This article is kindly contributed by Alessandro Mulinacci, Legal Partner at Crowe Horwath in Milan. His contact details are at the end of this article.
This article provides an overview of the most common procedure for removing an Italian subsidiary – which could be a company limited by shares, or a limited liability company.
Voluntary liquidation is a procedure regulated by the Italian Civil Code that involves some formalities and timings to be respectively adopted and respected.
It is important to note that the closure, i.e. the extinction of the Company and the consequent cancellation from the Register of Companies, will be completed only after the filling of the final Balance Sheet of liquidation, to be prepared at the end of the liquidation procedure.
Upon deciding for the liquidation of the company, the board of directors (or the sole director) must call a shareholders’ meeting, which is the competent body to resolve in this respect.
During the meeting, that has to be held before an Italian notary, a liquidator has to be appointed.
The appointed liquidator must carry out all the activities having the aim to extinguish the company’s assets, such as paying debts, collecting receivables and so on.
The liquidator is generally chosen among one of the outgoing directors and can be a foreign individual.
Regarding the accounting formalities (such as, for example, the keeping of accounts, journal books and the VAT registers), it is important to notice that during the ‘liquidation phase’, a company which is about to be wound up has the same accounting obligations as any other company.
In addition, some specific accounting activities must be undertaken:
a) ‘Opening accounting situation’
At the date of registration of the resolution of the quota-holders (shareholders) at the Register of Companies, an opening accounting situation must be prepared. It will reflect the final financial situation of the directors’ management, and will be handed over to the liquidators. This ‘opening accounting situation’ does not have to be approved by the quota holders’ meeting.
b) ‘Accounting situation’
At the end of the first period of liquidation (from the date of starting of the liquidation to the end of the relevant fiscal year) another accounting situation must be prepared. This ‘accounting situation’ does not have to be approved by the quota holders’ meeting either. This period also represents a tax period, therefore the applicable income taxes must be calculated and paid.
c) ‘Annual financial statement of liquidation’
At the end of every fiscal year (as long as the winding up procedure continues), a financial statement of liquidation must be prepared, including the relevant explanatory note. This document has to be approved at a meeting of the quota holders.
d) ‘Final financial statement of liquidation’
Once the liquidator has finished the activities he has to perform in order to realise the company’s assets, and he has settled all the claims of third parties, it will be possible to draw up a final financial statement of liquidation.
In addition, the liquidator should draft a ‘plan of allocation’ that has to be filed with the Register of Companies together with the Final financial statement. The mentioned plan consists of a programme of distribution of the net liquidation capital (if any).
Those documents also have to be approved by a meeting of quota holders.
The activities to be carried out by the liquidator may include:
- to collect all the receivable positions;
- to settle all the payable positions;
- to offset any inter-company positions (those operations should be documented by proper signed documentation);
- to terminate any contract or agreement (i.e rent, bank account, etc.) held in the name of the company;
In the case the company’s assets are insufficient to pay its debts, the liquidator may ask for funds from the shareholders.
Obviously the duration of the procedure depends on the time necessary to perform the above activities.
e) Cancellation of the company
The request for cancellation of the company from the register can be made together with the filing of the final financial statement, if the final financial statement has been approved by a meeting of quota holders (this is usually the suggested option).
Otherwise, the final financial statement and the plan of allocation can be approved by the quota holders by tacit consent. In this case, the request for cancellation of the company can be filed only after the expiration of a 90 days period from the filing of the final financial statement.
Finally, it is important to notice that all the documents, accounts and tax ledgers and tax returns have to be kept available in Italy for at least ten years (as per Civil Laws). This period may be extended if a tax assessment, with the tax authorities, is in progress.
Alessandro Mulinacci, the author, is a Legal Partner in the Milan office of Crowe Horwath. He can be contacted by telephone on +39 02 80673878 or by email at email@example.com.