Acquiring a company or business in Italy means acquiring its history as well: contracts, disputes, employment relationships, tax positions and permits. Due diligence and the purchase agreement exist to bring these elements to light and to allocate the related risks between the parties in a way that reflects the price.

Share deal or asset deal

The first decision concerns the structure of the transaction.

  • Share deal: the buyer acquires the quotas of an S.r.l. (limited liability company) or the shares of an S.p.A. (joint-stock company). The company remains the same legal entity, with all its liabilities, including unknown ones. A transfer of S.r.l. quotas requires a deed with notarised or digital signatures, filed with the Companies Register; the by-laws may provide for pre-emption rights, approval clauses or other transfer restrictions.
  • Asset deal: the buyer acquires a business or a business unit (azienda or ramo d’azienda, Article 2555 et seq. of the Civil Code). The buyer is liable for business debts recorded in the mandatory accounting books (Article 2560); employment contracts transfer automatically, and seller and buyer are jointly liable for employees’ claims existing at the time of transfer (Article 2112). Above a statutory headcount threshold, trade unions must be informed and consulted.

For tax purposes, the buyer of a business may also be liable, within statutory limits, for taxes and penalties relating to periods before the sale; a certificate from the tax authorities listing outstanding liabilities can contain this risk. The choice between the two structures therefore depends on legal, tax and operational factors.

The scope of due diligence

A well-designed legal due diligence is proportionate to the deal and focuses on risks that affect value. Typical areas include:

  • corporate matters: title to shares, encumbrances, shareholders’ agreements, validity of resolutions;
  • material contracts, with particular attention to change-of-control, exclusivity and non-compete clauses;
  • employment: applicable collective agreements, disputes, outsourcing and social security compliance;
  • tax, carried out with tax advisers;
  • real estate, permits and environmental matters;
  • intellectual property, data protection and regulatory compliance, including the compliance programme under Legislative Decree 231/2001 on corporate criminal liability and any pending proceedings;
  • pending and threatened litigation.

The outcome is a report that ranks risks by severity and indicates how to address them: a price adjustment, specific indemnities, conditions to closing, or remedial action before signing.

The purchase agreement: warranties, indemnities and price

In a share deal, the buyer’s statutory protection relates primarily to the shares themselves. According to the prevailing Italian case law, the value and condition of the company’s assets are protected, in practice, only by the warranties the parties agree. A carefully drafted set of seller’s representations and warranties is therefore essential, together with indemnification obligations, de minimis thresholds, caps and claim periods.

Common features include completion accounts or locked-box pricing, earn-outs, escrow arrangements and warranty and indemnity (W&I) insurance. Conditions precedent and interim covenants governing the business between signing and closing complete the framework.

Regulatory clearances and closing

Before closing, buyers must check whether the transaction requires notification under the Italian golden power rules (Decree-Law 21/2012) for strategic sectors, and under merger control rules: Law 287/1990 in Italy or, for deals with an EU dimension, the EU Merger Regulation (Regulation (EC) 139/2004). Turnover thresholds are updated periodically, and under certain conditions the Italian Competition Authority may call in transactions that fall below them. Regulated sectors also require approval from the competent supervisory authorities.

When to seek legal advice

Legal support is most effective when it begins before the letter of intent, which often already fixes the price, exclusivity and structure. Counsel coordinates the due diligence with tax and technical advisers, negotiates the agreement and manages the process through closing and beyond, including any indemnity claims. For foreign buyers, it is also helpful to understand early on where Italian deal practice differs from what they are used to at home.

This article is for general information only and does not constitute legal advice.