It is estimated that there are

about 8,000 companies in Italy whose capital is owned by public administrations

(State, Regions, Provinces, Municipalities, etc.…).

Ultimately, the need for spending

review has led the Italian Government to intervene (again) in this sector of

the Public Administration, by issuing Legislative Decree No. 175/2016 (“the

Decree”), which follows other reforms promoted by Minister Marianna Madia pursuant

to Law No. 124/2015.

The Decree aims at regulating

the participation of public administrations in the share capital of companies, in

order to rationalize the number of public companies and make sure that they are

duly managed.

First of all, as a general

rule, public administrations are not allowed to create companies, or purchase

shares in companies, directly or indirectly, whose corporate purpose is not strictly related to their institutional

tasks (Art. 4.1). This means that, for example, a municipality is not allowed

to hold shares in a corporation that produces sugar.

Moreover, the Decree specifies

the kind of activities of public interest, which justify the participation in

the share capital of companies (Art. 4.2):

a) services of

general interest, including the management of the relevant infrastructures;

b) public works

based on a programme agreement between public administrations or a public-private

partnership agreement;

c) production of goods

and services in favour of the shareholders;

d) public

procurement.

The deliberation to found a

company or buy shares in a pre-existing one has to be analytically motivated,

with particular attention to the economic sustainability and the compliance

with EU law on state aids. Said deliberation is then sent to both the Court of

Auditors and the Antitrust Authority (Art. 5).

The Decree also draws a line

between companies that are controlled by public administrations (“società a controllo pubblico”) and companies

in which they are solely involved (“società

a partecipazione pubblica”). There is “public

control” when a public administration exercises a dominant influence,

either by ownership rights or through shareholders’ agreements (Art. 2.b); there

is “public participation” when a public administration vests the quality of

shareholder or exercises management rights due to the possession of financial

instruments (Art. 2.f).

The aforementioned distinction

is important because it entails different legal regimes.

In fact, companies under

public control are subject to stricter rules, since they are presumed to

operate more like public entities rather than private companies.

For instance, companies under

public control must have a sole

administrator, unless there are specific reasons justifying the appointment

of a board of directors, which nevertheless shall consist of no more than five

members (Art. 11.2-11.3). The sole administrator and the members of the board

must possess the requirements of good

reputation, professionalism and independence, as indicated in a future

decree by the President of the Council of Ministers (Art. 11.1).

When the directors are also

employees of the shareholder administration, they are obliged to transfer their

remuneration back to the company, since they already get a wage from the State

(Art. 11.8). The remuneration of administrators, directors and employees of

said companies shall not exceed 240,000 Euros (Art. 11.6).

External

controls are strengthened: companies under public control must comply with the

provisions of Transparency Decree No. 33/2013 (Art. 22) and any shareholder administration

may file a lawsuit for the ascertainment of irregularities by the directors,

independently from the percentages established by Article 2409 of the Civil

Code (Art. 13). In case of corporate malpractice, the directors and the

employees of the company are subject to the jurisdiction of both civil courts

and the Court of Auditors (Art.12).

The Decree also contains

provisions regarding public-private companies

and in house companies.

With reference to former

category, the private partner is chosen through a public tender procedure and must

possess no less than 30% of the share capital (Art. 17.1). With reference to

the latter, in house companies are subject to a control by the shareholder

administration which is similar to that which it exercises over its own

departments (Art. 16.1): these companies must provide goods and services almost

exclusively in favour of the controlling administration (80% of the income -

Art. 16.3); when purchasing goods and services, they must use public tenders,

so as not to bypass the rules of public evidence (Art. 16.7).

As previously established by

the majority of court rulings, both controlled companies and participated ones

are now subject to bankruptcy

proceedings in the event of default (Art. 14). Furthermore, the Decree

prohibits the shareholder public administrations to create new companies for

the management of the same activities of bankrupt companies for five years

starting from the declaration of bankruptcy (Art. 14.6).

That said, it needs to be

noted that there are considerable exceptions to the application of the Decree: associations

and foundations; special purpose companies created by law for the management of

specific public interest services; and listed companies, which may opt to

comply with the new rules, but are not obliged to do so; plus a variety of

exemptions from single provisions.

In conclusion, Decree No. 175

has achieved the result of providing public companies with a common legal

framework. However, given the lack of precision of key provisions and the

number of exemptions, the effectiveness of such provisions will be eventually

determined by the interpretation of the courts of law.