In the Italian market, early-stage venture capital financing and funding are based on a few recurring structures that can envisage the use of pure equity and/or hybrid instruments having debt-like and equity-like features.

Traditionally, and in the simplest structures, investors would inject pure equity and subscribe new shares or quotas in the context of capital increases, and shares of quotas subscribed often have special economic and governance rights attached. These “preferred” economic rights usually include liquidation preferences over dividends and exit-related proceeds, anti-dilution protections, board representation and tight transfer restrictions.

At the very earliest stage, however, when valuation is uncertain, Italian practice has witnessed the use of more hybrid instruments with shares/quotas benefitting from minimum returns protections and priority. Other instruments and structures include funding through a mix of equity and convertible loans or warrants, thereby allowing the immediate deployment of cash with the flexibility to convert into equity in a future financing round, or to otherwise benefit from the equity upside in the context of an exit.

The Italian Civil Code also provides for a home-grown solution in the form of participating financial instruments (Strumenti Finanziari Partecipativi). Such instruments, available only for joint stock companies, allow investors to take a quasi-equity position, with rights to profits and limited governance rights, and they can be structured for conversion into shares.

Overall, the trend in Italy mirrors international practice: hybrids like preferred shares, convertible loans and warrants dominate pre-seed and seed-stage funding.

In growth capital and private equity financing, structures are less creative than those applied for venture capital transactions. Indeed, in those stages of the lifespan of a company, the company is more stable, and the relevant financial metrics are more available and reliable. This results in investors being focused less on downside protections and more on governance control, leverage, and exit routes and strategies. Moreover, in a typical buyout transaction, the investor acquires a majority or even 100% of the company. These deals are frequently structured as leveraged buyouts (LBOs), where a significant portion of the purchase price is financed with debt repayable with future earnings. This is a defining feature of private equity and sets it apart from venture capital: start-ups cannot sustain debt, but a mature company can.

In a typical growth capital deal, a private equity fund or late-stage investor acquires a majority stake or a significant minority stake, as the main purpose of investors at this stage is to foster organic expansions and add-ons. In such structures, the investor often leaves the day-to-day operations to the founders or managers, while having ultimate control over the company and/or veto rights over major strategic decisions.

The contractual arrangements regarding such investment will usually contain provisions on dividend policy, exit timing, tag-along/drag-along rights, transfer restrictions and incentives to ensure a profitable exit.

Governance in these deals reflects the investor’s level of control. In buyouts, the private equity fund takes board control and dictates strategy; in minority growth deals, it exerts an influence through reserved matters and veto rights. In venture capital transactions, investors typically take minority stakes, with limited protective governance rights relying on preferred shares and liquidation preferences for protection on the downside rather than stringent legal control.

When a company decides to go public, the journey to an equity listing is structured, formal and highly scrutinised. It usually begins well before the actual listing date, with management and advisers making the company “IPO-ready”. This means not only having solid financials and growth prospects, but also having corporate governance structures, internal control procedures and disclosure standards strong enough to withstand the constant spotlight of the market.

Once the decision is made, the company must choose the right venue. In Italy, large and established players typically aim for Euronext Milan, the main regulated market. Smaller and younger companies, often in technology or life sciences, find a more natural home on Euronext Growth Milan (formerly AIM Italia), which was designed specifically to give SMEs easier access to capital.

The process itself, which generally takes approximately six months from kick-off to the actual listing date, revolves around drafting and filing a detailed prospectus with the Italian Companies and Exchange Commission (Commissione Nazionale per le Società e la Borsa; CONSOB), the Italian securities regulator. At the same time, investment banks structure the offering, which may combine newly issued shares (to raise fresh capital for the company) with existing shares sold by current shareholders (often family owners or private equity funds seeking an exit). The banks then lead a roadshow, where management meets potential investors to discuss the company’s growth story, test demand and ultimately set a price for the offering.

When trading finally begins, the company becomes a public entity subject to continuous reporting obligations, market discipline and a level of transparency far beyond what most private businesses are accustomed to.

The decision to list is always a balancing act. On one side, an IPO can bring fresh capital for expansion and/or an exit (total or partial) to the existing shareholders, international visibility, liquidity and a valuable acquisition currency in the form of publicly traded shares. On the other hand, it can imply higher costs and constant discussions with investors.

In Italy, equity restructurings are a fairly common tool to deal with financial distress, especially in capital-intensive industries or in growth companies that run into liquidity shortages. The instruments most frequently seen are capital increases, debt-to-equity swaps and, in the venture space, down rounds.

The most traditional and straightforward approach is the capital increase. Companies raise new equity to strengthen their balance sheets, either from existing shareholders or new investors. If incumbents do not participate, their stakes are diluted – sometimes substantially. In family-owned companies, which are very common in Italy, this can be a sensitive issue: families often want to preserve control, even if it means shouldering more of the recapitalisation burden.

In cases of heavier distress, debt-to-equity swaps are used, often in the context of negotiated restructurings with banks or within formal restructuring procedures under Italian insolvency law. By converting loans into equity, creditors reduce the company’s debt load and acquire ownership stakes. While this helps restore financial viability, it comes with challenges: creditors may have little interest in becoming shareholders, while existing owners resist the dilution or loss of control that follows.

In the venture capital segment, down rounds – raising new money at a lower valuation than the last round – are not rare. They allow the company to survive, but they also trigger anti-dilution protections for early investors and cause tension among shareholder groups. Founders and management often feel the impact most, as their equity is heavily diluted, and the reputational signal of a down round can make future fundraising more difficult.

Overall, these tools – capital increases, debt-to-equity conversions and down rounds – are recognised and commonly applied in the Italian market, with an obvious preference for capital increases for listed entities. The challenges lie less in their technical feasibility and more in their execution: securing shareholder approval, dealing with notarial and regulatory formalities and managing the conflicting interests of different stakeholders. Cultural factors also matter. The Italian business environment is dominated by family-controlled companies that may resist ownership dilution or external control, which makes restructurings not just a financial negotiation, but also a deeply political one.

Italian law provides for an articulated set of provisions relating to corporate governance for both joint stock companies and limited liability companies. The main difference between the two different type of companies is that, for limited liability companies, it is possible to allocate certain managerial powers to the quotaholders, while for joint stock companies the management is entrusted to a board of directors, and shareholders take decisions on extraordinary matters only (such as capital increases, mergers or liquidation).

In practice, though, while the legal framework provided for under applicable provisions of law is already well advanced and detailed, the investors and founders govern their reciprocal rights and obligations through shareholders’ agreements. These agreements are then mirrored in the company’s by-laws to give them greater enforceability and derogate to the default regime provided under applicable laws, which limits the duration of such agreements to a maximum of five years for joint stock companies.

A typical agreement starts with information rights. Investors expect regular access to financial data, business plans, budgets and management reports. They may also negotiate the right to appoint a board observer, ensuring they can follow strategic discussions even if they do not have a majority on the board.

The heart of the arrangement is governance. Founders usually retain day-to-day operational control, but investors secure a seat on the board and define a list of “reserved matters” that cannot be decided without their consent. These often include issuing new shares, a budget and business plan, taking on significant debt, changing the business plan, amending by-laws or approving mergers and acquisitions. In this way, investors can protect themselves against decisions that might fundamentally alter the value of their investment, even if they are not majority owners.

However, the approach outlined in the foregoing is more streamlined for listed companies, where the presence of multiple majority shareholders is either subject to ordinary capital market rules or agreed in public shareholders’ agreements, whereby shareholders tend to divide their roles in the governance of the listed company.

Another central part of these agreements is exit rights. Because shares in private companies are illiquid, investors need a clear path to realising their investment. This is why contracts commonly include drag- and tag-along rights, allowing investors to direct the exit strategy.

All of these provisions are designed to strike a balance. Founders want to run the company without constant interference, while investors want oversight, transparency, and a reliable and feasible exit route.

Exit rights in listed entities shareholders’ agreements are instead quite rare, with the exception of the orderly sell-down mechanism usually applicable to minority shareholders.

It is not unusual for investors to provide a mix of debt and equity financing to the same company, but the context and implications differ depending on whether the investor is a venture capitalist or the investment is carried out as a more standard private equity transaction.

In a buy-out, which is the most common investment carried out by private equity funds, the investment is carried out as equity, and as shareholder loans or subordinated debt. This can optimise the capital structure, reduce tax burdens (where interest may be deductible) and give the fund repayment priority over pure equity, facilitating the cash upstream.

In early-stage companies, a pure mix of equity and debt from the same investor is less frequent. Venture investors generally provide equity for upside and use convertible instruments (convertible loans and warrants).

From an investor perspective, the advantage of mixing debt and equity is flexibility. The investor can protect part of the investment with the features of the debt instrument while keeping equity exposure to benefit from potential growth. However, there are legal complications to consider, especially in Italy. Under Article 2467 of the Civil Code, shareholder loans granted in situations of financial imbalance may become subordinated to all other creditors if the shareholder has a position of control or significant influence. This means that, in insolvency, repayment of those loans will only occur after external creditors are satisfied. Courts may also requalify shareholder debt as equity if it was really intended to shore up under-capitalisation. These rules exist to prevent shareholders from disguising risk capital as debt and putting ordinary creditors at a disadvantage.

There is also a governance challenge: when an investor is both shareholder and creditor, its interests may diverge. As a lender, it may want to minimise risk and push for repayment; as a shareholder, it may favour riskier growth strategies. This dual role can create conflicts, especially if the company faces financial distress.

For these reasons, combining debt and equity requires careful structuring. This can be a powerful tool in private equity, where funds deliberately design layered financing packages, but it is used with more caution in the venture space. In all cases, investors must weigh the commercial benefits of flexibility and tax optimisation against the legal risks of subordination, requalification and conflicts of interest.

At its core, equity finance means raising capital through the issuance of shares, but in practice it spans everything from early-stage venture capital to large public offerings, with a variety of hybrid forms in between.

The Italian venture market has grown significantly over the past decade, supported by public incentives and the creation of the “innovative start-up” regime. Legal and financial practitioners have refined the hybrid instruments such that they mirror those used in common law countries.

As companies grow, equity finance takes the form of growth capital. These deals are usually structured as minority or majority investments, with strong governance and exit rights negotiated in shareholders’ agreements.

In the realm of pure private equity investments, equity finance is a long-established practice. Buy-out funds routinely acquire controlling stakes, often combining equity injections with leveraged structures that mix shareholder loans and bank financing. This segment of the market in Italy is relatively sophisticated, with both domestic and international players being active, and transactions frequently involve tailored governance arrangements, management incentive schemes and carefully structured capital stacks. Hybrid forms such as preferred shares with stapled debt instruments, mezzanine capital – subordinated loans with equity kickers – are less common than in Anglo-American markets, but they do appear in later-stage deals, particularly when traditional bank financing is unavailable.

Finally, at the most public end of the spectrum, equity finance in Italy takes the form of IPOs and public equity offerings. Large corporates and financial institutions are listed on Euronext Milan, while smaller, high-growth companies have access to Euronext Growth Milan, a junior market designed for SMEs.

In Italy, equity financing is provided by a diverse range of sources depending on the company’s stage and size. For start-ups and SMEs, the main providers include business angels, venture capital funds, family offices, equity crowdfunding platforms and corporate venture capital arms. For established companies, financing comes from private equity funds (both domestic and international), institutional investors and strategic industrial partners and, with respect to listed companies, public markets.

Italian law generally adheres to the principle of freedom of establishment and capital movement. Aside from companies operating in certain regulated industries (eg, banks and insurance companies), there are typically no quantitative restrictions on maximum shareholding percentages or minimum shareholder numbers for private companies (Srl) or corporations (SpA). Both corporate forms can operate as single-shareholder entities (società unipersonali), and there are no general limits on how much of a company any investor can own. Similarly, there are no blanket restrictions based on investor nationality or type (individuals, corporations and funds can all participate), subject to the qualitative restrictions described in the following.

Qualitative restrictions exist primarily through the “golden power” regime and foreign direct investment (FDI) screening framework, which have been significantly strengthened in recent years. The government maintains special powers in strategic sectors including defence, national security, energy, transport, communications, critical infrastructure and high technology (AI, robotics, semiconductors and cybersecurity). Foreign investments in these sectors – particularly from non-EU investors or countries lacking reciprocity – may require prior notification and can be subject to veto or conditions.

In Italy there are very clear differences between companies seeking capital, and these differences strongly influence both whether they raise debt or equity, and which structure they choose.

Smaller and younger companies, especially start-ups and innovative SMEs, almost always rely on equity financing. Their financial and economic position, with limited assets and often-negative cash flows, would not put them in a position to easily access bank debt. Equity is their natural option because it provides patient risk capital and does not burden the company with stringent covenants and repayment obligations.

By contrast, mature mid-sized and large companies – often family-owned businesses with an established track record – tend to prefer bank debt or bond financing, sometimes supplemented by private equity in growth or succession situations. Age and size matter here: these businesses have the collateral and cash flows that banks demand, and culturally, Italian entrepreneurs are more comfortable with debt (which preserves control) than with opening up their capital to outsiders.

In terms of shareholder composition, family-controlled companies are often reluctant to dilute ownership, so they lean towards debt unless there is a pressing need for equity – for example, to resolve succession issues, fund an acquisition or recapitalise after distress. By contrast, companies already backed by institutional investors are much more open to structured equity financings, since investor exits and staged funding are built into their model.

The equity finance market in Italy is steadily developing. In particular, venture capital has grown quickly in recent years: in 2024, Italian start-ups raised around EUR1.2 billion across roughly 300 deals, with median round sizes climbing to about EUR540,000, more than double the year before. Private equity investments were confirmed to be common in the Italian market, with several billion euros invested annually – mostly in buy-outs and growth deals involving mid-sized, often family-owned businesses.

A further aspect to be taken into account is that family businesses continue to prefer bank debt funding over equity, to avoid having an investor controlling or having a significant influence on their business.

Looking ahead, deal sizes are expected to continue growing, with more focus on additional equity rounds and growth equity, and with international investors likely to play a bigger role. IPOs remain limited but could recover if market conditions improve. Overall, private equity continues to be the most active segment, while venture capital is expanding from a small base.

In Italy, public equity raisings are not a common source of equity funding. Private equity accounts for several billion euros annually, while IPO activity on Euronext Milan and Euronext Growth Milan has been limited in the last three years. Family-owned mid-sized companies, which dominate the Italian economy, prefer private capital to avoid the costs, disclosure requirements and dilution that come with public markets, although the Italian government has extended the multiple voting rights regime to minimise this risk.

Recent trends underline this gap: private deals are getting larger and attracting more international investors, while IPOs remain rare and highly sensitive to market volatility. Geopolitical uncertainty and unstable macro conditions have further discouraged listings, making private channels the more reliable and flexible option.

The development of an efficient equity funding environment requires sophisticated and experienced advisers. Deals in Italy – especially in the mid-market – are often identified through investment banks, boutique M&A advisers, law firms and accounting firms that have longstanding relationships with family-owned businesses. Private equity funds also leverage proprietary networks, approaching entrepreneurs directly when succession or expansion needs are on the horizon.

Both investors and companies seeking capital can benefit from Italy’s increasingly well-developed adviser and investor scene. Milan, in particular, has become a hub for venture capital, private equity, corporate finance boutiques and international law firms. This concentration of expertise helps streamline transactions, brings international standards into local deals and gives companies access to a broader pool of investors, including foreign funds.

As regards the public markets, deal sourcing typically occurs through a well-developed ecosystem of financial intermediaries, including major domestic and international investment banks and corporate finance boutiques. The maturity of this adviser ecosystem has been particularly valuable in recent years as Italian companies have increasingly looked beyond domestic markets for growth capital, requiring intermediaries capable of bridging cultural and regulatory differences between Italian corporate traditions and Anglo-Saxon investor expectations.

In Italy, exit paths follow the same routes seen internationally. However, given the specifics of the Italian market, the most common exit is a trade sale – selling the company to an industrial player, often foreign, seeking to expand in Italy or acquire technology, brand value or market share. Given that many Italian companies are small or mid-sized and highly specialised, strategic buyers often see them as attractive bolt-on acquisitions.

Another common exit path is secondary sale to another financial investor, typically another private equity fund. This is especially common in the mid-market, where funds with different strategies (eg, growth vs buyout) or different fund sizes move company ownership around as the company scales.

The IPO exit is another valuable tool, although it has been underused in the last few years due to market conditions. IPO usually involve larger corporates or niche high-growth businesses on Euronext Growth Milan. IPOs are also sometimes pursued to give private equity investors a partial exit while maintaining a stake during the initial listing period.

Other mechanisms include buy-backs by founders or families, which sometimes occur in family-controlled businesses when external capital was brought in only temporarily, and, in some cases, dividend-recapitalisations or structured refinancings where investors extract value through dividends or preferred instruments rather than a full sale.

In Italy, debt finance remains far more important than equity finance for most companies. The Italian economy is dominated by small and medium-sized, often family-owned, businesses, and these companies traditionally rely on bank lending as their primary source of funding. Strong relationships with local banks and a cultural preference for retaining control have long made debt funding the first and easiest option.

Equity funding has nonetheless gained traction over the last decade. Private equity funds have become particularly active, offering capital and managerial support to family-owned companies facing succession issues or seeking growth, even through international expansion. Venture capital is also growing, though is still smaller than in other European markets.

Recently, there has been a gradual rebalancing towards equity in innovative sectors and mid-market private equity, driven by government incentives, international investor presence and the growing sophistication of advisory ecosystems in Milan. Still, in terms of sheer volume, debt remains dominant because of cultural preferences, abundant banking relationships and the structure of Italy’s corporate landscape.

A private equity transaction, whether it involves a minority growth investment or a full buy-out, requires time and due care in investment analysis and structuring. The length of the process in mainly dependent upon funds conducting full financial, legal and tax due diligence, banks or advisers that can run competitive auctions, and negotiations on the transaction and potential structuring of a deal with the management – often requiring long negotiations with respect to management incentive plans. Where family-owned businesses are involved – which is so often the case in Italy – negotiations can become more complex, as the owners may have different views and needs, with the investor having to find a balance that ensure the company’s growth while preserving family heritage. Regulatory approvals, such as antitrust clearance or FDI scrutiny in sensitive sectors, can further extend the timeline.

As regards the IPO, the time between the initial decision to list and the first day of trading is usually six to eight months. Companies must prepare audited accounts, reshape governance to comply with listing requirements, draft a prospectus for approval by CONSOB and conduct roadshows to build investor demand. The process is usually structured thanks to the established ecosystem of advisers, although it is subject to external conditions: market volatility, geopolitical uncertainty or weak investor sentiment can delay a listing.

Italy’s equity markets are in principle open to both domestic and foreign investors. There are no general restrictions on who may hold shares in an Italian company, and a company can even be wholly owned by a single foreign shareholder. That said, there are important exceptions linked to defence/national security, strategic sectors and regulated sectors (in which the operations of the relevant companies are supervised by Italian or EU regulators).

The most significant framework is Italy’s Golden Power regime, which gives the government the right to screen and, if necessary, veto or impose conditions on acquisitions in sectors deemed strategic: defence, energy, transport, telecommunications and, more recently, health, agri-food, finance/insurance, media, aerospace, critical raw materials, and high-tech and data-intensive industries. The rules apply not only to non-EU investors but also, in certain cases (with respect to certain key strategic sectors), to EU buyers (including Italian investors). In practice, this means that foreign private equity funds, corporate investors and even EU players must notify and obtain clearance for deals in these industries.

There are also sector-specific ownership rules in highly regulated sectors, such as the banking, insurance and financial sectors, which require prior authorisation of the relevant supervisory authority in connection with the acquisition by a domestic or foreign investor of any significant stake (usually 10% or more of the target company’s equity capital). In general terms, such authorisation is issued upon completion of a regulatory assessment carried out by the competent regulator for the purpose of verifying whether the relevant acquisition could negatively affect the sound and prudent management of the target entity. In this respect, Italy maintains reciprocity rules: if an investor comes from a jurisdiction that restricts Italian or EU investors, Italy can apply mirror restrictions on those investors’ ability to buy into Italian companies.

In practice, these rules rarely block transactions outright. Most notifications under the Italian Golden Power regime are cleared, though sometimes with conditions attached (for instance, commitments on technology transfer, governance or employment). In sensitive industries, parties usually structure deals with advisers to anticipate regulatory concerns and engage proactively with the authorities.

In Italy, companies can distribute dividends and repatriate capital abroad (to the extent that this in compliance with applicable corporate law), but certain tax and regulatory limits apply. The main constraints concern withholding tax on dividend payments to non-resident investors.

When dividends are paid to foreign shareholders – whether individuals or entities – they are generally subject to Italian withholding tax.

The impact of these taxes can often be reduced by the EU parent–subsidiary framework and double taxation treaties (DTTs), which may lower withholding rates or, in some cases, exempt dividends altogether.

In addition, AML legislation, the Directive on Administrative Cooperation 6 (DAC6) and sanctions legislation may impose restrictions (eg, the EU sanctions on Russia and Belarus). Dividends cannot be freely paid to sanctioned individuals or entities, or to shareholders whose assets have been seized under the regulations. In such cases, any dividends must be deposited into frozen bank accounts in the name of the sanctioned person.

Beyond these tax, regulatory and sanctions-related issues, there are no specific restrictions in Italy on the repatriation of capital by foreign investors, provided that all corporate, tax and regulatory obligations are complied with.

Italy is subject to strict AML and KYC rules, which also apply in the context of equity financings. The applicable framework – which is aligned to European AML directives – requires banks, financial intermediaries, notaries, lawyers, accountants and other “AML-obliged entities” to carry out customer due diligence before and during transactions. In practice, this means:

• identification and verification of the customer’s identity, including the ultimate beneficial owners (UBOs) and the executor of the specific transaction;
• collection of information on the purpose and nature of the transaction;
• ongoing monitoring of the relationship and transactions for suspicious activity; and
• reporting obligations – if a suspicious transaction is detected, the “AML-obliged entity” must file a report with the Financial Intelligence Unit (Unità di Informazione Finanziaria per l’Italia; UIF), a dedicated unit established within the Bank of Italy.

For equity financings, this typically affects transactions as follows:

• new investors must provide documentation (ID, corporate records, beneficial ownership declarations and evidence of the source of funds);
• notaries – who are required for capital increases and share/quota transfers in many cases – will not proceed unless AML/KYC requirements are satisfied; and
• financial intermediaries handling payments must ensure funds come from legitimate, identified sources.

Overall, these rules do not block foreign or domestic investment.

In Italy, the default choice of law in equity financing transactions is Italian law, with jurisdiction given to Italian courts (especially Milan or other courts where specialised court sections have been established). This is largely because the company itself is incorporated under Italian law, and its share capital and corporate governance are in any case subject to Italian law. For this reason, even when foreign investors are involved, Italian law and courts are usually acceptable for core corporate matters.

That said, investors – particularly international funds – often prefer arbitration for dispute resolution. Arbitration can be agreed in the shareholders’ agreement (which is separate from the by-laws) and is enforceable under Italian law. It allows disputes to be resolved more quickly with expert arbitrators, and awards are generally enforceable abroad.

International investors sometimes go further and opt for international arbitration – for example, under ICC or Milan Chamber of Arbitration rules. This is particularly common when there is a cross-border investor base, or when significant sums are involved.

Golden Power Regime

There has been a steady increase in the number of annual Italian Golden Power notifications, with increased focus on pledge transactions (particularly in the context of a dividend recap transaction), as well as specific scrutiny of the banking sector and intragroup transactions. While notified transactions are generally cleared, the government may impose conditions (which in the case of pledge transactions may consist of a requirement not to distribute the financing proceeds upstream and to use such proceeds to implement the strategic company’s business plan).

Greater Foreign Investor Presence

International private equity and venture funds are more active in Italy than ever, drawn by relatively lower valuations and a wealth of mid-market, family-owned targets. This is pushing Italian companies to adopt more international standards in governance and reporting.

Succession-Driven Deals

A large share of private equity activity in Italy stems from generational transitions in family businesses. This is likely to remain a strong driver, as many mid-sized companies face leadership handovers in the coming years.

Sector Focus on Tech, Green Transition and Healthcare

Digitalisation, renewable energy and life sciences continue to attract disproportionate equity financing, driven both by EU recovery funds and investor appetite for scalable, high-growth sectors.

Capital gains of investors are taxed at the following rates.

• Resident individuals: flat 26% withholding tax if the shares are not held in a business context;
• Resident companies: generally, 95% of dividends received from qualifying participations are exempt from corporate income tax (IRES); only 5% is taxable.
• Non-residents: dividends are generally subject to a 26% withholding tax. This may be reduced under:
1. DTTs, which often lower the rate to between 5–15% depending on participation and jurisdiction; and
2. the EU Parent–Subsidiary Directive, which provides for a full exemption on intra-EU dividends if certain conditions are met (minimum holding of 10%, held for at least one year, etc).

Other taxes relevant to investors making an investment into entities incorporated in Italy are as follows.

• Cash contributions into Italian companies are subject to a fixed registration tax of EUR200.
• Purchases of shares in Italian joint stock companies (SpA) are subject to a financial transaction tax (FTT) of:
1. 0.2% (standard rate) or;
2. 0.1%, if executed on regulated markets or multilateral trading facilities (MTFs).
• Investments in “innovative start-ups” and “innovative SMEs” are eligible for a tax deduction of 30% of the invested amount.

Annual limits are up to EUR1 million for individuals and up to EUR1.8 million for companies (corporate taxpayers). In certain cases (eg, high-risk or high-impact sectors), the deduction may increase to 50%, provided specific conditions are met.

Italy has developed an extensive DTT network, giving non-resident investors a high degree of certainty when structuring cross-border investments. These treaties are essential to avoid overlapping taxation on income streams such as dividends, interest, royalties and capital gains. By 2024, Italy had concluded treaties with more than 100 countries, including major economies like the United States, Germany, France, the United Kingdom, China and Japan.

In addition, Italy is an active participant in the OECD Multilateral Convention (multilateral instrument; MLI), which introduces co-ordinated measures to combat base erosion and profit shifting (BEPS). Thanks to this framework, investors from treaty countries can usually benefit from reduced withholding tax rates or full exemptions on cross-border payments, ensuring a more predictable and efficient tax environment.

When an Italian company enters insolvency, the position of its equity investors changes fundamentally. From being the ultimate owners of the business, they become residual claimants, standing at the very bottom of the distribution line. Creditors – secured, preferential and unsecured – are paid first, and only if they are fully satisfied do shareholders have any chance of recovering value. In reality, this almost never happens, which means equity is typically wiped out.

Control also shifts away from shareholders. Once insolvency is declared, the company’s management powers pass to a court-appointed commissioner, liquidator or trustee, leaving equity investors with no say in day-to-day decisions. Even shareholder loans, if made when the company was already undercapitalised or in financial difficulty, may be reclassified under Italian law as “quasi-equity” and pushed behind the claims of ordinary creditors.

That does not mean shareholders are irrelevant in every scenario. In pre-insolvency and restructuring proceedings, such as a concordato preventivo, their approval may be needed for measures like capital increases, reductions or debt-to-equity swaps. In these contexts, they play a role in enabling or blocking restructuring plans, even though doing so often results in heavy dilution or loss of control.

In an Italian insolvency, equity investors stand last in the order of payment. The statutory “waterfall” of distributions is clear:

• pre-deductible claims (such as – amongst others – those arising from pre-deductible loans authorised in the context of the relevant insolvency proceeding, expenses connected to the proceeding itself, etc);
• secured creditors are paid first, from the proceeds of assets over which they hold security (eg, mortgages, pledges);
• preferential creditors (such as employees and certain tax and social security claims) follow, often ranking ahead of unsecured lenders;
• unsecured creditors are then paid on a pari passu basis with whatever remains;
• subordinated creditors – including shareholder loans that are recharacterised as “quasi-equity” under Article 2467 of the Civil Code – come after all ordinary creditors; and
• equity investors (shareholders) are repaid only if anything is left after all creditors have been fully satisfied. In practice, this almost never happens, meaning shareholders usually lose their entire investment.

As for uncalled capital commitments, Italian law allows insolvency administrators to call (as far as the judicial liquidation is concerned, on the basis of a judicial order of the delegated judge) unpaid share capital from shareholders even after insolvency has commenced. This means that if a shareholder has subscribed for shares but not yet fully paid them up, they remain liable to contribute the outstanding amount. These funds become part of the insolvent estate and are used to pay creditors according to the ranking outlined in the foregoing.

In Italy, insolvency proceedings are lengthy and rarely yield anything for shareholders.

A straightforward judicial liquidation of a small company can take two to three years, but more complex cases, especially those involving large corporates, litigation over claims, or asset sales and claw-back actions, can last five to seven years or more. Even with reforms – most recently the Crisis and Insolvency Code (Codice della Crisi e dell’Insolvenza), which seeks to accelerate procedures – the system remains formalistic and heavily supervised by courts and judicial officers, which contributes to delays.

When it comes to recoveries, shareholders almost never see a return. Insolvency is creditor-driven, and, as summarised under 5.2 Seniority of Investors in Distributions, the statutory payment waterfall places shareholders at the very bottom, after secured, preferential and unsecured creditors, and even after subordinated shareholder loans. By the time all creditor claims are satisfied – if they are satisfied at all – there is usually nothing left for equity. The only rare exception is when the company still has significant residual value after repaying debts (eg, if liquidation proceeds exceed total liabilities), but in practice this outcome is exceptional.

In Italy, when a company faces financial distress, the legal system encourages rescue and reorganisation procedures before pushing a business into full insolvency. The framework is now largely governed by the Crisis and Insolvency Code (Codice della Crisi d’Impresa e dell’Insolvenza), which came fully into force in 2022 and was designed to promote early intervention.

Typical rescue tools include the following.

• Restructuring plans and agreements with creditors (piani attestati/accordi di ristrutturazione): Out-of-court or court-homologated settlements with creditors, often involving debt rescheduling, debt-for-equity swaps or new financing. These are useful for companies that are still viable but overleveraged.
• Composition with creditors (concordato preventivo): A court-driven process where the company proposes a restructuring plan to its creditors, subject to their approval and court confirmation (omologazione). The plan can be liquidation-oriented (orderly asset sale) or restructuring-oriented (continuation of the business).
• Rescue financing: The Crisis and Insolvency Code expressly allows new financing, including by shareholders or third parties, to support a restructuring plan. These loans may enjoy priority in insolvency if properly authorised.
• Early warning procedures: The Crisis and Insolvency Code also introduced mechanisms requiring directors to act once “crisis indicators” appear, pushing entrepreneurs and companies to take any measures required to avoid an insolvency becoming irreversible.

When an Italian company becomes insolvent, equity investors face more than just the loss of their stake. They may also encounter a number of legal and financial risks that insolvency administrators actively pursue in order to maximise recoveries for creditors.

One common area is uncalled capital. As highlighted under 5.2 Seniority of Investors in Distributions, if investors have subscribed for shares but have not fully paid them up, the liquidator can still demand the outstanding amount. This obligation survives insolvency and is often one of the first avenues administrators look to.

Another recurring risk involves shareholder loans. Italian law treats loans granted by controlling or influential shareholders during times of financial distress as “quasi-equity”. These loans are subordinated to all other creditor claims, which means repayment only happens after everyone else has been satisfied – in practice, rarely if ever. Worse, if repayments were made shortly before insolvency, they may be clawed back as preferential transactions.

Distributions also attract scrutiny. If dividends were paid when no profits were legally available, shareholders can be asked to return what they received. Likewise, insolvency administrators carefully review past transactions with shareholders, and anything that looks like it unfairly extracted value – such as redemptions or asset transfers on favourable terms – can be challenged and unwound.

While it is directors who normally bear liability for mismanagement, investors with strong influence are not immune. If they are seen to have directed the company’s affairs, they risk being treated as “de facto” directors and held liable for damages. In extreme cases, courts may even pierce the corporate veil if the company was deliberately undercapitalised or used in a way that harmed creditors.

In practice, ordinary minority shareholders are rarely sued, beyond being asked to cover unpaid capital. However, controlling shareholders or private equity sponsors often find themselves targeted for claw-backs of shareholder loan repayments, unlawful dividends, or questionable pre-insolvency transactions.

In short, insolvency in Italy usually wipes out equity, but it can also expose investors to additional liabilities, particularly if they exercised significant control or engaged in transactions that reduced the company’s assets before collapse. For investors, the risks extend beyond the loss of value to potential repayment or litigation.