For purchasers, the advantage lies in the comfort of recovery from a solvent counterparty rather than from the individual sellers.

The Italian antitrust framework is primarily governed by Law No. 287 of 10 October 1990, entitled “Rules for the Protection of Competition and the Market,” which incorporates the fundamental principles of European Union competition law, in particular Articles 101 and 102 of the Treaty on the Functioning of the European Union. The authority responsible for enforcing the legislation is the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato, AGCM), which oversees compliance with rules concerning restrictive agreements, abuse of dominant position, and economic concentrations.

In particular, Article 16 of Law No. 287/1990 establishes the obligation of prior notification for concentration operations that exceed certain turnover thresholds, which are updated annually by the Authority. For the year 2025, these thresholds are set at a total national turnover of the enterprises involved exceeding €582 million, and an individual turnover in Italy of at least two of the involved enterprises exceeding €35 million each. If both thresholds are exceeded, the transaction must be notified in advance to the AGCM, which proceeds to assess whether the operation may result in the creation or strengthening of a dominant position likely to significantly impede effective competition in the national market or in a substantial part thereof.

The procedure consists of a preliminary phase of thirty days and, if necessary, an in-depth investigative phase, at the conclusion of which the Authority may authorize, prohibit, or subject the transaction to the adoption of specific remedial measures. In recent years, there has been a significant strengthening of antitrust oversight concerning companies operating in the technology and digital sectors, in line with the evolution of European competition law and with the entry into force of Regulation (EU) 2022/1925, known as the Digital Markets Act, which introduces ex ante obligations for so-called gatekeepers.

The AGCM has shown increasing attention to practices such as the abuse of dominant position in online platform markets, acquisitions of innovative start-ups potentially capable of reducing competitive pressure (so-called killer acquisitions), restrictions on interoperability, and self-preferencing conduct. This trend reflects a broader supervisory strategy aimed at ensuring effective competition even in digital markets, which are characterized by rapid innovation, high economic concentration, and significant data power.

At the European level, Regulation (EU) 2019/452 establishes a comprehensive framework for the screening of foreign direct investments (FDI) in the European Union, aimed at safeguarding security and public order. The Regulation enables Member States to adopt national measures to assess and, if necessary, restrict or condition foreign investments that could pose risks to these interests. Under this framework, Member States are required to notify the European Commission of investments that may potentially affect security or public order, even when the investor is based within the EU. The Regulation also provides for enhanced cooperation and information exchange between Member States and the Commission, allowing for coordinated assessments of risks related to critical technologies, sensitive data, and strategic sectors, while maintaining the primary authority of each Member State to take final decisions regarding the approval, conditional authorization, or prohibition of an investment.

In Italy, the regime for foreign direct investments is governed by Decree-Law No. 21/2012 (the so-called “Golden Power”) and subsequent amendments, in line with the European framework. The Government may exercise special powers over corporate transactions involving strategic assets in the sectors of defence, national security, energy, transport, communications, healthcare, agri-food, and the financial sector.

The obligation for prior notification applies when an investor acquires a stake that allows them to exercise dominant or significant influence over the target company. The assessment focuses on risks to national security, the protection of sensitive data, and access to critical technologies.

In recent years, Italy has intensified oversight of foreign investments in the technology sector, particularly concerning 5G networks, cloud computing, and the management of sensitive data. Decree-Law No. 21/2022 expanded the scope of special powers, explicitly including critical technologies and sensitive data. Sectoral authorities collaborate through information exchange to ensure the security of critical infrastructures in the context of increasing digitalization.

In technology deals, IP is invariably the core of the due diligence and the negotiation. The baseline is straightforward: confirm ownership and chain of title, validate registrations (where relevant), and understand what is licensed in, out, or jointly developed. Italian law splits the framework between the Industrial Property Code, Legislative Decree No. 30 of 10 February 2005 (patents, trademarks, designs, know-how and trade secrets) and copyright law, Law No. 633 of 22 April 1941 (software, databases, creative works), but the practical concerns are universal.

The pressure points are predictable. Founders and consultants must have properly assigned all rights; development work carried out by external contractors or freelancers often raises gaps. Open-source compliance needs a hard look: misuse of licences, missing attributions or copyleft contamination can force unwanted disclosure obligations. Claims or pending proceedings on patents, trademarks or software are material and must be ring-fenced.

In short, the purchaser needs certainty that the technology it is buying is actually owned, properly protected, and legally usable post-closing.

In Italy, the protection of personal data is primarily governed by Regulation (EU) 2016/679 (GDPR) and the Privacy Code (Legislative Decree No. 196/2003), as amended by Legislative Decree No. 101/2018 to ensure alignment with the GDPR. These legislative frameworks establish a comprehensive set of principles governing the processing of personal data, including lawfulness, fairness, transparency, purpose limitation, data minimization, accuracy, and security. In addition, the GDPR introduces the principle of accountability, under which data controllers and processors are required not only to comply with the rules but also to demonstrate compliance through appropriate documentation, policies, and procedures. The Italian Data Protection Authority (Garante per la protezione dei dati personali) serves as the national supervisory authority, endowed with wide-ranging powers to monitor compliance, conduct audits and inspections, and impose administrative fines, including in cases involving cross-border data processing.

Privacy compliance is central in tech transactions. The framework is the GDPR, supplemented by the Italian Privacy Code, but the issues arise from practice rather than doctrine. A purchaser will want evidence that the target has a lawful processing basis for the data it holds, uses valid consents where needed, and has processor agreements that meet the GDPR requirements. Policies, notices and internal governance need to be aligned with the accountability principle, not merely drafted.

Data retention, deletion practices and the handling of legacy datasets are recurring weaknesses. Cross-border transfers must be covered by appropriate safeguards (SCCs, BCRs or adequacy decisions). If the business processes sensitive data or operates in a high-risk area, a DPIA may be required.

After completion, the purchaser inherits full responsibility for ongoing compliance, including security measures and breach management. For this reason, privacy due diligence is both a regulatory exercise and a risk-allocation tool: it identifies gaps, informs contractual protections, and prevents the purchaser from inheriting liabilities that could have been addressed up front.

Employment issues in tech acquisitions typically revolve around classification. Outsourced developers, consultants, freelance engineers and other “hybrid” roles often mask relationships that, in substance, meet the statutory criteria for employment. If reclassification occurs, the acquirer steps into the employer’s shoes under Article 2112 of the Civil Code, with full continuity of rights, seniority and compensation.

Legislative Decree 81/2015 widens the scope for reclassification by extending employment protections to collaborations that are personal, continuous and carried out under the client’s direction. In practice, many start-ups rely on arrangements that fall squarely within this perimeter. Trade-union information requirements (Article 47 of Law 428/1990), GDPR compliance for employee data and workplace-safety rules (Legislative Decree 81/2008) add further layers of diligence.

In Italy, M&A disputes are generally managed with a practical mindset. Parties usually try to resolve issues informally before escalating, given the time and cost of ordinary litigation. ADR mechanisms are widely used. Mediation and assisted negotiation offer structured but flexible paths to settlement. Arbitration — domestic or international — is standard in sophisticated deals, especially where confidentiality, speed and technical competence are key. ICC arbitration remains the default choice in large-cap cross-border transactions.

In tech deals, these mechanisms are particularly relevant because disputes often involve intangible assets, commercial sensitivities and the need for swift, confidential outcomes. In adopting an arbitration clause, the contract should be tailored to the deal, aligned with the governing-law provisions, and coordinated with the dispute-resolution mechanism in any W&I policy.

Italian corporate law still relies heavily on notarial formalities. Transfers of shares or quotas in SRLs and SPAs, capital increases, incorporations and most extraordinary transactions require a notarial deed and subsequent registration with the Companies Register.

In addition to notarial and registration requirements, the parties must consider tax obligations, including registration tax, stamp duties, and other related taxes, pursuant to D.P.R. 131/1986 (Consolidated Law on Registration and Stamp Duties), as well as any reporting obligations to the Italian Tax Revenue Agency.

This regulatory framework ensures the validity, enforceability against third parties, and legal publicity of corporate transactions, safeguarding the certainty of legal relationships among shareholders, third parties, and administrative authorities.