ANDREA FUSARO Transferring Business Ownership in Italian ...

In 2006 fiscal treatment of transfers of firms was modified, through the abolition or reduction of inheritance
and gift taxes. Business and substancial shareholding in a company, whatever the amount,
is not taxed if they pass to the descendants of the deceased and if they undertake to continue the
business or control the company for at least five years 20 .Otherwise, in the value of shares and firms
goodwill is not included 21
7.Our succession law reserves a dominant role to the will: article 458 of Civil Code denies the validity
of succession agreements. The will must be personal, individual: article 589 prohibits joint
and mutual wills.
This makes proper estate planning difficult. In order to mitigate the consequences of these proibitions
business or family agreements are used, so as to mantain a certain number of management rules
throughout the change of generations. To protect ownership in family firms some of the clauses
above described are used. In the articles of the company whose members are the parent and only
the child involved in the business -not his/her sisters and brothers- we often include the buy-sell
clause, mandatory for the heirs, that allows the child who is already a member (in the quality of
shareholder) to buy all the shares of the deceased, paying full price.
8. Italian law doesn't consider suitable family foundation. It is deemed to be invalid if it has no
other object apart from keeping assets for the benefit of a family, even though there is no esplicit
legal prohibition, but only a doctrinal opinion and an old case of our Supreme Court 22 , based on the
rule against Fidei-commissum, that family foundation would violate.
9. Hereditary business ownership transfers have been studied deeply in Italy in last years, in relation
to the use of legal instruments alternative to gifts and wills.
It is well known that according the 1994 Recommendation of the European Commission on the
transfer of small and medium- sized enterprises 23 the Member States should consider allowing the
conclusion of future succession pacts.
Italian scholars have incouraged the legislator to introduce a new legal instrument, following the
model of family agreement used in practice to transmit ownership and management to one or more
heirs, shaped in a way to avoid the risk of "azione di riduzione", the proceeding that those with a
right to a reserved share can bring to have legacies or donations reduced.
Italian legal tradition knows some similar patterns, especially "division by the testator", where the
testator directs the division, specifing how the portions are to be made; he can also state that the division
be carried out according to a valuation drawn up by a disinterested third party 24 . But it takes
effect under the provisions of a properly executed will, so that the transfer of the firm is postponed,
it happens after death; on the contrary, often one wishes an immediate transfer, like a gift, under
which title passes immediately to the transferee.
Anther similar pattern wold be "donatio mortis causa" 25 : a gift made during the life of the donor
which is conditional upon, and takes effect upon, death. But it was verified in consistency with article
458 civil code and the risults have usually been uncertain.
10. In order to facilitate the transfer of enterprises, succession rules have been reformed 26 , introducing
family agreements 27 .
20
Art. 3, par. 4-ter, d.lgs. 31.10.1990, n. 346, as amended by d.l. 3.10.2006, n. 206, conv. by l. 24. 11. 2006, n. 286
21
Art.8, par. 1-bis, d.lgs. 346/1990
22
Cass. 10. 7. 1979, n. 3969
23
OJ L385, 31. 12. 1994, p. 14(see also the communication containing the motivations of the recommendation:OJ C
400, 31.12.1994, p.1), followed by the Communication from the Commission on the transfer of small and medium- sized
enterprises(98/C 93/02)
24
F.SALERNO CARDILLO, Italy, p. 371
25
Latin, meaning "gift on the occasion of death"
26 Through law nr.55, February 14 2006
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