The Introduction of the Benefit Corporation in the Italian Legal System

The introduction of the Benefit Corporation in the Italian legal system

Feb 11, 2016

On December 28, 2015 the Italian Parliament approved the Law n. 208 which has introduced in the Italian legal system the benefit corporation, an innovative type of corporation largely inspired by the US legislation. A Benefit Corporation legislation has, in fact, been adopted by several US states (such as California, Delaware, New York, New Jersey, Massachusetts, Illinois, etc.).

The main peculiarities of the Italian Benefit Corporation are the following:

 The benefit corporation pursues a public benefit purpose (“finalità di beneficio comune”) in addition to the profit purpose, which is typical of the traditional commercial corporations. Said public benefit purpose must be specifically indicated in the business purpose of the company by-laws;

 The company by-laws must identify the person or the persons entrusted with the task of pursuing the public benefit purpose. Failure to comply with the obligation to pursue the public benefit purpose is a breach of the directors’ duties. Thus, legal proceedings can be brought against the directors for said breach;

 For transparency reasons, on a yearly basis, the benefit corporation must deposit, together with the Financial Statements, a report concerning the pursuit of the public benefit purpose. The report has to be published on the benefit corporation’s website. The report must assess the impact of the benefit company and of its activities in the pursuit of the public benefit purpose, by using a comprehensive, transparent and independent third-party standard;

 The benefit corporation which does not pursue the public benefit purpose is subject to the rules concerning deceptive advertising and to consumer law;

 Any partnership or corporation can acquire the legal status of Benefit Company if all the above-mentioned conditions are satisfied and can add the title “benefit” to its social corporate name.

The Italian legislator, by approving the above-mentioned law, has taken into consideration the modern trends of corporate sustainability. These trends show that sustainability is not only en ethic issue but also an economic issue: it is proved that sustainability generates more business value, enhances profitability and saves money. The Dow Jones Group Sustainability Index performed at an average of 36,1% better than the traditional Dow Jones Group Index (source: “The Business Case for Sustainability”, July 2012 issued by International Finance Corporation ”).

However, the approved legislation has some critical aspects.

First of all, the legislator did not clarify the meaning of public benefit purpose, which appears to be too generic. The legislator simply referred to a public benefit purpose which must have a positive impact on persons, communities, territories, environment, cultural and social activities, bodies and associations and other stakeholders. It is likely that case-law and best practices will contribute to clarify the meaning of the public benefit purpose. Secondly, the scope of the directors’ liability seems extended given that the directors have the duty to pursue also social goals. Notwithstanding this, the legislator has not entitled third parties (in their capacity of stakeholders) to bring legal claims against the directors for breach of their duty to pursue the social goal. Said possibility, to date, seems reserved exclusively to the shareholders of the benefit company.

Finally, up to now, the benefit corporation legislation has not introduced special incentives such as tax reliefs or rules in derogation of ordinary corporate law and labour law. It goes without saying that said incentives would contribute much more to the promotion and the adoption of the Benefit Corporation model.

Paola Tascione

Italian lawyer and solicitor (non -practicing) admitted in the senior courts of England and Wales [email protected]

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