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.