How to "transform" a Company into an "innovative start-up" under Italian Law.

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Under Italian Law, an innovative start-up is a company whose exclusive or predominant corporate purpose is the development, production and marketing of innovative products or services with high technological value. The Italian system set forth certain requirements and grants certain concrete benefits connected to this particular type of company.

However, not everyone knows that it is possible for those who have already set up a company to transform it into an innovative start-up and to benefit from its advantages.

Transformation" is possible provided that certain requirements are met.

The conversion into an Innovative Start Up does not constitute a real corporate transformation and it is therefore not necessary to follow the complex and costly procedure set forth for this specific extraordinary operation (notary fees, advertising requirements, etc.).

However, it is essential to verify compliance with certain requirements and to proceed with the preliminary verification of all phases of the "transformation" process.

Verification of the corporate purpose

The first requirement to be verified is related to the corporate purpose of the existing company, as it is necessary to evaluate the possible modification of the same before finalizing the change. The regulations in force provide, in fact, as a requirement for innovative start-ups, to have "as exclusive or prevalent corporate purpose, the development, production and marketing of innovative products or services with high technological value".

This analysis is particularly delicate but, if carried out carefully, it allows to save the costs connected to the notarial deed of change of the corporate object.

General requirements and term for the "transformation”

At the same time, the company must proceed with the transformation no later than 5 years (60 months) from the date of incorporation and must meet the requirements of common innovative start-ups (e.g. not distributing or having distributed profits), while at the same time undertaking not to exceed 5 million annual turnover and to continue not to distribute profits for the entire period during which it maintains this corporate form.

There are three other requirements required by current legislation:

  • compliance with a predetermined percentage of research and development expenditure;

  • 2/3 employees with a master's degree;

  • company is the owner or licensee of a patent or intellectual property right.

However, it is sufficient that only one of these can be configured to proceed with the relative variation in innovative start-ups.

The procedure

The transformation process does not require any particular bureaucratic formalities and is entirely telematic, although assistance from a professional with adequate regulatory experience is obviously advisable.

In fact, the first step consists in the electronic compilation by the company's legal representative of the innovative startup self-declaration model. Once the form has been filled in, in order to register the company in the special section of the Register of Companies, the form must be digitally signed and sent electronically together with the Single Communication to the Register of Companies.

It should be remembered that this declaration must be renewed periodically by filing it within 30 days of the approval of each financial statement and in any case within six months of the end of each financial year in order to certify the permanence of the legal requirements.

With regard to the Single Communication, in the "VARIATION" section, a large number of data must be entered relating, for example, to the activity carried out, the corporate purpose and research activities, and this information must also be updated promptly in the event of changes.

Finally, it should be noted that, for the purposes of registration in the special section of the Register of Companies, innovative start-ups are automatically considered to be registered in the special section of the Register of Companies following the completion and submission of the application in electronic format.