What are “Benefit Companies”

What are “Benefit Companies”

introduced in Italy with the 2016 Stability Law

(Law no. 208 of 28 December 2015)

and what they do

The legal institution of the Benefit Company was introduced in Italy with the 2016 Stability Law. Under this law, Benefit Companies are those companies that:

In the exercise of an economic activity, in addition to the purpose of dividing the profits, they pursue one or more purposes of public benefit and operate in a responsible, sustainable and transparent manner towards people, communities, territories and the environment, cultural assets and activities and social organizations, organizations and associations and other stakeholders.

Italy is the first country in Europe to have approved this new form of doing business, which we hope will become the new reference model for everyone: an innovative and responsible model that can best adapt to the concept of sustainable business, not only with regarding large corporations but also small and medium-sized enterprises.

In relation to the concept of public benefit, i.e. what a Benefit Company can do in practice for the environment and the community, among the main objectives there are, for example, the following: providing goods and services to low-income citizens or disadvantaged communities, protect and restore the environment, protect and improve health, promote the arts, sciences and advancement of knowledge, increase capital flows through social impact investments, use energy from renewable sources.

On the basis of recent data provided by InfoCamere, responsible companies that have chosen to pursue, in addition to profit, also a public benefit, reached 1922 in March 2022; in the same period of 2020, while the Covid-19 pandemic broke out, there were just over 500. Thus, in last two years the number of Benefit Companies in Italy has quadrupled.

1. The requirements to become a Benefit Company.

To become a Benefit Company a company must:

  1. indicate in its corporate purpose the public benefit pursued, through a management aimed at balancing the interest of the shareholders with the interest of those impacted by the corporate activity;

  2. identify one or more responsible parties (the “responsible for the pursuit of the public benefit”) within the company who are responsible for monitoring the pursuit of the objective defined in the corporate purpose;

  3. develop an annual report (called “impact report”) on the methods of pursuing the public benefit – the report must be attached to the financial statements and published on the companies website, where existing.

2. Who supervises the Benefit Companies and the pursuit of the common benefit?

Italian law has mandated the Competition and Market Authority (AGCM) to supervise the Benefit Companies and the pursuit of the public benefit they have chosen and indicated in the corporate purpose. If the company does not in reality pursue such public benefit, it would violate the rules on misleading advertising (Legislative Decree no. 145/2007) and the Consumer Code (Legislative Decree no. 206/2005).

This provision is aimed at preventing companies that do not pursue the objectives set in the corporate purpose from benefiting from the advantages enjoyed by Benefit Companies and therefore to prevent consumers and other professionals from being misled.

3. Tax benefits of the Benefit Companies.

In order to support the strengthening of the system of Benefit Companies throughout the country, the law decree no.34 of 19 May 2020 provides for the granting of a tax credit in the amount of 50% of the establishment or transformation costs incurred by the Benefit Company (Article 38-ter, paragraph 1). The costs of incorporation or transformation include notary and registration costs in the register of companies as well as expenses related to professional assistance and consultancy incurred and directly intended for the establishment or transformation into a Benefit Company. The maximum amount that can be used in compensation by each beneficiary cannot exceed the amount of 10,000.00 Euros.

The terms and procedures for submitting the subsidy applications are defined in the recent directorial decree of 4 May 2022. With the same provision, the application form for admission to the subsidy was made available, together with the additional documentation useful for carrying out the preliminary investigation by the ministry.

4. The future of the Benefit Companies.

Benefit Companies represent an innovative corporate model, in a context where sustainability is fully part of the language of companies, institutions, and citizens. Considering the development of Benefit Companies can represent an opportunity to focus on the purposes of companies, the culture of the organization and review products and processes from this perspective, combining profit with the creation of a public benefit.

We hope that this piece has been of your interest, and please write to us if you want to hear more or if you have any doubts or questions: info@fiatlux.legal. Our Fiat Lux Legal experts will be happy to answer any of your questions.

Kind Regards,

avv. Federica Loreti

Fiat Lux Legal