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DAOs: essential legal issues

2023-08-28T21:23:05Z

Bianconi: links to other Wiki pages

= DAOs: an essential definition =
DAOs can be defined as "''non-hierarchical organizations that perform and record routine tasks on a peer-to-peer, cryptographically secure, public network, and rely on the voluntary contributions of their internal stakeholders to operate, manage and evolve the organization through a democratic consultation process''<ref>Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.</ref>" .

The operation of the DAO, its structure, organization and the interactions that its participants enact, are contained within a blockchain.

DAOs are also described, as suggested by the same acronym, as decentralized, autonomous and organized organizations, and it is precisely from the integration of these principles that the phenomenon emerges as a "''new organizational design''<ref>C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.</ref>".

Some peculiar features of DAOs, considered by a large proportion of scholars as advantageous elements, are:

* stability: every transaction is recorded and stored;
* anonymity: participants can register with their usernames, avoiding exposing their identities;
* knowability: transactions are validated and can be easily verified;
* transparency: the proposals made, the decision-making process, and the allocation and content of powers and duties among participants are knowable.

== Distributed and decentralized ==
Decentralization is imposed by the use of DLTs (Distributed Ledger Technologies) and operates on two distinct levels:

* on the one hand, it eliminates the need for an intermediary in product placement procedures;
* on the other, it marginalizes the role of the corporate model in the conduct of business activity.

The revolutionary profile of DAOs lies in the second of these issues, considering that [[The token holders|the token-holders]] – i.e., those who have obtained, as a counter-performance of the made contribution of cryptocurrencies, tokens attributing the right to vote – directly control the organization and the management of the entity, without the said function being delegated to another entity, tending to be different from the owner, and thus eliminating those so-called [[Agency Theory|agency relationships (and costs)]] that characterize corporations.

In other words, hierarchical and centralized authority (typically the managers) is dispensed with a structure based on cooperation and equality of its participants.

It is precisely the decentralized nature of the DAO that allows to distinguish (partially) such organizations from the increasingly common entities established through [[DAO formation|Initial Coin Offerings]] or through [https://economiapertutti.bancaditalia.it/chiedere-prestito/crowdfunding/index.html?com.dotmarketing.htmlpage.language=3 crowdfunding] activities.

== Autonomous and automated ==
DAOs operate according to the rules contained in the whitepaper, drafted and signed by [[THE FOUNDERS OF A DAO|the founders]], which are encoded in a [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]] that in turn is executed automatically using the blockchain protocol. Essentially, the smart contract is a computational program consisting of a series of provisions that are applied automatically and autonomously, irreversibly, and which, thanks to blockchain technology, are recorded and stored over time. The rules contained in the code, therefore, enable the operation of the organization without the need for human intervention and coordination.

In other words, the smart contract constitutes the foundational element of the DAO, which defines the [[The self regulation of a DAO|DAO's self-regulation]], according to the fundamental rule-of-code principle, and preserves its assets by tracking its movements.

Again, the automatisms arising from this technology enable the implementation of trust in the organization while reducing transaction costs and costs related to the exchange of information between participants.

== Organized and ordered ==
Blockchain technology, together with the clearly defined rules on it, allows for full transparency regarding the powers and duties of both members of the organization (token holders) and other [[The stakeholders|stakeholders]]. This transparency allows for increased trust in the functioning of the organization and efficiency of management.

= The distinction between DOs and DAOs =
Part of the doctrine distinguishes between DAOs and DOs: in the former, the functions are automatic and self-executing, as the blockchain and smart contracts constitute the communication protocol to enable interaction between algorithmic systems; in the latter, the decision-making and consultation role of the human being is included, while the algorithm acts only as a function of streamlining and automating the governance of the group.

Some authors distinguish instead between “''participatory DAOs''” in which smart contracts are used to collect votes from participants, and “''algorithmic DAOs''” organizations that are entirely algorithmic in their operation.

= DAO formation =
The establishment of a DAO is a complex procedure, carried on by the so-called [[THE FOUNDERS OF A DAO|founders]], as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles.

For further details see: [[DAO formation]].

= DAO governance =
The peculiarities of DAOs, deriving in particular from its decentralized nature, are reflected in the decision-making processes of its participants, which constitute the essential core of [[Corporate governance|Corporate Governance]]. The horizontal structure of the organization actually has advantages and disadvantages, and its specificities with respect to traditional corporations still need to be explored.

What is certain is that if, on the one hand, an attempt has been made to identify certain essential rules of its functioning, such as the principle of collegiality, the principle of one-token-one-vote or the principle of the rule of code, it is also true that some of them suffer inevitable exceptions, which constitute full demonstration of the complexity of the structure.

For further information see: [[DAO Governance|DAO governance]].

= DAO subjects =
According to some scholars, a fundamental challenge in the elaboration of a good governance scheme “''is the creation of clearly delineated organs whose members have certain rights and duties''<ref>P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.</ref>”. In this sense, DAOs should establish organs for [[The core developers of a dao|core developers]], [[The miners|miners]], and [[The token holders|token holders]].

= The legal status of the DAO: doctrinal proposals =
DAOs, a phenomenon that has developed essentially online without serious reflection on their legal structure, often operate without a clear and predetermined legal status. This leads to uncertainties about the relationship between token holders and between them and the DAO, with the risk that, as they carry out business activities, they are qualified as partnerships. Consequently, there is a risk that the participants will find themselves subject to unlimited liability for corporate obligations, in the absence of adequate awareness of this. It is therefore appropriate that a legally secure framework be created, or at least employed, primarily for the consumers themselves who participate in the business of the DAO.

Most common solutions:

* Establishment of DAOs in the form of corporate entities. Among [[Corporations (under Italian Civil Code)|corporations]], the creation of DAOs in the form of a joint stock company seems more difficult, while creation as a limited liability company seems feasible. Obstacles may arise from the impossibility of representing quotas by means of tokens, which would introduce a circulation mechanism similar to that for shares. An assimilation to one of the [[Partnerships (under Italian civil code)|partnerships]] is suggested.
* Establishment of DAOs in the form of a foundation. The DAO is comparable to the [[Foundation (under Italian Civil Code)|foundation]] by the tendency of immutability of purpose (in the one, the founder's purpose; in the other, the purpose set out in the code) and autonomy from the founder and developers. Among the most commonly used jurisdictions for establishing DAOs as foundations are Switzerland, which has a more flexible foundation law, and the Cayman Islands.

= The purpose of the organization =
The analysis of the legal models used for the establishment of DAOs and the sectors in which they are concretely employed suggests that DAOs can be used for the pursuit of both [[Profit-making purpose|lucrative]] and non-lucrative purposes.

In particular, those entities that could potentially benefit by operating as a DAO are:

* Charities or other non-profit organizations. The lack of transparency in modern charitable organizations is a significant concern, leading to a loss of trust between donors and these organizations. However, DAOs offer a solution to this problem, since they operate transparently on a blockchain, making all activities and transactions visible and auditable by donors.
* Financial industry. As the case study of MakerDAO suggests, DAOs could address some of the challenges in traditional banking systems. DAO-based currency systems have the ability to connect the vast number of unbanked individuals worldwide, estimated to be around 1.7 billion adults. This connectivity could enable these individuals to participate in investment and borrowing activities. Although financial DAOs are unlikely to replace traditional financial institutions entirely, they provide a new avenue for investing and engaging in financial activities, resembling traditional financial markets.
* E-government systems. In this sector, DAOs could offer significant benefits, since current government systems are often complex, centralized, and prone to errors due to human involvement. These systems lack transparency and often involve lengthy and costly processes. By incorporating DAOs into government services, operations can be automated, leading to increased efficiency and improved transparency, accountability, and resource management.
* Healthcare industries. In healthcare, a blockchain-based health information exchange (HIE) could reduce transaction costs and data errors. It would enable efficient sharing of patient medical records among healthcare providers, giving patients control over their data sharing.
* Insurance industry. In this sector, applying a decentralized and autonomous approach can reduce information asymmetry, administrative and operational costs and enables regulators to detect suspicious transaction patterns. Automation of insurance business processes can improve security by ensuring confidential client data accessible only to authorized parties.

Limits to the purpose that can be pursued may be imposed by individual national jurisdictions. This means that depending on the jurisdiction and the legal form in which the DAO is incorporated, there may be specific limitations to the purpose.

The Coalition of Automated Legal Applications (COALA)’s “''Model Law for Decentralized Autonomous Organizations (DAOs)''”, recently published in its finalized version, expressly acknowledges that a DAO may not only be a for profit entity, but may be used for multiple non-commercial purposes. For this reason, it suggests that “''the DAO is a legal entity than can be used for commercial, mutualistic, social, environmental or political purposes, the nature of which will be specified in its By-Laws''” (Article 1).

= The applicable law and jurisdiction =
A further issue of complexity concerns the difficulty of identifying the [[Jurisdiction (Under Italian Law)|jurisdiction]] to which the DAO belongs.

As regards the determination of the applicable law, two criteria can be abstractly followed: criterion of incorporation or criterion of actual seat.

The problem is that if the DAO is not incorporated in a particular place, as is the case for companies, the first criterion cannot be applied. At the same time, with respect to DAOs, the second is difficult to apply, as they typically do not have a physically identifiable material organization in a given place; they are managed by nodes from all over the world; they are not connected to servers that could serve to identify a physical place of activity since they run on the nodes of a blockchain, and thus everywhere and nowhere. They are structurally 'open to the world': naturally vocated to attract participants from all over the world and to operate worldwide via distributed nodes. They are therefore by their very vocation opposed to the traditional search for a spatial center of gravity, to the law of which to subject them.

The same problem arises with regard to the identification of the competent judge in disputes involving them.

= Current form of regulation of DAOs: an overview =
In order to solve the uncertainties relating to the absence of a clear legal form and the identification of the applicable law and court of jurisdiction, there has been a tendency to set up DAOs according to clear legal models. In this sense, DAOs are sometimes established in the form of a company or a foundation, thus relying on general models that, due to their characteristics, are suitable for incorporation of DAOs. Moreover, in recent years, several countries have introduced ad hoc forms of regulation of the phenomenon, such as:

* Wyoming Decentralized Autonomous Organization Supplement (Wyoming, U.S.A.), which regulates the so-called DAO Limited Liability Company;
* Decentralized Autonomous Organization Act (The Republic of the Marshall Islands), which instead introduces the so-called MIDAO LLC.

For further details see: [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]].

= Case study: The Dao =
The DAO was “''the first high-profile realization''<ref>Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.</ref>” of a decentralized autonomous organization (DAO) running on the Ethereum platform, the history of which, with its splendors and failures, could be read on “[[The DAO]]”.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, pp. 2-5, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.
* Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.
* G. Kondova, R. Barba, ''Governance of Decentralized Autonomous Organizations'', in ''Journal of Modern Accounting and Auditing'', 2019, p. 406.
* R. Lener, S. L. Furnari, ''Prime riflessioni su DAO e principi generali del diritto dell’impresa'', in ''Riv. dir. priv.'', 2022, pp. 335 ss.
* B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, p. 3.
* N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, pp. 313 ss.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Stanford Journal of Blockchain Law & Policy'', 2021, p. 156.
* F. Zatti, ''Nuove tecnologie e modelli di governance nello sport: le'' Decentralized Autonomous Organization, in ''Nuovo diritto societario'', 2022, pp. 2155 ss.
* Coalition of Automated Legal Applications (COALA), ''Model Law for Decentralized Autonomous Organizations (DAOs)'', 2021, available at: https://coala.global/wp-content/uploads/2022/03/DAO-Model-Law.pdf

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<references />{{Musa cat}}

DAOs’ current forms of regulations: an overview

2023-08-23T07:40:31Z

Bianconi: links to external sites + bold fonts

== Introduction. ==
The legislative models that provide a legal status for the enterprise collectively carried out in the form of a DAO can be divided into two categories, depending on whether they provide a specific legal model for DAOs, or they are general models that can also be used with reference to them. In this second category, we can then further distinguish between cases in which DAOs are traced back to the corporate or foundational form.

== Legislative models introducing ad hoc regulations for DAOs. ==
There are only regulations that provide for the incorporation of DAOs in corporate form, in particular as Limited Liability Companies. See:

==== a) Wyoming Decentralized Autonomous Organization Supplement, Wyoming. ====
Passed on April 2021, effective from 1 July 2021. It is essentially an amendment to the Wyoming Limited Liability Company Act. It has been amended with:

1. SF0068, Decentralized Autonomous Organization Supplement Amendments, May 2022;

2. SF0075, of February 2023, effective 1 July 2023.

This law granted limited liability company status to DAOs operating on blockchain, organized under the Wyoming Limited Liability Company Act. It thus introduced the so-called DAO LLC ("DAO Limited Liability Company"). This protects participants by recognizing their limited liability.

The DAO is defined in § 17-31.102 (a) (ii), pursuant to which “Decentralized autonomous organization means a limited liability company organized under this chapter”.

In terms of management, § 17-31-109 provides that “management of a decentralized autonomous organization shall be vested in its members or the members and any applicable smart contracts. All smart contracts utilized by a decentralized autonomous organization shall be capable of being updated, modified or otherwise upgraded”. The law therefore recognizes two types of DAO:

a. Member-managed DAOs, similar to the LLC, where some members are responsible for maintaining and managing the organization;

b. Algorithmically-managed DAOs, which can register as an LLC if the governing smart contract system is already in place at the time of filing. In this case, the computer protocols for managing the DAO must be able to be updated or modified.

A further point of interest is that the law defines the membership interest in § 17-31.102 (a) (vi), as “member’s ownership right in a decentralized autonomous organization, which may be determined by the organization’s articles of organization or operating agreement or ascertainable from a blockchain on which the organization relies to determine a member’s ownership right. A membership interest may also be characterized as either a digital security or a digital consumer asset as defined in W.S. 34-29-101, if designated as such in the organization’s articles of organization or operating agreement”. An issue of proportionality is also introduced with respect to the DAO’s participation quota under § 17-31-111, whereby the participation “(i) (…) shall be calculated by dividing a member’s contribution of digital assets to the organization by the total amount of digital assets contributed to the organization at the time of a vote; or

(ii) If all members have not contributed digital assets to an organization as a prerequisite to becoming a member, each member shall possess one (1) membership interest and be entitled to one (1) vote”.

It should be noted that due to the Treaty of Friendship, Commerce and Navigation between the Federal Republic of Germany and the United States of America of 29 October 1954, this law also has concrete effects on the German and European business landscape. This means that a DAO LLC from Wyoming is also recognised as a limited liability company in Germany and can operate in Europe. For Italy, see Law No. 385 of 18 June 1949, ratifying and executing the Treaty of Friendship, Commerce and Navigation (Art. II, c. 2, Treaty), the Protocol of Signature, the Additional Protocol and the Exchange of Notes concluded in Rome between Italy and the United States of America on 2 February 1948.

====b) Decentralized Autonomous Organization Act, The Republic of the Marshall Islands.====
Outside the US context, reference is made to the experience of the so-called MIDAO LLCs, introduced by the Republic of the Marshall Islands with the Decentralized Autonomous Organization Act of 2022. In that case, too, they are regulated as limited liability companies subject, insofar as compatible, to the regulations of the Limited Liability Company Act of 1996, Chapter 4 of Title 52. It is presented as the legislation that will soon become the reference jurisdiction for the registration of DAOs, due to the fact that it is not a country on the European black list and the legislation is more flexible than that of North American countries. In particular:

- no board members or officers are required;

- every member gets equal liability protection;

- blockchain and smart contracts are officially recognized by law for use in governance and membership tracking;

- costs are lower than other non-US options;

- compliance requirements are optimized for DAOs;

- no taxes on the entity or the members;

- not on any blacklists, sanctions lists, or tax evasion lists.

The DAO is defined in §102 (c) as “a resident domestic limited liability company organized under this chapter”. It also contains a more detailed list of definitions, including those of digital asset, digital security, blockchain, membership interest, and smart contract.

Similarly to the Wyoming regulations, in terms of management it provides that (§ 108) “management of a decentralized autonomous organization shall be vested in its members, if member managed, or the smart contract, if algorithmically managed, unless otherwise provided in the certificate of formation or limited liability company agreement”. It therefore contemplates the possibility of the DAO being managed by the members or algorithmically, i.e. managed by the smart contract.

From the point of view of purpose, it is made clear that a decentralized autonomous organization may form and operate for any lawful purpose, regardless of whether for profit (§105).

From the point of view of membership participation, however, it is expected that, unless otherwise provided for in the certificate of formation, limited liability company agreement or smart contract, membership interests in a member managed decentralized autonomous organization shall be calculated by dividing a member’s governance tokens held divided by the total amount of the organization at the time of a vote. However, it is possible that members do not hold governance tokens of an organization as a prerequisite to becoming a member. In this case, each member shall possess one membership interest and be entitled to one vote.

==Legislative models which, although not specifically considering DAOs, are usually used to provide DAOs with legal status.==

===A) As corporations:===

====a) Blockchain-based Limited Liability Company, Vermont. ====
On 30 May 2018, Vermont passed the Senate Bill 269, “an Act Related to Blockchain Business Development”, which came into effect on the following 1 July. The law was designed to stimulate Vermont’s economic development through the promotion of blockchain technology. To this end, it introduced Blockchain-based Limited Liability Companies (BBLLCs). The regulatory intervention took place through the introduction in Title 11, dedicated to “Corporations, Partnerships and Associations”, “Chapter 25 - Limited Liability Companies”, of “Subchapter 12 - Blockchain-based limited liability companies”.

It has thus opened up the possibility of setting up limited liability companies as DAOs, allowing for full governance via blockchain. In this case, we do not have a definition of a DAO, as the regulatory intervention addresses the Blockchain-based Limited Liability Company more generally, as a “limited liability company organized pursuant to this title for the purpose of operating a business that utilizes blockchain technology for a material portion of its business activities” (§4172).

With respect to the governance of these companies, the act specifies that “a BBLLC may provide for its governance, in whole or in part, through blockchain technology” (§4173 (1). See §4175). In addition, the operating agreement shall specify whether the decentralized consensus ledger or database utilized or enabled by the BBLLC will be fully decentralized or partially decentralized (§4173 (2)).

====b) Legal DAO, Delaware.====
DAOs are often incorporated under Delaware law: they are the so-called LAO (Legal DAO). The LAO provides a legal structure to allow members to invest in blockchain-based projects in exchange for tokens. It is a “legal wrapper” created by structuring the DAO as an LLC, with the aim of ensuring limitation of liability to members, clarifying applicable law, and providing tax benefits.

The Delaware statute governing limited liability companies (LLCs) is found in Chapter 18 of Title 6 of the Delaware Code. It provides, inter alia, the laws relating to the formation, management, governance, mergers and dissolution of LLCs.

Thus, in this case, a Delaware-based LLC holds full ownership rights and serves as the beneficiary of the funds, or part thereof, collected in a token sale launched by a DAO. While Wyoming now has ad hoc legislation, Delaware allows a DAO to be created as a single legal entity, with legal protections similar to any other LLC, but DAOs are only at the “front” side. In the “back” part, there is a regulated corporate structure as an LLC.

===B) As foundations: ===
Alternatively to the corporate form, DAOs are often taken to the legal structure of the foundation, as phenomena that are characterized by:

- immutability of purpose;

- tendential autonomy from the founder.

Although these profiles lead to the DAO being approached in this legal form, the following obstacles should be noted:

- the possibility of including virtual assets, such as the tokens typically used by the DAO in its operations, in the list of assets that may constitute the foundation's assets;

- the legal form of the foundation in many countries requires the presence of directors, who legally represent the foundation. A profile that evidently can come into friction with the need for decentralization typical of DAOs.

The following models are mentioned:

====a) Cayman Foundation Companies, Cayman Islands. ====
Cayman Foundation Companies were introduced because in recent years many common law jurisdictions such as the Isle of Man and Channel Islands have moved to create legal structures that emulate civil law foundations in an effort to remain competitive on the world stage. Cayman seized the opportunity to do the same by enacting the Foundation Companies Law in 2017.

The foundations have separate legal personality and provides for limited liability. They can be structured without shareholders. In that case, the foundation companies can be supervised by a supervisor. Limitations on roles and duties of the directors can be set by the bylaws. In 2022 the Caymans enacted the Virtual Assets Service Providers Act, (cd. VASP), which can be useful for those DAOs which want to carry out Virtual Assets activities.

==== b) Swiss Foundations, Switzerland.====
This is not ad hoc legislation, but a general legal model that is used for the incorporation of DAOs as it is considered more flexible than the corresponding European models.

====c) Others.====
- Virtual Assets Service Providers Act, 2022 (Cd. VASP), Virgin Islands.

- Panama Foundation.

== Conclusive remarks.==
The following conclusions can be drawn from the analysis of legal precedents:

1. In terms of governance, two types of DAOs are generally accepted: those managed by members and those managed by algorithms. Member-managed DAOs are governed through blockchain-based voting mechanisms, while retaining decision-making power in the hands of the members. Algorithmically managed DAOs, on the other hand, are entirely controlled by their smart contracts.

2. From the point of view of decentralization, totally or only partially decentralized DAOs are allowed.

3. Although they are often used in the context of cryptocurrency brokering activities, regulation does not only consider this type of activity.

4. The regulation does not require the pursuit of a profit-making purpose, as DAOs may well be established and used for the performance of non-profit activities.

==References==
F. Sarzana di S. Ippolito e M. Nicotra, ''Diritto della blockchain, intelligenza artificiale e IoT'', Wolters Kluwer, Milano, 2018, p. 126 ss.;

B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.;

G. Weinstein, S. Lofchie, and J. Schwartz, ''A primer on DAOs'', in ''Harvard'' ''Law School Forum on Corporate Governance'', September 17, 2022, available [https://corpgov.law.harvard.edu/2022/09/17/a-primer-on-daos/ here];

Tyros Consulting, ''Decentralized Autonomous Organization (Organizzazione Autonoma Decentralizzata) DAO – aspetti legali e societari'', March 24, 2022, available [https://tayros.bg/index.php/2022/03/24/decentralized-autonomous-organization-organizzazione-autonoma-decentralizzata-dao-aspetti-legali-e-societari/ here].

==Websites==
Regulations cited above are available at the following sites:

* Wyoming Decentralized Autonomous Organization Supplement, Wyoming, is available [https://wyoleg.gov/NXT/gateway.dll?f=templates&fn=default.htm here];

* Blockchain-based Limited Liability Company, Vermont, is available [https://legislature.vermont.gov/statutes/section/11/025/04171 here]; alternatively, it is available at [https://law.justia.com/codes/vermont/2018/title-11/chapter-25/ this unofficial website];

* Legal DAO, Delaware: the Delaware statute governing limited liability companies (Chapter 18 of Title 6 of the Delaware Code) is available [https://delcode.delaware.gov/title6/c018/index.html here].

A Comparison between the different legal entity options available worldwide is provided [https://delcode.delaware.gov/title6/c018/index.html here].

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[[Category:MUSA DOLaw]]

DAO formation

2023-08-23T07:29:51Z

Bianconi: hyperlinks + bold fonts

==== A complex procedure: empirical and technological profiles. ====
The establishment of a DAO is a complex procedure, as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles, in particular when a clear legal form is to be given to it.

From an empirical point of view, the founders need to establish the rules governing the organization and operation of the DAO and incorporate them into the code. Before it is officially established, they must also set out how the DAO will be financed. In addition, the code of the DAO must be checked before the system can be fully implemented, since it could include possible bugs and security problems.

The creation of a DAO requires the development of the smart contract, in which the rules of operation are incorporated, and the definition of the DAO's governance structure. It then involves raising the necessary capital, which is done by issuing tokens. Finally, the operation of the DAO is implemented and everything is sent to the blockchain. In the event that the DAO needs to make a decision, community members must vote on these changes.

==== Forms of incorporation of the DAO. ====
In order to be given a clear legal status, it is necessary to incorporate the DAO into one of the currently available legal models. There are various organizational models according to which a DAO can be incorporated (for more details see [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]]). An analysis of the best-known legal models in the international regulatory landscape shows that the formation of a DAO can take place according to the forms provided for limited liability companies or foundations, depending on the legal nature of the chosen entity. In particular:

===== a) Legislative models introducing ad hoc regulations for DAOs: =====

* Wyoming (§ 17-31-105). § 17-31-106 provides for the adoption of a statute with the obligation to provide certain information (including an indication that it is a DAO and those matters required by the general provisions of the Wyoming Limited Liability Act under § 17-29-201. In addition, the articles of organization shall include a publicly available identifier of any smart contract directly used to manage, facilitate or operate the decentralized autonomous organization.
* The Republic of the Marshall Islands. According to the Decentralized Autonomous Organization Act (§105) any person may form a decentralized autonomous organization which shall have one or more members by signing and delivering one original and one exact or conformed copy of the certificate of formation and limited liability company agreement to the Registrar for filing. The person forming the decentralized autonomous organization need not be a member of the organization. Each decentralized autonomous organization shall have and continuously maintain in the Republic a registered agent as if they had a place of business in the Republic as provided in the Limited Liability Act (52 MIRC Chapter 4 §5). A statute must be adopted, regulating all matters listed in §106.

===== b) Legislative models which, although not specifically considering DAOs, are usually used to provide DAOs with legal status: =====

* Blockchain-based Limited Liability Company, Vermont: according to § 4176, except as expressly provided otherwise, this subchapter does not exempt a BBLLC from any other judicial, statutory, or regulatory provision of Vermont law or federal law, including State and federal securities laws. Except to the extent inconsistent with the provisions of this subchapter, the provisions of the Vermont Limited Liability Company Act govern. For this reason, the formation of the BBLLC should be governed by the rules on limited liability companies.
* With regard to the various general legal models also used for the establishment of DAOs (in particular Delaware law and foundations), the rules laid down with reference to the individual models considered should apply.

==== Overlap profiles with Initial Coin Offerings (ICOs). ====
A key step in the establishment of DAOs concerns the raising of the capital needed to start the project.

DAOs obtain the necessary capital through the issuance of DAO voting tokens against the transfer of cryptocurrencies native to the blockchain on which the DAO is established. DAO tokens are generally allocated in proportion to the funds transferred. The initial offering of tokens constitutes an Initial Coin Offering (ICO) and is therefore subject to the relevant regulations.

In particular, the tokens underlying the DAO qualify as digital native security tokens, i.e. programmable financial instruments created as smart contracts and resident on a DLT. If the tokens issued qualify as security tokens, they are comparable to financial instruments. Therefore, their issuance is governed by the regulation of offers of financial products to the public (for further details see: [[Initial Coin Offerings (ICOs): legal issues according to Italian law]]).

==== References. ====
P. Carrière, N. de Luca, M. de Mari, G. Gasparri e T.N. Poli, ''Tokenizzazione di azioni e azioni tokens'', Quaderni giuridici Consob, January 25, 2023, available [https://www.consob.it/documents/1912911/1916538/qg25.pdf/0cc70f0f-49ac-7ee4-f8cc-c07f7affbf35 here];

N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, p. 313 ss.;

J. Wanguba, ''What is a DAO LLC?'', in ''E-Crypto News'', available [https://e-cryptonews.com/what-is-a-dao-llc/#:~:text=A%20Decentralized%20Autonomous%20Organization%20(DAO,organization%20holds%20any%20majority%20rule here];

C. Hamman, ''DAO creation: A Basic How To'', in ''E-Crypto News'', available [https://e-cryptonews.com/how-can-anyone-create-a-dao/ here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Initial Coin Offerings (ICOs): legal issues according to Italian law

2023-08-23T07:27:02Z

Bianconi: links to other Wiki pages + hyperlinks + bold fonts

==== Definition. ====
Initial Coin Offering (ICO) refers to the initial offerings of cryptographic tokens that can be traced back to a blockchain and are made by the [[Issuers (legal matters according to Italian law)|issuer]] itself. When coin offerings are launched via an exchange platform, they are generally referred to as Initial Exchange Offerings (IEO).

From an empirical point of view, initial token offerings have emerged in practice by means of a basically recurring scheme, which consists of the following phases:

1. preliminary disclosure of the project through specialized internet channels (such as new technology forums), followed by the so-called executive summary, aimed at disclosing the project to potential interested parties in order to receive their feedback;

2. publication of the so-called white paper containing detailed information on the project;

3. publication of the so-called yellow paper, containing all the technical specifics of the project;

4. launch of the offer, sometimes preceded by the so-called pre-ICO reserved for selected investors;

5. subscription of the tokens by private investors through the issuer's electronic structure or through an exchange platform;

6. as a general rule, tokens are then listed on exchange portals.

The initial offer of crypto-assets traces back to the public offer of financial products, but the discipline to which the offer is subject depends, in the Italian context, on the type of token considered and is affected by recent regulatory interventions adopted in the European context. In fact, in the absence of an organic regulation of crypto-activities, the classification of tokens constitutes the discriminating element in identifying the discipline applicable to ICOs.

====Offerings of “security tokens”.====
Security tokens are to all intents and purposes considered as [[Financial products, financial instruments and securities (Italian Law)|financial instruments]]. From this qualification derives the application of the relevant discipline regardless of whether the financial instrument consists of a crypto-asset. Therefore, initial offers of security tokens, insofar as they qualify as financial instruments, are subject to the rules that apply to offers of financial products to the public, as set forth in Articles 94 et seq. TUF and the so-called Prospectus Regulation (EU Reg. 2017/1129).

The further trading of security tokens (the issuance of which is, as mentioned, governed by the general rules for financial instruments) has been considered in two recent regulatory interventions.

At the European level, EU Regulation 2022/858 "on a pilot scheme for market infrastructures based on distributed ledger technology and amending Regulations (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU" (so-called Pilot Regulation) was adopted on May 30, 2022. It entered into force the following June 22, 2022 and receives application from March 23, 2023. This regulation is intended to set up an initial regulatory framework for market infrastructures using DLT technology. It only concerns tokens that qualify as financial instruments under MIFID (so-called security tokens) and are defined as 'DLT financial instruments' (instruments that, as will be seen, are exempt from the application of the MiCAR Regulation).

At the domestic level, the provisions of the above-mentioned Regulation were implemented by Decree-Law No. 25/2023, converted into Law No. 52/2023, setting forth "Urgent provisions concerning the issuance and circulation of certain financial instruments in digital form and the simplification of FinTech experimentation" (so-called Fintech Decree).

====Offerings of “utility tokens” and “monetary tokens”.====
While the regulation of offers of security tokens has found complete regulation through the assimilation of this type of crypto-asset to financial instruments, the reconstruction of the regime applicable to issues of other types of tokens, which do not qualify as financial instruments, has been more uncertain.

The first hint of domestic regulation came from Consob consultation document dedicated to 'Initial offers and exchanges of crypto-assets' of March 19, 2019, which was followed, as a result of the consultation, by the final report published on January 2, 2020. In that document, Consob postulated an opt-in regime for those wishing to initiate crypto-asset offerings in Italy, outlining an optional framework that the issuer could elect to access or not.

A roughly uniform framework for crypto-assets has been provided for by the EU digital finance regulatory package and, in particular, the recently adopted [[MiCAR (Reg. EU 2023/1114)|MiCAR (EU) Regulation 2023/1114]]. This regulation, which regulates both the issuance and the trading phase of crypto-assets, applies, however, only to crypto-assets other than those listed in Article 2(4) MiCAR (EU Reg. 2023/1114), among which are, in particular, also those falling under the definition of financial instruments. The Regulation applies, therefore, only to "utility tokens" and "monetary tokens". The latter include those tokens which under the Regulation itself are defined as "asset-referenced tokens" and "e-money tokens". The MiCAR Regulation, adopted on May 31, 2023, will apply in its entirety as of December 30, 2024 (see Art. 149).

Pursuant to Article 3(1)((12)), an offer to the public is defined as “a communication to persons in any form, and by any means, presenting sufficient information on the terms of the offer and the crypto-assets to be offered so as to enable prospective holders to decide whether to purchase those crypto-assets”.

In general terms, the regulation makes the publication of the white paper mandatory and introduces powers of control and approval in the hands of the supervisory authorities of the member states. Specific disciplines are introduced for public offerings of:

=====a) utility tokens: art. 4 ss.=====
The offering is reserved for legal persons who have prepared and notified the competent authority of the white paper, the content of which is specifically regulated in Article 6 below. The crypto-asset white paper shall contain all of the following information:

(a) information about the offeror or the person seeking admission to trading;

(b) information about the issuer, fi different from the offeror or person seeking admission to trading;

(c) information about the operator of the trading platform in cases where ti draws up the crypto-asset white paper; (d) information about the crypto-asset project;

(e) information about the offer to the public of the crypto-asset or its admission to trading; (f) information about the crypto-asset;

(g) information on the rights and obligations attached to the crypto-asset;

(h) information on the underlying technology;

(i) information on the risks;

(i) information on the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue the crypto-asset.

In cases where the crypto-asset white paper is not drawn up by the persons referred to in the first subparagraph, points (a), (b) and (c), the crypto-asset white paper shall also include the identity of the person that drew up the crypto-asset white paper and the reason why that particular person drew ti up.

Consumers who have purchased such tokens are granted a right of withdrawal that can be exercised freely and without cost within 14 days (Art. 13).

=====b) asset-referenced tokens: art. 16 ss.=====
The offer of such tokens may only be made by entities authorized by the competent supervisory authorities of the Member States. Authorization may only be granted to entities established in the Union and on the basis of a specific application accompanied by the white paper. Additional requirements are foreseen for the issuance of significant tokens.

=====c) e-money tokens: art. 48 ss.=====
With respect to these, the offer may only be made by an authorized issuer such as a credit institution or e-money institution, which has notified a White Paper on crypto-assets to the competent authority and has also published it. Even then, additional obligations are introduced for significant tokens.

====The U.S. context (referral).====
On the test applied by the Security and Exchange Commission (SEC) in order to establish whether or not a certain activity is referable to the offering of financial products (i.e. investment contracts) in the U.S. and is therefore subject to U.S. Securities Law see: [[Howey test]].

====References. ====
S. Schlegelmilch, E. Newman and C. Wolfe, ''SEC’s Inaction Against Most Initial Coin Offerings Sends More Mixed Messages on Crypto Enforcement'', January 6, 2023, available [https://wp.nyu.edu/compliance_enforcement/2023/01/06/secs-inaction-against-most-initial-coin-offerings-sends-more-mixed-messages-on-crypto-enforcement/ here];

P. Carrière, ''Decreto Fintech e MICAR: il quadro normativo sulle cripto-attività'', in ''Dirittobancario.it'', May 30, 2023;

P. Carrière, N. de Luca, M. de Mari, G. Gasparri and T.N. Poli, ''Tokenizzazione di azioni e azioni tokens'', Quaderni giuridici Consob, January 25, 2023, available [https://www.consob.it/documents/1912911/1916538/qg25.pdf/0cc70f0f-49ac-7ee4-f8cc-c07f7affbf35 here];

G. Farina, ''L’emissione di token digitali nell’assetto normativo attuale'', in A. Blandini, ''Diritto dell’innovazione'', Wolters Kluwer, Milano, 2022, p. 471 ss.;

P. Carrière, ''Initial Coin Offerings (ICOs): Italia-Francia, due approcci regolatori a confronto'', in ''Dirittobancario.it'', January 15, 2020;

M. Nicotra, ''Il regime giuridico delle ICOs. Analisi comparata e prospettive regolatorie italiane'', in ''Dirittobancario.it'', April 18, 2019;

M. Nicotra, ''ICO, Initial Coin Offering: una ricostruzione giuridica del fenomeno'', 2017, available [https://www.blockchain4innovation.it/esperti/ico-initial-coin-offering-ricostruzione-giuridica-del-fenomeno/ here].

====Websites.====
Consob consultation document on “Le offerte iniziali e gli scambi di cripto-attività” of May 19, 2019 is available at [https://www.consob.it/documents/1912911/1972122/doc_disc_20190319.pdf/2044537e-487c-5093-112e-3eacc69b12d4 this site];

Consob Final Report on “Le offerte iniziali e gli scambi di cripto-attività” of January 2, 2020 is available [https://www.consob.it/documents/1912911/1938506/ICOs_rapp_fin_20200102.pdf/e83b06b8-6e7a-2dd7-9fe5-f742e9f2621e here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Financial products, financial instruments and securities (Italian Law)

2023-08-23T07:23:47Z

Bianconi: hyperlinks + bold fonts

==== Introduction. ====
Financial market regulation is based on the notions of financial products, financial instruments and securities. The three definitions outline a system of concentric circles, whereby:

- the category of financial products includes that of financial instruments;

- the category of financial instruments includes that of securities.

==== Financial products. ====
Pursuant to Article 1(1)(u) of Legislative Decree 58/1998 (“Testo unico delle disposizioni in materia di intermediazione finanziaria”, the Consolidated Law on Finance, commonly referred to in Italian as “TUF”), financial products are 'financial instruments and every other form of investment of a financial nature; bank or postal deposits without the issue of financial instruments shall not constitute financial products'.

This is an open category, which includes but is not limited to financial instruments. The legally atechnical term 'other form of investment of a financial nature' is apt to embrace any transaction carried out with the use of capital that entails the assumption of a risk related to the expectation of a profit. For a transaction to be of a financial nature, it must have the following essential elements:

1) investment of money;

2) expectation of profit;

3) associated risk.

It therefore includes all the atypical and unnamed forms of investment gradually created by the market.

The category of financial products is decisive for the purposes of the application of the regulatory complex of provisions designed to protect savers, including the regulation of the public savings appeal (Art. 94 ff. TUF).

==== Financial instruments. ====
Pursuant to Article 1(2) TUF, financial instruments are 'any instrument listed in Section C of Annex I, including instruments issued using distributed ledger technology. The payment instruments are not financial instruments'.

Section C of Annex I includes, among others: transferable securities, money market instruments, units of a collective investment undertaking, option contracts, standardized financial futures, swaps, agreements for future exchange of interest rates and other derivative contracts listed therein. Financial instruments are thus divided into derivative and non-derivative instruments.

==== Securities. ====
Pursuant to Article 1(1 bis) of the Consolidated Law on Finance, transferable securities are the 'categories of security that can be traded in capital markets, such as:

a) company shares and other titles equivalent to company shares, of partnership or of other parties and share deposit receipts;

b) bonds and other debt titles including the deposit receipts relative to said shares;

c) any other transferable security that permits buying or selling transferable securities indicated in letters a) and b) or that involve spot settlement determined with reference to transferable securities, foreign exchange, interest rates or rates of return, commodities or other indices or measurements".

The rule introduces an illustrative list. Accordingly, the notion identifies an open category.

==== References and Websites. ====
V. Calandra Buonaura, ''Commentario breve al testo unico della finanza'', Wolters Kluwer, Milano, 2020, ''sub'' art. 1, p. 26 ss.;

Consob, ''I titoli di credito e gli strumenti finanziari'', available [https://www.consob.it/web/investor-education/i-titoli-di-credito here].

The Consolidated Law on Finance (“Testo Unico dell’intermediazione finanziaria”) and its Annex I are available [https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=1998-03-26&atto.codiceRedazionale=098G0073&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=e46a3848-5759-4380-9c61-a768655f3e28&tabID=0.5407578726849629&title=lbl.dettaglioAtto here].

The English version is available [https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/fr_decree58_1998.htm?hkeywords=&docid=0&page=0&hits=19&nav=false here].

The Consob guidelines on the notion of financial product/instrument can be found at [https://www.consob.it/web/area-pubblica/servizi-di-investimento-nozione-di-prodotto/strumento-finanziario this page].

A stylised representation of the configuration of the current financial system is accessible at the Consob website, [https://www.consob.it/web/investor-education/il-sistema-finanziario-attuale-una-stilizzazione here].

For the definition and identification of the main derivative instruments, see Consob, ''I derivati'', available [https://www.consob.it/web/investor-education/i-derivati here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Issuers (legal matters according to Italian law)

2023-08-23T07:19:45Z

Bianconi: hyperlinks + bold fonts

==== Definition. ====
According to Borsa Italiana’s Financial Glossary, issuers are entities that, for the financing of their activities, issue financial instruments suitable for circulation and therefore for being traded on a market. Companies organized as corporations, public bodies and the State are the most important issuers of financial instruments.

==== Definition of listed issuers. ====
Pursuant to Article 1(1)(w) of Legislative Decree No. 58/1998 (Consolidated Law on Finance, commonly referred to in Italian as “TUF”), listed issuers are subjects, Italian or foreign, including trusts, which issue financial instruments listed on a regulated Italian market. In the case of deposit receipts admitted for trading on a regulated market, the term issuer refers to the issuer of the securities represented, even if such securities are not admitted for trading on a regulated market.

==== Definition of issuers of financial instruments distributed to the public to a significant extent. ====
Issuers of financial instruments widely distributed among the public to a significant extent, pursuant to Article 116 of Legislative Decree No. 58/1998 (TUF), are defined by Article 2-bis of Consob Regulation no. 11971 of 14 May 1999, concerning the discipline of issuers, with reference to both shares and bonds.

==== Definition for MiCAR purposes. ====
According to Article 3(1)(10) of the recent '[[MiCAR (Reg. EU 2023/1114)|MiCAR' Regulation (Regulation EU 2023/1114)]], for the purposes of that Regulation issuer means “a natural or legal person, or other undertaking, who issues crypto-assets”.

==== References and Websites. ====
Borsa Italiana’s financial glossary is available [https://www.borsaitaliana.it/borsa/glossario/emittenti.html here]. <nowiki>https://www.borsaitaliana.it/borsa/glossario/emittenti.html</nowiki>.

The definition and the list of issuers of financial instruments that are widely distributed among the public is available on the Consob website, ''Emittenti strumenti finanziari diffusi fra il pubblico in misura rilevante'', at [https://www.consob.it/web/area-pubblica/emittenti-titoli-diffusi this page].

The Consolidated Law on Finance (“Testo Unico dell’intermediazione finanziaria”) and its Annex I are available [https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=1998-03-26&atto.codiceRedazionale=098G0073&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=e46a3848-5759-4380-9c61-a768655f3e28&tabID=0.5407578726849629&title=lbl.dettaglioAtto here].

The English version is available [https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/fr_decree58_1998.htm?hkeywords=&docid=0&page=0&hits=19&nav=false here].

The English version of Regulation implementing Italian Legislative Decree no. 58 of 24 February 1998, concerning the discipline of issuers, adopted by CONSOB under resolution no. 11971 of 14 May 1999 as subsequently amended, is available [https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/reg11971e.htm?hkeywords=&docid=2&page=0&hits=19&nav=false here].

The official, updated version of the MiCAR Regulation, Reg. (UE) 2023/1114, is available in all official laguages at [https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX%3A32023R1114&qid=1688044240930 this site].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

MiCAR (Reg. EU 2023/1114)

2023-08-23T07:16:01Z

Bianconi: hyperlinks + bold fonts

==== Definition. ====
The regulation known as 'MiCAR' means the Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937.

==== Content and scope of application. ====
The regulation has caused great excitement among scholars and practitioners because it sets out for the first time uniform requirements for the public offer and admission to trading on a trading platform of certain crypto assets as well as requirements for service providers for crypto assets.

It applies only to:

- utility tokens;

- "monetary tokens", including those tokens which under the Regulation itself are defined as "asset-referenced tokens" and "e-money tokens".

Under Art. 3, par. 1:

an ‘asset-referenced token’ is a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies (n. 6);

an ‘electronic money token’ or ‘e-money token’ means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency (n. 7);

an ‘utility token’ is a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer (n. 9).

According to Art. 2, par. 4, the Regulation does not apply to crypto-assets that qualify as financial instruments. Consequently, it does not apply to those tokens that are known as “security tokens”. Paragraph 5 below then defers to ESMA to develop, by 30 December 2024, guidelines in accordance with Art. 16 of Regulation (EU) No 1095/2010 on the conditions and criteria for the qualification of crypto-assets as financial instruments.

==== Implementation. ====
The Regulation was enacted on 31 May 2023 and was published in the Official Journal of the European Union on 9 June 2023. It shall apply from 30 December 2024, except for Titles III and IV, which shall apply from 30 June 2024.

==== References and Websites. ====
For more details see:

A. Lanotte, ''L’avvento del MiCA mette davvero fine al Crypto Far West in Europa?'', in Econopoly, 24 Aprile 2023, available [https://www.econopoly.ilsole24ore.com/2023/04/24/mica-crypto-regolamento-europa/ here];

P. Carrière, ''Decreto Fintech e MICAR: il quadro normativo sulle cripto attività'', in ''Dirittobancario.it'', 30 maggio 2023, available [https://www.dirittobancario.it/art/decreto-fintech-e-micar-il-quadro-normativo-sulle-cripto-attivita/ here].

The full text of the MiCAR Regulation, Reg. (UE) 2023/1114, is available [https://www.dirittobancario.it/art/regolamento-mica-il-testo-del-regolamento-ue-2023-1114-in-gu-ue/# here].

The official, updated version of the Regulation is available [https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX%3A32023R1114&qid=1688044240930 here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Howey test

2023-08-23T07:13:26Z

Bianconi: links to other Wiki pages + bold fonts

==== Definition. ====
Evaluation test used by the Security and Exchange Commission (SEC) in order to establish whether or not a certain activity is referable to the offering of financial products (i.e. investment contracts) and is therefore subject to US Securities Law.

On the basis of these principles, a concrete case falls within the definition of an 'investment contract' in consideration of a criterion of prevalence of the substantial aspect over the formal one, i.e. when, regardless of the type of contract agreed upon between the parties through the agreement, there is an 'investment of money in an enterprise with the reasonable expectation of profits from the managerial or entrepreneurial efforts of others'. The three elements of the test are therefore:

1) the investment of money;

2) the expectation of profit;

3) the fact that such profit is derived from the labour of others.

==== The origin: SEC v. W.J. Howey Co. ====
The case concerned two corporations, the W. J. Howey Company and Howey-in-the-Hills Service Inc., which were Florida corporations under direct common control and management. The Howey Company, which owned large tracts of citrus acreage in Lake County, Florida, used to plant about 500 acres annually, while the Howey-in-the-Hills Service Inc., was a service company engaged in cultivating and developing many of these groves. The case arose because the company owning the land had offered contracts on the basis of which it undertook to cultivate the land with citrus fruits and the investors would be paid a portion of the harvest resulting from the cultivation as remuneration for the capital invested. Upon the facts of that case, the US Supreme Court ruled that an offering of units of a citrus grove development, coupled with a contract for cultivating, marketing, and remitting the net proceeds to the investor, was an offering of an "investment contract" within the meaning of that term as used in the provision of § 2(1) of the Securities Act of 1933 defining "security" as including any "investment contract," and was therefore subject to the registration requirements of the Act. The test of whether there is an "investment contract" under the Securities Act is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others; and, if that test be satisfied, it is immaterial whether the enterprise is speculative or non speculative, or whether there is a sale of property with or without intrinsic value.

==== TheDAO case. ====
A popular example of the application of the Howey test to a DAO concerned the [[The DAO|TheDAO]] case, in which the SEC qualified the initial offering of TheDAO tokens as investment contracts on the basis of the following considerations:

- the investment does not have to be 'monetary' in nature, but can be made by other means of contribution of value. In the present case, the value was Ether (with which a monetary value was associated) contributed to the project in exchange for DAO Tokens;

- the investors' participation was motivated by an expectation of profit. TheDAO's promotional materials, in fact, clearly emphasized the goal of creating an entity that would finance projects and provide investors with a return on their investment;

- profit for investors depended on the management efforts of others. In fact, decisions within TheDao on which projects to submit for funding evaluation were made by a small group of individuals. Founders and curators monitored the activities, safeguarded the interests of investors, and selected projects to be nominated for potential investment.

As a result, TheDAO was held to be subject to the Securities Law with the consequent obligations for the issuing entity to register the offers and sales of the securities (an obligation not complied with by the organizers of TheDAO in violation of Section 5 of the aforementioned law); to inform potential investors; and with related obligations to register as a "national securities exchange" for the entities that allowed through their exchange platforms the trading of the aforementioned tokens.

====References and Websites.====
A. Dhanani e B. J. Hausman, ''Decentralized Autonomous Organizations'', in ''Intellectual Property and Technology Law Journal'', 2022, vol. 34, n. 5, p. 1 ss.;

M. Nicotra, ''Il regime giuridico delle ICOs. Analisi comparata e prospettive regolatorie italiane'', in ''dirittobancario.it'', 18 aprile 2019.

US Supreme Court, SEC v. W.J. Howey Co., 328 U.S. 293, May 27, 1946, is available [https://supreme.justia.com/cases/federal/us/328/293/ here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Collective enterprise

2023-08-23T07:11:21Z

Bianconi: links to other Wiki pages + bold fonts

==== Individual and collective enterprise. ====
In the Italian legal system, the enterprise can take the dual form of individual enterprise or collective enterprise.

The individual enterprise is that headed by a single person; the collective enterprise is instead exercised by an organized group of people. While in individual enterprise the notion of entrepreneur (Art. 2047 of the Civil Code) corresponds to a single individual, when the enterprise is exercised collectively the entrepreneur corresponds instead to a collective entity.

==== The forms of collective enterprise. ====
The typical legal forms of collective enterprise are those of the company, in the various types governed by Book V, Titles V and VI of the Civil Code. However, although they are the most frequent, they are not the exclusive forms.

According to Article 2247 of the Civil Code, with the company contract 'two or more persons confer goods or services for the joint exercise of an economic activity with a view to sharing the profits'. Thus, only the collective enterprise exercised for the purpose of sharing profits, i.e. for profit ([[Profit-making purpose|subjective profit]]), qualifies as a company.

However, the enterprise may also be collectively exercised to produce a profit (objective profit) that is not, however, distributed among the parties. In this case, the enterprise is functional to produce the financial resources necessary to carry out a further activity, aimed at realizing an ideal purpose of the group. This represents a form of collective exercise of economic activity that differs from companies, carried out not for the purpose of profit but for cultural, recreational, charitable or otherwise ideal purposes. Associations and foundations realize forms of non-corporate collective enterprise insofar as they carry out business activities. On the requirements of enterprise activity under Italian law see: [[Entrepreneur (under Italian Law)]].

====References.====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 3 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 144 ss.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Corporations (under Italian Civil Code)

2023-08-23T07:10:33Z

Bianconi: bold fonts

==== Introduction. ====
In the Italian legal system, there are two types of companies: partnerships and corporations.

==== Corporations: types and main characteristics. ====
Corporations include:

- joint-stock company (“società per azioni”);

- limited liability company (“società a responsabilità limitata”);

- partnership limited by shares (“società in accomandita per azioni”).

These three types of corporations are grouped together because of the following common features:

===== a) Limited liability of the shareholders. =====
From an economic point of view, the partners risk in the enterprise only the money or assets they have contributed to the company. The so-called 'benefit of limited liability' is enjoyed by all partners in the joint-stock company and the limited liability partnership. In the limited partnership with share capital, on the other hand, there are two categories of partners: the limited partners, who have limited liability, and the general partners, who retain unlimited liability for the company's obligations.

===== b) The power to administration is separate from partner status. =====
Membership automatically confers only the power to concur in the appointment of directors.

The internal organization of the company is divided into a plurality of bodies, each with a specific competence:

- Shareholders' Meeting. The body representing the shareholders, competent on matters determined by law. In particular, in the traditional system, it is competent to appoint and dismiss directors.

- Administrative body (usually, a board of directors), which may be composed of non-members and is competent for the management of the social enterprise.

- Control body: mandatory in the joint-stock company; merely possible in the limited liability company.

===== c) Membership is freely transferable. =====
In such partnerships, the personal qualities of the partner lose their importance and the partners are only taken into account for the share of capital subscribed. Therefore, the substitution of the partner's person does not require any amendment of the partnership contract and does not imply the consent of the other partners. Membership becomes an exchange value and is intended for circulation. In the joint-stock company, circulation is facilitated by the fact that shareholder status is represented by a title: the share, transferable according to its law of circulation.

==== Partnerships (referral). ====
For more details see page: [[Partnerships (under Italian civil code)]].

==== References. ====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 29 ss.;

G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 38 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 159.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Partnerships (under Italian civil code)

2023-08-23T07:09:23Z

Bianconi: links to other Wiki pages + bold fonts

==== Introduction. ====
In the Italian legal system, there are two types of companies: partnerships and corporations.

==== Partnerships: types and main characteristics. ====
Partnerships include:

- the simple partnership (“società semplice”);

- the general partnership (“società in nome collettivo”);

- the limited partnership (“società in accomandita semplice”).

These three types of partnerships are grouped together under the name 'personal partnerships' because of the following common features:

===== a) Unlimited and joint liability of the partners for corporate obligations. =====
In the general partnership, all partners, without exception, are unlimited and jointly liable for the company's obligations (Art. 2291 of the Civil Code), whereas in the simple partnership, liability limitation agreements are admissible with effect vis-à-vis third parties, but only for partners who do not act in the company's name and on its behalf (Art. 2267 of the Civil Code).

The limited partnership, on the other hand, is characterized by the presence of two categories of partners: limited partners (“accomandanti”) and general partners (“accomandatari”). Only the latter are unlimitedly liable.

The partner in a partnership (albeit with the differences noted) therefore bears an unlimited business risk from an economic point of view: he will be liable for the company's obligations with all his present and future property.

===== b) The power of administration is directly linked to the status of partner (unlimited partner). =====
In partnerships, each partner with unlimited liability is for that reason solely a director of the company. Each thus contributes to the management of the partnership enterprise. The unlimited liability and the correlative participation in the administration make the personal qualities and conditions of the partner relevant. Hence the name 'partnerships' because the persons of the partners are crucial in them.

===== c) Untransferability of membership without the consent of the others. =====
Given the centrality of the persons of the partners, the partnership contract is set up as an intuitus personae, i.e. a contract in which the identity or qualities of the contracting parties are determinative of the consent of the others. The substitution of the person therefore implies a modification of the original agreements and requires the consent of the other partners.

==== Corporations (referral). ====
For more details see page: [[Corporations (under Italian Civil Code)]].

====References.====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 29 ss.;

G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 38 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 159.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Foundation (under Italian Civil Code)

2023-08-23T07:08:05Z

Bianconi: links to other Wiki pages + bold fonts

==== Collective entities in the Italian Civil Code: a taxonomy ====
The Italian Civil Code sets out two macro-categories of collective entities:

- those for profit, governed by Book V, Title V, of the Civil Code;

- those not-for-profit, governed by Book I, Title II, of the Civil Code.

While the legislator has precisely identified the purpose of profit-making companies (the division of profits, according to art. 2247 of the Civil Code), it has not specified the purpose of the entities governed by Book I. However, it is unanimously considered that they may pursue any purpose, as long as it is not for profit (e.g. cultural, political, religious, philanthropic, sporting, ...): they may carry out any type of activity, including economic ones, and even make a profit, which, however, shall not be distributed among the members, hence the term 'non-profit organizations'.

Within the framework of non-profit organizations, a distinction is made between:

- Associations;

- Foundations.

==== Foundations: definition and main characteristics ====
According to the earliest classification, associations were defined as 'universitas personarum', as groups of persons brought together for the pursuit of a common purpose, where persons prevailed over assets. In contrast, foundations were defined as 'universitas bonorum', as entities intended by the founder's will to take care of goods linked to a specific work, in which the patrimonial element prevailed. This categorization has, however, been superseded.

A foundation can be defined as a permanent organization established to allocate assets to the pursuit of a purpose. The assets are withdrawn from the disposal of the founder and the trustees to be used solely for the realization of the statutory purposes.

The foundation has legal personality. It has full legal capacity and capacity to act, implemented through its organs.

==== The foundation act ====
The foundation is established by a unilateral, non-receptive act, by which the founder (or the founders, if they are a plurality: the act nevertheless retains its unilateral character) manifests the will to establish the foundation by allocating a certain amount of assets to a certain purpose. Founders may be both natural persons and legal entities, including companies.

Article 16 of the Civil Code, which governs the content of the foundation agreement, applies to the foundation agreement.

==== The purpose of the foundation ====
In spite of the silence of the Civil Code, it is considered that foundations, like associations, may pursue any purpose as long as it is [[Profit-making purpose|non-profit making]]. However, the prevailing doctrine holds that the foundation must pursue purposes of general interest.

====The administration of the foundation====
The only body provided for by the Civil Code for the administration of the foundation is the board of directors. In its traditional structure, however, there is no assembly body. The administrative body derives its power directly from the foundation act.

The method of appointment and composition of the governing body is generally laid down in the foundation deed, which must also stipulate its powers and functions and indicate to whom powers of representation are conferred.

==== ETS foundations====
Legislative Decree No. 117/2017 (the so-called Third Sector Code) introduced and regulated [[Third Sector Entities]], which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code. Third Sector Entities are, in particular, 'voluntary organizations, associations for social promotion, philanthropic entities, social enterprises, including social cooperatives, association networks, mutual aid societies, associations, whether recognized or unrecognized, foundations and other private entities other than companies set up for the pursuit of non-profit purposes, the purpose of which is to promote the development of the economy and the environment, and to promote the development of the economy and the environment, non-profit, civic, solidarity and socially useful purposes through the performance, exclusively or principally, of one or more activities of general interest in the form of voluntary action or the free provision of money, goods or services, or mutuality or the production or exchange of goods or services, and registered in the single National Register of the Third Sector' (Art. 4, c. 1, of Decree-Law No. 117/2017).

====References and Websites====
F. Galgano, ''Trattato di diritto civile'', I, 3° ed., Cedam, Padova, 2015, p. 299 ss.;

A. Trabucchi, ''Istituzioni di diritto civile'', 48° ed., Wolters Kluwer, Milano, 2017, p. 345 ss.;

M. Ferrari, ''Le fondazioni: la guida completa'', 17 May 2021, available [https://www.altalex.com/guide/fondazioni here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Articles of incorporation and bylaws (under Italian Law)

2023-08-23T07:01:18Z

Bianconi: links to other Wiki pages + hyperlinks + bold fonts

=== Definition and content ===
Article 2328 of the Italian Civil Code introduces a distinction between articles of incorporation and by-laws.

In particular, the articles of incorporation contain the manifestation of will relating to the constitution of the company and the fundamental provisions of its organizational structure. They must be drawn up by notarial deed (Art. 2328(2) of the Civil Code).

Paragraph 2 of Art. 2328 then provides for the content of the articles of incorporation, which must indicate:

1) the surname and first name or name, date and place of birth or state of incorporation, domicile or registered office, citizenship of the shareholders and any promoters, as well as the number of shares allocated to each of them;

2) the name and municipality where the company's registered office and any secondary offices are located;

3) the activity that constitutes the object of the company;

4) the amount of the subscribed and paid-up capital;

(5) the number and nominal value, if any, of the shares, their characteristics and the manner of their issue and circulation;

6) the value attributed to receivables and assets transferred in kind;

7) the rules according to which profits are to be distributed;

8) the benefits, if any, granted to the promoters or founding members;

9) the system of administration adopted, the number of directors and their powers, indicating which of them shall represent the company;

10) the number of members of the board of auditors;

11) the appointment of the first directors and statutory auditors or the members of the supervisory board and, where applicable, the person appointed to perform the statutory audit of the accounts;

12) the total amount, at least approximately, of the formation expenses charged to the company;

13) the duration of the company or, if the company is incorporated for an indefinite period of time, the period of time, in any event not exceeding one year, after which the shareholder may withdraw.

It should be noted that, although in practice the content of the articles of incorporation is broader and more articulate than the minimum required by law, not all the indications are essential. Moreover, only the absence of any indication as to the name of the company, the contributions, the amount of the share capital or the object of the company entails the nullity of the articles of incorporation pursuant to Article 2332 of the Civil Code.

The last paragraph of Art. 2328, on the other hand, regulates the by-laws, i.e. the document containing the rules relating to the functioning of the company. The rule provides that even if it is contained in a separate deed, it constitutes an integral part of the articles of incorporation. It is therefore generally agreed that the by-laws must also be drawn up by public deed. In the event of a conflict between the provisions of the articles of incorporation and those of the by-laws, the latter shall prevail.

=== Amendments to the articles of incorporation ===
Amendments to the articles of incorporation are subject to special rules, contained in Articles 2436 et seq. of the Civil Code. It should be noted that amendments to the articles of incorporation may have the most diverse content, as they may affect the company’s organizational structure in various ways. However, the regulation to all amendments to the articles of incorporation is very meagre: it is limited to the regulation of the procedure. On the other hand, the law lays down specific rules for certain particular amendments to the articles of incorporation, such as increases and reductions in share capital.

As far as the procedure is concerned, under Article 2436 of the Italian Civil Code, the shareholders' resolution to amend the by-laws, which is the responsibility of the extraordinary shareholders' meeting pursuant to Article 2365 of the Italian Civil Code, must be recorded in the minutes by a notary public, who, within thirty days, after verifying the fulfillment of the conditions set forth by law, must request registration in the [[Business registry (under Italian Law)|business registry]] at the time of filing. The business registry office, having verified the formal regularity of the documentation, must enter the resolution in the registry. The effects of the resolution are produced by the registration.

In order to make the content of the statutes easier to understand, the full text of the articles of incorporation and by-laws, as amended, must be filed with the register after each amendment.

=== The articles of incorporation of a limited liability company===
The provisions on the [[Corporations (under Italian Civil Code)|limited liability company]] do not mention the word 'by-laws', but always refer to the term 'articles of incorporation' and the expression 'rules relating to the functioning of the company'. Although the rules do not require the drawing up of two separate documents for the drafting of the limited liability company, but instead suggest that the articles of incorporation must themselves contain the rules of the company's by-laws, notarial practice applies by analogy the provisions on limited liability companies and thus inserts the clauses on the operation of the limited liability company into the by-laws, understood in the formal sense as a document annexed to the articles of incorporation and containing the rules of the company's relationship that are not transitory in nature. The articles of incorporation of a limited liability company must also be drawn up by notarial deed and must contain the particulars set out in Article 2463 of the Civil Code.

The Decree of 26 July 2022, no. 155 of the Ministry of Economic Development (containing the "Regulation on the definition of the models of the articles of incorporation of limited liability companies having their registered office in Italy and whose capital is paid up by means of cash contributions") provided for the possibility that the deeds of incorporation in question may be received by the notary public by means of a public electronic deed, with the participation by videoconference of the requesting parties or some of them, through the use of a telematic platform prepared and managed by the National Council of Notaries, also using the uniform standard models approved by the Minister. For further details see [https://www.ipsoa.it/documents/quotidiano/2022/10/22/srl-definizione-modelli-atti-costitutivi this page]. Standard models are available at [https://www.re.camcom.gov.it/gestire-limpresa/registro-imprese-rea/costituzione-in-videoconferenza-di-srl-e-srls-1 this site].

===References===
G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 149 et seq., 493 et seq. and 564 et seq.;

F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 171 et seq. e 389 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 35 et seq.;

G. Migliorati, ''Atto costitutivo di s.r.l.'', in ''Ilsocietario.it'', 8 May 2019;

G. M. Nigro, ''La costituzione online di srl e di srls: le novità del decreto all’esame del Parlamento'', 15 October 2021, available [https://www.altalex.com/documents/2021/10/15/la-costituzione-online-di-srl-e-di-srls-le-novita-del-decreto-all-esame-del-parlamento here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Jurisdiction (Under Italian Law)

2023-08-23T06:57:40Z

Bianconi: hyperlinks + bold fonts

=== Introduction: the debated notion of jurisdiction ===
The concept of jurisdiction is indeed difficult to define. The search for a definition of jurisdiction has often led scholars to overlook the fact that it can only be understood by locating it in social and legal life.

Jurisdiction is generally characterised as a function of the State, as opposed to the administrative and legislative functions that constitute the three functions of the State, exhaustive of all its tasks and powers. In this sense, it is commonly referred to as the enforcement of law, the settlement of disputes, the implementation of sanctions, or the substitution of public activity for the activity of others.

One of the most famous definitions of jurisdiction is that provided by Chiovenda, for whom jurisdiction is 'implementation of the law by substituting the activity of public bodies for the activity of others'.

The definition available on the website of the Italian Ministry of Justice is similarly expressed, where it says that jurisdiction is one of the fundamental functions of the State, exercised by the magistrates that make up the judicial order and directed to the application of legal norms to individual cases.

According to a different approach, which detaches the concept of jurisdiction from the functions of the State, jurisdiction represents the assertion of the legal system in the concrete case. Depending on the diversity of the concrete case, jurisdiction can then manifest itself concretely in different ways.

=== The Italian judicial system: ordinary jurisdiction and special jurisdictions ===
The judicial system is composed of all the organs of the State called upon to perform the function that is technically called ius dicere, i.e. to take a decision on a given dispute according to the rules of law.

These organs constitute, depending on their organizational structure and the type of matter on which they are called upon to judge, constitutional jurisdiction, ordinary jurisdiction or special jurisdictions.

The judicial system distinguishes between two jurisdictions in civil and criminal matters, which are exercised by ordinary judges (Art. 1 of the Judicial System Act and Art. 1 of the Code of Civil Procedure). Ordinary jurisdiction is exercised by ordinary magistrates and concerns matters that the law does not reserve for special courts. The organs of ordinary jurisdiction are, for example, the General Court, the Court of Appeal and the Court of Cassation. Other jurisdictions are called special jurisdictions. They include administrative jurisdiction. Special jurisdiction, therefore, concerns matters that the law reserves to a special judiciary. Organs of special jurisdiction are, for example, the Regional Administrative Courts and the Council of State. Depending on the areas and competences, jurisdiction is differentiated into constitutional, civil, criminal, administrative, accounting, tax and military. The main instrument of jurisdictional activity is the trial, which through the adversarial process of the parties aims at the pronouncement of a measure, e.g. a judgment, by which the law is interpreted and applied to the concrete case.

=== The limits of jurisdiction. In particular, jurisdiction in private international law ===
Our legal system contains a set of rules specifically designed to determine, by means of specific criteria, the disputes to be submitted to the jurisdiction of the Italian State.

The rules on jurisdiction perform their function by identifying the circumstances in disputes that are suitable for determining whether that dispute should be submitted to the State's jurisdiction. A distinction is made between special and general jurisdiction rules. The former are those intended to apply with respect to specific categories of disputes. E.g. disputes concerning obligations. Among the general jurisdiction criteria, on the other hand, the main core of rules were Articles 1-5 and 37 of the Code of Civil Procedure. Articles 2, 3 and 4 were repealed by Law 218/1995, which in Articles 3, 4 and 7 contains the current rules on the subject.

In private international law, the general criterion for identifying Italian jurisdiction is the defendant's domicile or residence in Italy (Art. 3 L.218/1995). Italian jurisdiction exists when the defendant is domiciled or resident in Italy or has a representative there authorized to stand trial pursuant to Article 77 of the Code of Civil Procedure and in the other cases where it is provided for by law.

Jurisdiction also exists on the basis of the criteria established by Sections 2, 3 and 4 of Title II of the 1968 Brussels Convention (made enforceable by Law No. 804 of 21 June 1971), replaced first by Regulation (EC) No. 44/2001 and subsequently by Regulation (EU) No. 1215/2012, also known as the "Brussels I bis" Regulation, in force since 10 January 2015. The "Brussels I bis" Regulation applies in civil and commercial matters, regardless of the nature of the court.

=== References ===
G. Chiovenda, ''Istituzioni di diritto processuale civile'', II, Napoli, 1934, p. 7 ss., in part. p. 8, from whom the quotation above;

R. Iannotta, ''Art. 1'', in ''Codice di procedura civile'', a cura di N. Picardi – B. Sassani – A. Panzarola, I, VI ed., Giuffrè, Milano, 2015, p. 3 et seq.;

S. Satta, ''Giurisdizione (nozioni generali)'', in ''Enc. Dir.'', XIX, Giuffré, Milano, 1970, p. 218 et seq.;

V. Starace, ''Limiti della giurisdizione (diritto internazionale)'', in ''Enc. Dir.'', XIX, Giuffré, Milano, 1970, p. 428 et seq.

=== Websites ===
For the definition of jurisdiction available on the website of the Italian Ministry of Justice see: https://www.giustizia.it/giustizia/it/mg_14_3_1.page?contentId=GLO53027&previsiousPage=mg_14_3;

For a review of the structure of the Italian judicial system see: https://www.csm.it/web/csm-internet/magistratura/il-sistema-giudiziario

About jurisdiction in private international law see:

D. G. Daleffe, ''Diritto internazionale privato e giurisdizione italiana'', 25 novembre 2016, available [https://www.altalex.com/documents/news/2016/11/22/diritto-internazionale-privato-e-giurisdizione-italiana here];

Treccani Online, voce ''Competenza giurisdizionale. Diritto internazionale privato'', available [https://www.treccani.it/enciclopedia/competenza-giurisdizionale-diritto-internazionale-privato/ here].

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Entrepreneur (under Italian Law)

2023-08-23T06:54:33Z

Bianconi: bold fonts

=== Introduction: the entrepreneur from an economic point of view ===
In the economic sense, the entrepreneur is the activator of the system, the one who organizes and combines the factors of production in order to create new wealth. For this reason, he bears the business risk, i.e. the risk of not being able to cover the costs incurred with the revenues from production, and takes the general profits from the business. He also organizes the means employed and directs production, deciding what, how and how much to produce.

=== The legal definition ===
The former Italian Commercial Code, reflecting the mercantile origin of commercial law as a law proper to the merchant class, focused its discipline on the figure of the merchant, who was defined as the one who performs acts of commerce 'by habitual profession' (Art. 8 Commercial Code 1882). Commercial acts were listed in detail in Art. 3 of the Commercial Code, which also included factories and manufacturing enterprises.

Instead, the adoption of the 1942 Civil Code placed the entrepreneur at the centre of the system, giving it a legal definition consistent with the economic substance of the phenomenon. According to Article 2082 of the Italian Civil Code, 'an entrepreneur is anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services'. Also from a legal point of view, therefore, an entrepreneur is one who, through his activity, aims to create new wealth by producing goods and services or by increasing the usefulness of those already produced by intervening in their circulation. An essential requirement is therefore that the goods and services produced are intended for exchange: an entrepreneur is not one who carries out the activity with the sole purpose of satisfying exclusively personal needs.

The definition of entrepreneur given by the civil code also provides a subjective qualification: not the enterprise itself, but rather the entrepreneur is defined, because the person is seen as the activating subject of the economic system.

=== Requirements for business activity ===
The legal definition determines the scope of application of the discipline of the enterprise, in the sense that by defining who is an entrepreneur, it identifies the subjects who will be required to comply with the rules set out in Art. 2083 et seq. of the Civil Code.

The civil law notion of entrepreneur introduces three requirements for the activity carried out, if directed at the market, to qualify as entrepreneurial:

===== a) Professionalism =====
Professionalism means the stability or non-occasionality of the activity performed. It may also be a periodic activity (e.g. seasonal hotel business) or a secondary activity, as long as it is not occasional. It may possibly also be a single act when it is of such complexity as to exclude the possibility of it being an isolated affair.

===== b) Economicity =====
Economic efficiency means the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability. It is generally referred to as the 'objective cost-efficiency' of the activity. It is therefore not legally necessary for the entrepreneur to pursue a profit-making purpose (the objective of making a profit from the business), it being sufficient that he or she pursues a balanced budget.

The requirement of cost-efficiency marks the boundary between activities that are or are not entrepreneurial in nature, even if they have the same object and are professionally exercised. For example, a company canteen that carries out its activity according to the balanced budget criterion may be considered an undertaking; a charity canteen, even if habitually carried out, is not an entrepreneurial activity.

===== c) Organization =====
Article 2082 of the Civil Code refers to an 'organized' activity, i.e. an activity carried out through the coordinated use of one's own or others' factors of production (capital and/or labour). Normally, in fact, the entrepreneur makes use of a stable and complex production apparatus, comprising persons and goods that are organized by the entrepreneur for the purposes of the activity.

However, from a strictly legal point of view, it is now considered that:

* it is not necessary that the entrepreneur's organizational function also involves the labour force of others. Therefore, anyone who operates using only the capital factor and his own labour, provided the other requirements are met, is also an entrepreneur;
* the presence of a material organization is also not necessary: anyone who operates without the creation of a physically perceptible instrumental apparatus (machinery, premises, furniture, ...), but using only financial means, can also be legally qualified as an entrepreneur.

However, it is debated whether anyone who professionally carries out an economic activity using only his own personal labour can qualify as an entrepreneur.

Those who answer the question in the affirmative, believing that an entrepreneur is 'any self-employed person who performs activities of a non-intellectual nature of work or services, even if in the performance of the activity he does not avail himself of anything other than his own labour', conclude that the organization is in reality only a 'pseudo-requisite', useful to distinguish small from non-small enterprise but not to exclude the entrepreneurial character of the activity (Meruzzi, 2019, p. 15, adhering to the thesis of Galgano, 2013, p. 28 et seq.).

This doctrine is contrasted by a different orientation that, by emphasizing the requirement of organization, considers that a minimum amount of organization is always necessary to be an enterprise: what qualifies an enterprise is the use of productive factors and their coordination for a productive purpose even if the type of instrumental apparatus employed by the entrepreneur can be very varied and can also consist of a minimal apparatus (Campobasso, 2022, p. 25 et seq.). According to this approach, the organization requirement would mark the difference between entrepreneurs (even small ones) and the self-employed.

=== Entrepreneurs and intellectual professionals ===
Intellectual professionals also engage in activities that produce goods or services. However, for such activities even if professionally exercised, the entrepreneurial qualification is expressly excluded. This follows from Article 2238(1) of the Civil Code for which 'if the exercise of the profession constitutes an element of an activity organized in the form of an undertaking, the provisions of Title II shall also apply'. Therefore, in the Italian legal system, the exercise of an intellectual profession in itself does not constitute a business activity and is therefore not subject to the rules governing businesses. Self-employed persons become entrepreneurs only if and to the extent that the profession is exercised in the context of an activity qualifying as an enterprise. For example, a doctor who manages the private clinic in which he operates is an entrepreneur: in that case, two distinct activities are carried out (intellectual profession and business) and both the specific rules laid down for the profession and the rules on business apply to the same person.

=== References ===
F. Galgano, ''Diritto commerciale'', 1, ''L’imprenditore'', 13° ed., Zanichelli, Bologna, 2013, p. 28 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 11 et seq.;

G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, 2022, p. 19 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Social Enterprise (Italian Law)

2023-08-23T06:53:25Z

Bianconi: links to other Wiki pages + bold fonts

=== Definition and legal framework ===
Social enterprises were introduced into the Italian legal system by Legislative Decree 24 March 2003 no. 155. Art. 1 defined them as 'all private organizations, including the bodies referred to in Book V of the Civil Code, which carry out, on a stable and principal basis, an organized economic activity for the purpose of producing or exchanging goods or services of social utility, aimed at achieving aims of general interest, and which meet the requirements set out in Articles 2, 3 and 4' of the same decree.

This decree was repealed by Legislative Decree 3 July 2017 No. 112 on the 'revision of the regulations on social enterprises', which sets the current regulations on the matter.

Pursuant to Article 1(1) of Legislative Decree 112/2017, 'all private entities, including those established in the forms set out in Book V of the Civil Code, which, in accordance with the provisions of this decree, carry out on a stable and principal basis a business activity in the general interest, without profit and for civic, solidarity and socially useful purposes, adopting responsible and transparent management methods and favoring the widest involvement of workers, users and other stakeholders in their activities, may acquire the status of social enterprise'. The status of Social Enterprise can therefore be acquired by private entities, such as associations and foundations, and companies that carry out on a stable and principal basis a business activity in the general interest, without profit and for civic, solidarity and socially useful purposes. Social Enterprises include, by right, Social Cooperatives and their consortia.

A Social Enterprise can only permanently and principally carry out the business activities of general interest provided for in Article 2 of Legislative Decree 112/2017. An enterprise activity in the general interest is considered to be carried out on a principal basis if its revenues exceed seventy per cent of total revenues. Also considered of general interest, independent of its object, is the business activity in which, for the pursuit of civic, solidarity and socially useful purposes, very disadvantaged workers and disadvantaged or disabled persons are employed, as well as persons benefiting from international protection, homeless persons, who are in a condition of poverty such that it is not possible for them to find and maintain a home of autonomy.

=== Incorporation and Registration with the Business Registry ===
The social enterprise is established by notarial deed and the relevant articles of incorporation must make explicit the social character of the enterprise in accordance with the rules of Legislative Decree no. 112/2017, indicating in particular the corporate purpose and the absence of the purpose of profit-making.

The articles of incorporation, their amendments and other deeds relating to the company must be filed by the notary or the directors with the Office of the [[Business registry (under Italian Law)|Business Registry]] in whose district the registered office is established, for registration in the appropriate section, within thirty days of their completion.

The annual balance sheet (Article 9 of Legislative Decree 112/2017) and the social balance sheet drawn up according to specific Guidelines (see below) must be filed at the same Register.

===Social Enterprises and Third Sector Entities ===
Legislative Decree No. 117/2017 (the so-called 'Third Sector Code' or 'TSC') introduced and regulated [[Third Sector Entities]] (“TSE”), which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code. Generally speaking, it can be stated - with a good degree of approximation - that, by virtue of the provisions of the TSC, the set of TSEs encompasses a heterogeneous set of types of entities:

*certain named types of entities, some of which were already subject to a special regulation that, in some cases, was repealed and replaced with a new one (as in the case of social enterprises: see Article 40, paragraph 1, TSC; Article 17, paragraph 3, Decree 112/2017) and, in other cases (such as mutual aid societies), remained governed by the original regulations, without prejudice, however, to the possibility of transforming into entities now regulated by the TSC. Other entities, on the other hand, have been regulated ex novo despite being de facto already widespread in the 'third sector' market (e.g. the so-called 'associative networks' and philanthropic entities).
*Non-typical TSEs, the establishment of which is permitted by the residual provision set out in Article 4 of the Third Sector Code: this, however, provided that the entities in question - in addition to being private in nature and meeting the constituent elements laid down by the legislator in general for typical TSE - never take corporate form.

Social enterprises are therefore included among the typified types of TSEs. This has led to the establishment of a special section of the Single National Register of the Third Sector, in which TSEs must be registered, dedicated to social enterprises and, among them, to social cooperatives, which, being social enterprises by law, are also third sector entities by law (see Art. 46, par. 1, lett. d), Legislative Decree No. 117 of 2017). From the point of view of the legal framework, they are therefore subject in the first place to the special rules laid down by Legislative Decree 112/2017, as well as to the rules of Legislative Decree 117/2017, insofar as they are compatible with the provisions of Decree 112/2017. In their absence and for the aspects not regulated, the rules of the Civil Code and its implementing provisions concerning the legal form in which the social enterprise is established apply to them.

===References===
E. Cusa, ''Frammenti di disciplina delle cooperative con la qualifica di impresa sociale'', in ''Nuove leggi civ. comm.'', 2021, p. 267 et seq.;

A. Fici, ''Tipo e'' status ''nella nuova disciplina dell’impresa sociale'', in ''Contr. impr.'', 2023, p. 112 et seq.;

D. Foresta, ''Sugli enti del terzo settore. Tipi e funzione nell’articolazione del registro unico'', in ''Nuove leggi civ. comm.'', 2022, p. 1461 et seq.;

M. L. Vitali, ''Riforma del terzo settore, nuova disciplina dell’impresa sociale e regole societarie'', in ''Osservatorio del diritto civile e commerciale'', 2020, p. 79 et seq.

===Websites===
For further information and links, see the following site: https://italianonprofit.it/risorse/definizioni/imprese-sociali/

For the legal framework, with direct links to the current regulations, see: https://www.lavoro.gov.it/temi-e-priorita/terzo-settore-e-responsabilita-sociale-imprese/focus-on/impresa-sociale/pagine/default

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Third Sector Entities

2023-08-23T06:51:28Z

Bianconi: links to other Wiki pages + bold fonts

=== Introduction ===
Legislative Decree No. 117/2017 (the so-called Third Sector Code, or “TSC”) introduced and regulated Third Sector Entities (“TSE”), which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code.

=== Third Sector Entities: definition and main features ===
Third Sector Entities are defined as 'voluntary organizations, associations for social promotion, philanthropic entities, [[Social Enterprise (Italian Law)|social enterprises]], including social [[Cooperative corporation (under Italian Law)|cooperatives]], association networks, mutual aid societies, associations, whether recognized or unrecognized, [[Foundation (under Italian Civil Code)|foundations]] and other private entities other than [[Corporations (under Italian Civil Code)|companies]] set up for the pursuit of [[Profit-making purpose|non-profit purposes]], the purpose of which is to promote the development of the economy and the environment, and to promote the development of the economy and the environment, non-profit, civic, solidarity and socially useful purposes through the performance, exclusively or principally, of one or more activities of general interest in the form of voluntary action or the free provision of money, goods or services, or mutuality or the production or exchange of goods or services, and registered in the single national register of the Third Sector' (Art. 4, par. 1, Legislative Decree No. 117/2017).

The definition is therefore articulated, as it first includes a list of entities typologically identified ('voluntary organizations, associations for social promotion, philanthropic entities, social enterprises, including social cooperatives, association networks, mutual aid societies). These are the so-called 'named types' of entities, some of which were already subject to special regulations which, in some cases, were repealed and replaced with a new one (as precisely in the case of social enterprises: see Article 40, paragraph 1, TSC; Article 17, paragraph 3, Decree 112/2017) and, in other cases (as for mutual aid societies), remained governed by the original regulations. Other entities, such as 'associative networks' and philanthropic entities, on the other hand, have been regulated ex novo. The regulation then goes on to provide a general definition to include in the ETS the recognized and unrecognized associations, foundations and other private entities other than companies that meet the following requirements:

*pursuit, on a non-profit basis, of civic, solidarity and socially useful purposes;
* carrying out, exclusively or principally, one or more of the activities of general interest typified in Article 5;
*the general interest activity may be carried out indifferently in a free, mutual or entrepreneurial form;
*registration in the Single National Register of the Third Sector.

===The enterprise in the Third Sector===
The Third Sector Code introduced a general legal regime, applicable to all TSEs regardless of the specific legal form adopted from time to time by the individual entity and largely modelled on the rules laid down in the Civil Code for [[Corporations (under Italian Civil Code)|corporations]]. In this sense, see for instance Art. 23 et seq. Code of the Third Sector, which subject Third Sector associations and foundations to governance rules largely similar to those of companies.

Moreover, the Third Sector Code expressly recognizes the possibility that non-profit organizations may carry out business activities either exclusively or principally or only secondarily. In the first case, it will be the same activity of general interest that will be carried out in an entrepreneurial form, but on a non-profit basis and for civic, solidarity or socially useful purposes. If the entity carries out its activity exclusively or principally in the form of a commercial enterprise:

- is obliged to register not only in the Single National Register of the Third Sector but also in the [[Business registry (under Italian Law)|Business Registry]] (Art. 11 CTS);

- is obliged to keep civil-law accounting records (Art. 13, para. 4, CTS);

- is obliged to draw up the annual balance sheet in the form of the balance sheet of a stock corporation and consequently to file it with the business register (Art. 13, para. 5, CTS).

Alternatively, TSEs may only carry out business activities on a secondary basis, as a way of obtaining financial resources to invest in carrying out their main non-profit activity (Art. 6 CTS). In that case then the business activity will be aimed at generating a profit, which is, however, ancillary and instrumental to the general interest activity.

===References===
D. Foresta, ''Sugli enti del terzo settore. Tipi e funzione nell’articolazione del registro unico'', in ''Nuove leggi civ. comm.'', 2022, p. 1461 et seq.;

C. Ibba, ''Codice del terzo settore e diritto societario'', in ''Riv. soc''., 2019, p. 64 et seq.;

G. Marasà, ''La ‘commercializzazione’ degli enti del libro I del codice civile'', in ''Riv. dir. civ''., 2023, p. 210 et seq.;

G. Marasà, ''Appunti sui requisiti di qualificazione degli enti del Terzo settore: attività, finalità, forme organizzative e pubblicità'', in ''Nuove leggi civ. comm''., 2018, p. 675 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 36 et seq.;

G. Ponzanelli, ''Enti del terzo settore: un primo commento'', 2017, in ''I quaderni della fondazione italiana del notariato'', available [https://elibrary.fondazionenotariato.it/risultati.asp?q=Enti%20del%20terzo%20settore%3A%20un%20primo%20commento here];

E. Quadri, ''Il terzo settore tra diritto speciale e diritto generale'', in ''Nuova giur. civ. comm''., 2018, p. 708 et seq.

===Websites===
The updated version of the Third Sector Code can be found [https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=2017-08-02&atto.codiceRedazionale=17G00128&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=4200499a-cfce-483e-84e2-703cb6f79c7e&tabID=0.08454119083690514&title=lbl.dettaglioAtto here]

Further information and links are also available at [https://italianonprofit.it/risorse/definizioni/enti-terzo-settore/ this site]

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Business registry (under Italian Law)

2023-08-23T06:47:01Z

Bianconi: links to other Wiki pages + bold fonts

=== Introduction ===
Formally established in 1942 "for the registrations provided for by law" (Art. 2188, par. 1, Civil Code), the business registry became operational only in the early 1990s thanks to Art. 8 of Law No. 580 of December 29, 1993 (dedicated to the reorganization of the chambers of commerce, industry, handicrafts and agriculture and establishing the business registry).

The business registry is public and is maintained by the business registry office (Art. 2188, paras. 2 and 3, Civil Code), which was established by Art. 8, paras. 1 and 3, Law 580/1993 at the chamber of commerce. The office maintains the business register under the supervision of a judge delegated by the president of the court of the provincial capital.

=== Subjects required to register and effectiveness of registrations ===
The following are required to register in the ordinary section of the business register:

(a) non-small commercial individual [[Entrepreneur (under Italian Law)|entrepreneurs]], for this purpose providing the information stipulated in Article 2196 of the Civil Code;

(b) all companies, apart from the [[Partnerships (under Italian civil code)|simple company]];

(c) [[The consortium|consortia]] with external activity;

d) [[The European Economic Interest Grouping (EEIG)|European economic interest groups]] based in Italy;

e) the other entities listed in Art. 7, par. 2, Decree 581/1995.

Registration has declaratory effect, that means it is functional to the enforceability against third parties of the registered acts. This implies that:

*the facts of which the law prescribes registration, if they have not been registered, cannot be opposed to third parties by the person who is obliged to request their registration, unless he proves that the third parties had knowledge of them (art. 2193, par. 1, Civil Code);
*ignorance of the facts of which the law prescribes registration cannot be opposed by third parties from the moment the registration took place (art. 2193, par. 2, Civil Code).

Registration thus enables the entrepreneur to oppose the registered news to third parties, replacing actual knowledge with a legal presumption of knowledge.

There are also special sections of the business register, to which are registered, for example:

(a) agricultural entrepreneurs (Art. 2135 of the Civil Code);

(b) small entrepreneurs (Art. 2083 Code);

(c) persons exercising management and coordination activities;

(d) [[Social Enterprise (Italian Law)|social enterprises]].

Law 580/1993 (art. 8, para. 5) introduced a special regime for the publicity of registrations in the special sections, providing that these had the effect of mere publicity notice, unless otherwise provided by law. Legislative Decree 228/2001 then gave declaratory effect to the registration of agricultural enterprises in the relevant special section, with the result that today such registration has an effect equal to that provided for commercial entrepreneurs.

Registration with the business registry sometimes takes constitutive effect. This implies that the effectiveness of the legal act is subject to its registration with the register. This effectiveness is provided in particular for the registration of joint stock companies and, in general, of the articles of incorporation of corporations (Article 2331(1) of the Civil Code). In the absence of registration therefore the company legally does not exist.

Pursuant to Decree 581/1995, setting forth the implementing regulations for Article 8 l. 580/1993, the entities provided for by law (listed in Article 7, par. 1, Decree 581/1995) and the acts provided for by law (Article 7, par. 2, Decree 581/1995) must be registered with the business registry.

===References===
G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, p. 110 et seq.;

A. Riccio, ''L’iscrizione nel registro delle imprese e la designazione dei membri del consiglio della camera di commercio'', in ''Contr. impr''., 2000, p. 1401 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 73 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Network contract under Italian Law

2023-08-23T06:46:25Z

Bianconi: bold fonts

=== The network contract: notion and purpose ===
In addition to other forms of cooperation between companies (for further details see [[The firm network contract and other forms of business cooperation]]), the network contract was introduced into the national regulatory framework by Law Decree 5/2009, amended by Law Decree 33/2009 (subsequently amended by Law Decree 78/2010, enacted by Law Decree 122/2010; Law Decree 83/2012, enacted by Law 134/2012; Law Decree 179/2012, enacted by Law 221/2012), whose Article 3, paragraphs 4 ter - 4 quinquies, still provide the relevant rules. In particular, pursuant to the above-mentioned paragraph 4 ter, 'with the network contract several entrepreneurs pursue the purpose of individually and collectively increasing their innovative capacity and competitiveness on the market and to this end they undertake, on the basis of a joint network program, to' carry out one or more of the following activities:

# "collaborate in predetermined forms and in predetermined fields relating to the exercise of their respective businesses",
# "or to exchange information or services of an industrial, commercial, technical or technological nature",
# "or to carry on jointly one or more activities falling within the scope of their undertakings".

It is therefore a contract by which several contracting entrepreneurs prepare and implement a cooperation program aimed at improving the innovative capacity and competitiveness of their respective enterprises. This instrument of cooperation between entrepreneurs is undoubtedly similar to the consortium, but differs from it, insofar as it is relevant here, in terms of the purpose pursued, which is to individually and collectively enhance the innovative capacity and competitiveness of the member companies. It is therefore not (or at least not only) an instrument to achieve cost savings in order to generate greater profit, but rather an "instrument to realize individual and collective development policies of the enterprises" through the services to which they oblige themselves.

=== Subjective scope of application ===
The rule expressly refers to [[Entrepreneur (under Italian Law)|entrepreneurs]]. Therefore, only those who are legally qualifiable as such (see Article 2082 of the Italian Civil Code), whether in individual or associated form, may enter into such a contract, i.e., for example, individual entrepreneurs, [[Partnerships (under Italian civil code)|partnerships]], [[Corporations (under Italian Civil Code)|corporations]], [[Cooperative corporation (under Italian Law)|cooperatives]], [[The consortium|consortia]], [[Social Enterprise (Italian Law)|social enterprises]], as well as all those further entities qualifying as entrepreneurs insofar as they exclusively or principally carry out business activities, albeit non-profit, such as associations and, as would seem more consistent, ETS entrepreneurs (for further detail see [[collective enterprise]]).

It should be noted that Article 12(3)(a) of Law 81/2017 (the so-called jobs act of the self-employed) extended the possibility of entering into a network contract to professionals as well, in order to allow them to participate in calls for tenders and compete for private assignments and contracts. It thus also allows such persons to set up professional networks or participate in business networks in the form of mixed networks. Thus, the subjective requirement of the exclusively entrepreneurial nature of the members has been dropped.

===Advertising requirements and content of the contract===
The network contract is subject to registration in the section of the [[Business registry (under Italian Law)|business registry]] in which each participant is registered (para. 4 quater, cited above). To this end, the contract must be drawn up in the form of a public deed or a notarized private deed or a digitally signed deed (para. 4 ter, cited above). The effectiveness of the contract commences when the last of the prescribed inscriptions has been executed with respect to all the original signatories.

With regard to the content of the network contract, paragraph 4 ter, cited above, provides that it must mandatorily provide:

a) the data relating to each adhering company (whether by virtue of the original signing of the contract or by subsequent adhesion), as well as the name and registered office of the network, if the establishment of a common asset fund is envisaged;

b) an indication of the strategic objectives of innovation and enhancement of the competitive capacity of the participants and the modalities agreed with them to measure progress towards these objectives;

c) the definition of a common network program (see below);

d) the duration of the contract, the modalities for the accession of other entrepreneurs and, if agreed, the causes and modalities for early termination;

e) if the contract provides for its establishment, the information concerning the person chosen to act as joint body for the purpose of performing the contract or one or more parts or stages thereof. The topic is discussed in greater detail below. It should be noted at the outset that where provision is made for such a body, which is merely a contingent body, the contract must also govern its management and representation powers and the rules relating to its possible replacement;

f) the rules for the adoption of decisions by the partners on any matter or aspect of common interest which does not fall within the powers of management delegated to the common body, when established, as well as the rules relating to the manner in which decisions to amend the scheme are to be taken.

=== In particular, the network program===
A central role within the network, both at the stage of the conclusion of the contract and of its implementation, is played by the common network program, which pursuant to paragraph 4 ter (c), cited above, must, in particular, contain

- the statement of the rights and obligations assumed by each participant;

- the means of realizing the common purpose;

- the rules governing the joint property fund, if its establishment is envisaged. In particular, provision must be made for the amount and valuation criteria of the initial contributions and of any subsequent contributions that each participant undertakes to make to the fund, as well as the fund's management rules. Moreover, it is specified that if permitted by the plan, the contribution may also be made by means of the contribution of designated assets, established pursuant to Article 2447-bis, par. 1, letter a), of the Civil Code.

===The so-called “open door” principle===
As mentioned above, the network contract must provide for, inter alia, the modalities for the subsequent accession of new entrepreneurs. In this sense, the network contract takes on the characteristics of a structurally, but not necessarily open contract. It may, however, become so by providing for procedures that do not require the prior consent of the other contracting parties. In that case, the accession of new entrepreneurs would not technically be a subjective modification of the contract, but rather an act of execution thereof. Conversely, where nothing is envisaged, the entry of new participants is subject to the procedures envisaged for other contractual modifications, as a subjective modification of the contract.

===The distinction between 'Contract-Networks' and 'Subject-Networks' and the (past) problem of legal subjectivity===
Under the original legislative framework, the possibility of attributing an autonomous [[Legal Subjectivity (under Italian Law)|legal subjectivity]] to the network was debated. In the absence of an explicit indication, doctrine had come to admit the configuration of the network as an autonomous subject of law depending on the concrete features given to it by the network enterprises.

Following the amendments made in 2012, the aforementioned paragraph 4 ter now expressly excludes that the network be endowed with legal subjectivity, without prejudice, however, to the possibility of its acquisition by the express will of the parties. This means that, unless otherwise chosen, the network is not configured as a legal entity independent of the member undertakings. Indeed, in the event that the network without legal entity is provided with a common body, such body acts as a representative not of the network but of the member undertakings (see paragraph 4 ter, letter e).

This legislative option has led to the definition of the macro subdivision between:

i. contract-networks: networks without legal subjectivity;

ii. subject-networks: networks having legal subjectivity, acquired by free choice of the members through the procedure outlined in the last part of paragraph 4 quater.

===The legal nature of the network===
The acquisition or not of an autonomous subjectivity, together with the network's internal organizational structure, affects its legal nature.

Indeed, with respect to business networks having their own subjectivity, the network contract is configured as a [[Plurilateral contract (Italian law)|plurilateral contract with common purpose]], having associative cause. It is in fact 'an associative contract in the proper sense, which gives rise to an organized organization, endowed with subjective alterity with respect to the individual participants in the network'.

On the other hand, the reconstruction of the legal nature of the network without subjectivity appears more articulated, as in this case a distinction must be made according to the organization of the network. In particular:

# networks lacking subjectivity but having a common body and an asset fund (so-called structured networks): the network contract retains the nature of a plurilateral contract with a common purpose with external relevance, but without an associative cause. The typical effect to which it gives rise appears to be specifically attributable to assets intended for the achievement of the objectives set forth in the network contract;
#networks lacking legal personality and also lacking a common body and an asset fund (so-called unstructured networks): in this case the contract may take on the features of a plurilateral exchange contract or a plurilateral contract with a common purpose, depending on the use of the services of each contracting party. In the latter case, even where a form of internal organization is given (e.g., contributions of the parties) for the purpose of enabling the joint activity to be carried out, the internal organization remains devoid of external relevance and autonomy vis-à-vis third parties.

===The organization of the network: general framework (referral)===
The discipline referring to internal organization is very meagre and flexible. To a large extent it refers back to contractual autonomy for the definition of the organizational structure of the network with reference to the organizational and governance profiles of the network. The subject matter unfolds through three main profiles:

=====a) The network bodies =====
The only body that is expressly contemplated in the legislative provisions referred to is the "common body", which is merely possible, the establishment of which must be provided for in the contract. In that case, it is always the contract that must govern its powers of management and representation and the rules relating to its possible replacement.

=====b) The common fund and the network's asset autonomy=====
A further profile that is expressly considered in the articles concerns the possibility of setting up a common fund. Also in this case, its provision is merely eventual and left to the free determination of the parties, who are allowed to endow the network with an asset fund or not. Where, however, the network is endowed with a common body and an asset fund, Articles 2614 and 2615 of the Civil Code, i.e. the rules governing the common fund of consortia with external activity (see paragraph 4 ter, no. 2, cited above), apply to it.

===== c) Decision-making processes within the network=====
The third profile concerns the decision-making processes within the network. Once again, the legislative discipline is very meagre, if not absolutely silent, limiting itself to deferring to contractual provisions the determination of the rules for the taking of decisions by the network members on any matter or aspect of common interest as well as for the modification of contractual provisions.

For further references on organizational profiles and decision-making processes within the network see: [[The organization and governance of Firm Networks (in Italian law)|The organization and governance of Firm Networks]].

=== References===
F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, p. 511 et seq.;

G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, p. 255-291;

G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, p. 640 et seq.;

A. Caprara, ''Le “modificazioni soggettive” del contratto di rete: spunti di riflessione'', in G. Meruzzi (a cura di), ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', 11 aprile 2012, p. 29 et seq.;

M. Ceolin, ''Il contratto di rete tra imprese nella legislazione italiana: rete strutturata e non strutturata tra luci e ombre a dieci anni dalla sua introduzione'', in ''Revista de Direito da Cidade'', 2019, p. 413 et seq.;

F. Cirianni, ''Il contratto di rete'', in ''Notariato'', 2010, p. 442 et seq.;

A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbli. e contr.'', 2010, p. 87 et seq.;

G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in Id. (a cura di), ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', 11 aprile 2012, p. 15 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019;

P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contr. impr.'', 2017, p. 673 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Profit-making purpose

2023-08-23T06:45:55Z

Bianconi: links to other Wiki pages + bold fonts

=== Definition. Objective profit and subjective profit ===
Profit-making is defined as the intent to achieve personal gain or profit.

Traditionally, a distinction is made between subjective profit and objective profit. Subjective profit concerns the production of profit as the psychological motive of the entrepreneur. It requires the parties to act for the purpose of sharing among themselves the profits made in the business (subjective profit).

Objective profit, on the other hand, concerns the production of profit in terms of the objective manner in which the activity is carried out. In this sense, the purpose of profit refers to the fact that the business activity is aimed at making profit (objective profit).

=== Profit-making purpose and business activity ===
Article 2082 Italian Civil Code defines entrepreneur as "anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services." Among the requirements of business activity it introduces, in particular, the economic character of the activity carried out (i.e., economicity). This requirement is understood by doctrine and jurisprudence as the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability (for more on the notion and requirements of business activity under the Italian Civil Code see [[Entrepreneur (under Italian Law)]]).

What characterizes entrepreneurial activity is thus the fact that the activity is carried out at least on a balance-sheet basis (economic method). On the other hand, it is not required that the activity be carried out in a manner tending to the realization of revenues in excess of costs (profit-making method) and thus to the accrual of a profit to be eventually attributed to the entrepreneur.

Therefore, according to Article 2082 of the Civil Code, business activity is that carried out by the economic method, while the pursuit of a profit-making purpose is not necessary.

===Profit-making purpose and companies===
Under Article 2247 of the Civil Code, "by the contract of partnership two or more persons contribute goods or services for the joint pursuit of an economic activity with a view to sharing the profits thereof."

The purpose of profit characterizes the company contract. Thus, companies are required to operate on a profit-making basis, in the twofold sense that the business activity must be aimed at making profits (objective profit) and that the profit must be distributed among the members (subjective profit).

Within the framework of collective forms of business operation, corporations are those business forms aimed at profit. However, there are alternative models of collective exercise of enterprise for non-profit purposes, on which see [[Collective enterprise]].

===Profit-making purpose, mutualistic purpose and consortium purpose (outline)===
The Italian legal system also includes among companies [[Cooperative corporation (under Italian Law)|cooperative enterprises]], distinguished by a mutualistic rather than a profit-making purpose. The mutual enterprise is aimed at realizing a patrimonial advantage for the members as it operates to "provide goods or services or work opportunities directly to the members of the organization on more advantageous conditions than they would obtain on the market" (see Report to the Civil Code, no. 1025).

Still different, finally, is the purpose that distinguishes [[The consortium|consortia]] and consortium companies, namely, the consortium purpose, understood as cost savings. The activity carried out by the entrepreneurs who are members of the consortium is not aimed at the goal of maximizing profit, but at an expense-saving purpose, similar as such to the mutualistic purpose. However, it differs from this because in the consortium, the expense saving is functional to the pursuit of each consortium member's typical purpose (which is generally a [[profit-making purpose]]).

===References===
F. Galgano, ''Diritto commerciale'', 1, ''L’imprenditore'', 13° ed., Zanichelli, Bologna, 2013, p. 23 et seq.;

F. Galgano, ''Diritto commerciale'', 2, ''Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 15 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 99 et seq.;

G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, 2022, p. 31 et seq.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Legal Subjectivity (under Italian Law)

2023-08-23T06:41:53Z

Bianconi: bold fonts

=== Introduction: natural persons and legal persons ===
The Italian legal system recognizes both natural persons, whose concept refers to human individuals, and legal persons, who are instead different entities, phenomena of law.

Identifiable in the legal world are certain phenomena which, although different from human individuals, are treated by law, at least in certain specific and essential aspects, like human individuals. For this reason, both phenomena are referred to as "persons," with the adjectives "natural" and "legal" then added to mark their substantive difference. In the juxtaposition of adjectives, it is thus made clear that while human individuals have their own, autonomous existence outside of law, in the physical world, the phenomena referred to as "legal persons" exist only because there is law and as a function of law.

=== Legal entities: legal subjectivity and legal personality ===
Legal entities are organizations endowed with legal capacity, i.e., the ability to hold rights and duties in their own right. Entities may or may not have legal personality: independent of this, however, they are subjects of law, like natural persons. Legal subjectivity is thus the quality of legal subject, that is, the quality that designates one who is legally capable and as such a participant in the legal system. In other words, legal subjectivity is the possibility of being the center of imputation of subjective legal situations, such as rights, duties, etc.

Being a subject of law, the entity is by law a party to legal relations. This means that if the entity incurs a debt, the entity is liable for the debt with its own assets; acts performed in the name of the entity must be carried out by the entity's legal representative.

Although entities are subjects of law, therefore, not all entities are legal persons: only those that the law formally qualifies as such.

In the Italian legal system, legal persons include foundations, associations and committees that have legal personality under a special act of public authority. Also legal persons are corporations and cooperatives.

In contrast, unincorporated entities are unrecognized associations and committees and partnerships.

Although these do not have autonomous personality, they are nonetheless endowed with general legal capacity and can therefore be holders of rights and obligations. In contrast, legal capacity should be denied to all those organizational forms of persons or property that do not constitute unitary centers of legal imputation.

=== Legal persons (referral) ===
On the concept of legal person see: [[Legal personality (under Italian Law)]].

===References===
C. M. Bianca, ''Diritto'' civile, 1, La ''norma giuridica. I soggetti'', 2° ed., Giuffré, Milano, 2002, in part. p. 311 et seq.;

P. Gallo, ''Soggetto di diritto'', in ''Digesto'' ''Disc. Priv.'', Sez. civ., XVII, Utet, Torino, 1998, p. 576 et seq.;

G. L. Pellizzi, ''Soggettività giuridica'', in ''Enc. Giur. Treccani'', XXXVI, 1990.

[[Category:MUSA Tech4Fin_Milestone_1]]
[[Category:MUSA DOLaw]]

Legal personality (under Italian Law)

2023-08-23T06:39:51Z

Bianconi: hyperlinks

=== Introduction: natural persons and legal persons===
The concept of legal person is one of the most controversial concepts in civil law. If, in fact, the notion of natural person is peacefully referred to human individuals, legal persons, on the other hand, are different entities, phenomena of law.

Identifiable in the legal world are certain phenomena which, although different from human individuals, are treated by law, at least in certain specific and essential respects, like human individuals. It is precisely for this reason that both phenomena are referred to as "persons," with the adjectives "natural" and "legal" then added to mark their substantial difference. In the juxtaposition of adjectives, it is thus made clear that while human individuals have their own, autonomous existence outside of law, in the physical world, the phenomena referred to as "legal persons" exist only because there is law and as a function of law.

In addition, the picture is further complicated by the fact that not all phenomena that are referred to as "legal persons" are always the same, but rather the list of legal persons varies depending on the system and even within the same system.

===The concept of legal personality in Italian law and doctrinal debate===
According to the meaning traditionally attributed to the concept of legal person, if an entity has legal personality, it means that it constitutes an autonomous subject of law, that is, a subject of law distinct from the persons of which it is composed and third to them. Thus, the legal person is the entity endowed with general legal capacity (as the capacity to be the holder of all legal positions related to legally relevant interests) and perfect patrimonial autonomy (it alone is liable for the obligations undertaken).

When, on the other hand, an entity does not have legal personality, it means that it is resolved in the plurality of its members and that the rights and obligations of the entity are nothing but the rights or obligations of its own members.

The idea that entities other than natural persons can enjoy legal capacity and themselves be "persons" is widespread in all modern legal systems. However, it is transposed with difficulty in legal thought. Therefore, various theories have been proposed over time to provide an explanation for the concept of legal personality. The best known are the theory of fiction and the theory of organic reality.

According to the first (fiction theory), legal persons would not have their own subjective reality, but are regulated "as if" they were persons. It is linked to the anthropomorphic preconception that pushes for attributes corresponding to the human person in the legal person.

In contrast, the opposite organic theory, also linked to the anthropomorphic preconception, attributes to legal persons an existence in the real world totally similar to that of natural persons. According to this theory, therefore, corporate entities present themselves in the world as organisms that, like natural persons, express their own will and act through their organs.

However, these theories have been superseded by the more recent approach, for which the reality of legal persons must be admitted on the basis of what is established by law because it is the law that decides who its recipients are (legal reality theory, advocated by F. Ferrara). Regardless of their possible existence outside the law what matters then is only what the law deems relevant for its purposes.

On the other hand, the modern linguistic conception of the phenomenon, supported in particular by F. Galgano, sees in the concept of legal person the synthesis of a special legal regime, dictated by the legislator in relation to the aggregated collectivity. Through the analysis of normative propositions, therefore, it is argued that the term "legal person" does not express any real data of experience but constitutes only a linguistic formula, of synthesis precisely, which summarizes the specific legal treatment reserved by the legislator for the organized collectivity and encompasses the rights and duties that characterize natural persons.

===Phenomena. Specifically, companies "with legal personality" and companies "without legal personality"===
Not all entities are legal persons: such are only those that the law formally qualifies as legal persons. Such are, in particular, foundations, associations and committees that have legal personality under a special act of public authority. Also legal persons are corporations and cooperatives.

With specific regard to companies, the Civil Code distinguishes between corporations with and without legal personality (Article 2331, paragraph 1, Civil Code as well as Articles 19 and 145 of the Civil Code). Thus, this is a co-extensive distinction with that between partnerships and corporations. This may lead one to believe that only corporations are "third parties" to their partners.

However, the legal status of partnerships is not always consistent with the idea that they are resolved in the plurality of partners. The distinction between partners and partnerships manifests itself particularly in the areas of representation in court (Art. 2266(1) Civil Code); corporate assets (Art. 2270 and 2305 Civil Code); and liability for corporate obligations (particularly with regard to the liability of partners in limited and limited partnerships).

Therefore, what in companies with legal personality may appear as a consequence of otherness with respect to the partners therefore ends up being present in companies without personality as well. An analysis of the legislative data of the Italian legal system then concludes for the substantial neutrality of the concept of legal person with respect to the legal status of the company. Any internal differences between types of companies should be more properly traced to the specific discipline of the type and not instead to the mere fact of the presence or absence of legal personality.

=== The notion of legal subjectivity (referral)===
On the notion of legal subjectivity see [[Legal Subjectivity (under Italian Law)]].

===References===
C. M. Bianca, ''Diritto'' civile, 1, La ''norma giuridica. I soggetti'', 2° ed., Giuffré, Milano, 2002, in part. p. 321 ss.;

F. Ferrara, ''Le persone giuridiche'', in ''Trattato di diritto civile italiano'', diretto da F. Vassalli, vol. II, tomo 2, Torino 1956;

F. Galgano, ''Delle persone giuridiche'', in ''Commentario del codice civile'', a cura di A. Scialoja e G. Branca, Bologna-Roma, 1969;

F. Galgano, ''Diritto commerciale'', 2, ''Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 33 ss.;

E. Gliozzi, ''Persona giuridica'', in ''Treccani Online'', available [https://www.treccani.it/enciclopedia/persona-giuridica_%28Enciclopedia-delle-scienze-sociali%29/ here];

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 163 ss.

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

Plurilateral contract (Italian law)

2023-08-23T06:35:50Z

Bianconi: bold fonts

=== Introduction ===
Article 1321 of the Italian Civil Code defines a contract as "the agreement of two or more parties to constitute, regulate or extinguish between them a patrimonial legal relationship."

Introduced with the Civil Code of 1942, the article thus recognizes the possibility of "two or more parties" participating in the contract, where "party" to the contract refers to a unitary center of interests, regardless of whether it then consists of one or more persons.

=== Plurilateral contracts with common purpose and other contracts with multiple parties ===
Alongside the notion of contract, the Civil Code recognizes and regulates the category of plurilateral contract.

A plurilateral contract with common purpose is defined as a contract that under Articles 1420, 1446, 1459 and 1466 of the Civil Code is characterized by the following elements:

a) presence of two or more parties: by qualifying the center of interest as a party, the party remains unitary even when it includes several persons. E.g. buying and selling where the selling party or the buying party corresponds to more than one person. In such a case, the contract remains bilateral.

b) common purpose: the common purpose characterizes the cause of the plurilateral contract and distinguishes it from the exchange contract. Indeed, in the latter, the performance of each party benefits the other party, and the benefit of each derives from the performance of the other. In the plurilateral contract with common purpose, on the other hand, the performance of each party does not immediately benefit the others, but ends up indirectly benefiting all the parties, including the one who performs it.

c) variability of the number of parties: both at the time of the conclusion of the contract and subsequently, the number of parties may vary. This means that the obligation or performance of one of the parties may cease without resulting in the nullity, annulment or termination (due to non-performance or supervening impossibility of performance) of the contract.

Only contracts with these characteristics can be defined as plurilateral (with common purpose) within the meaning of the Civil Code. Therefore, they are not technically plurilateral contracts:

* contracts with more than two parties but characterized by the invariability of the number of parties;
* plurilateral exchange contracts, where the commonality of purpose is lacking. E.g., transaction contract with more than two parties.

=== Discipline ===
The Civil Code dedicates the following rules to the plurilateral contract:

* art. 1420 c.c.: "In contracts with more than two parties, in which the performance of each is directed to the attainment of a common purpose, nullity affecting the bond of only one of the parties does not amount to nullity of the contract, unless its participation should, according to the circumstances, be considered essential".
* Art. 1446 c.c.: "In the contracts indicated in Article 1420, nullity affecting the bond of only one of the parties does not import nullity of the contract, unless the participation of that party should, according to the circumstances, be considered essential".
* Art. 1459 c.c.: "In the contracts indicated in Article 1420(1) the non-performance of one of the parties does not import the termination of the contract with respect to the others, unless the non-performance should, according to the circumstances, be considered essential".
* Article 1466 of the Civil Code: "In the contracts indicated in Article 1420, the impossibility of performance by one of the parties does not import dissolution of the contract with respect to the others, unless the missed performance should, according to the circumstances, be considered essential".

These rules are, in any case, an application of the principle of contract preservation.

In addition, to these rules dictated generally for the plurilateral contract are added the specific disciplines dictated for the main plurilateral contracts: associative contracts.

=== The associative contract ===
The prototype plurilateral contract with common purpose is the company contract, as the associative contract. However, not all plurilateral contracts are associative contracts, although in most cases they are: for example, associations, companies, consortia, and temporary business associations are plurilateral associative contracts.

=== References ===
T. Ascarelli, ''Le unioni di imprese'', in ''Riv. dir. comm. dir. gen. obbl.'', 1935, I, p. 152 ss., in part. p. 178 ss.;

A. Belvedere, ''Contratto plurilaterale'', in ''Digesto Disc. Priv.'', IV, Sez. civ., Utet, Torino, 1989, p. 270 ss.;

S. Maiorca, ''Contratto plurilaterale'', in ''Enc. Giur. Treccani'', X, Roma, 1988;

E. Minervini, ''Contratto plurilaterale'', in ''Enc. Dir. I tematici'', I, ''Contratto'', Giuffré, Milano, 2021, p. 450 ss.

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

Cooperative corporation (under Italian Law)

2023-08-23T06:34:55Z

Bianconi: bold fonts

=== Definition ===
According to Article 2511 of the Italian Civil Code, "cooperatives are companies with variable capital with a [[Profit-making purpose|mutual purpose]] registered in the register of cooperative companies referred to in Article 2512, second paragraph, and Article 223 sexiesdecies of the provisions for the implementation of this code."

Cooperative societies differ, therefore, from other [[Corporations (under Italian Civil Code)|corporations]] precisely because they are not devoted to achieving a profit to be distributed among the members, but are aimed at providing goods or services or employment opportunities directly to the members, on more profitable terms than those offered by the market.

They may be predominantly or not predominantly mutual, depending on whether or not there are clauses in the company's bylaws limiting the distribution of profits or reserves to members, and the activity is carried out primarily for the benefit of the latter.

The organizational model chosen, as well as its regulations, may follow those of the joint-stock company or the limited liability company, depending on the will of the members, except for cooperatives with fewer than 9 members, for which the limited liability company model is mandatory.

Among the special features of cooperative corporations are:

- the variability of capital: this means that there is no need to amend the bylaws when the membership varies (the so-called “open door” principle);

- the need for a resolution by the directors to make a member's admission or exclusion effective;

- the criterion of a capital vote, whereby each shareholder, regardless of the amount of his or her shareholding, is entitled to cast one vote at the shareholders' meeting ("one head - one vote" principle);

- the provision of supervision by the government authority, in order to ensure the smooth administrative and accounting operation of the cooperative society.

In addition to the [[Business registry (under Italian Law)|business registry]], cooperative societies are required to register in special registers maintained by the Ministry of Economic Development.

===References===
G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 603 ss.;

''Società cooperative'', in ''Dizionario Treccani Online'', disponibile al sito: https://www.treccani.it/enciclopedia/societa-cooperative/

[[Category:MUSA Tech4Fin Milestone 1]]
[[Category:MUSA DOLaw]]

Plurilateral contract (Italian law)

2023-07-20T21:34:57Z

Bianconi: definition and discipline of the plurilateral contract according to the Italian Civil Code

=== '''Introduction''' ===
Article 1321 of the Italian Civil Code defines a contract as "the agreement of two or more parties to constitute, regulate or extinguish between them a patrimonial legal relationship."

Introduced with the Civil Code of 1942, the article thus recognizes the possibility of "two or more parties" participating in the contract, where "party" to the contract refers to a unitary center of interests, regardless of whether it then consists of one or more persons.

=== '''Plurilateral contracts with common purpose and other contracts with multiple parties''' ===
Alongside the notion of contract, the Civil Code recognizes and regulates the category of plurilateral contract.

A plurilateral contract with common purpose is defined as a contract that under Articles 1420, 1446, 1459 and 1466 of the Civil Code is characterized by the following elements:

a) presence of two or more parties: by qualifying the center of interest as a party, the party remains unitary even when it includes several persons. E.g. buying and selling where the selling party or the buying party corresponds to more than one person. In such a case, the contract remains bilateral.

b) common purpose: the common purpose characterizes the cause of the plurilateral contract and distinguishes it from the exchange contract. Indeed, in the latter, the performance of each party benefits the other party, and the benefit of each derives from the performance of the other. In the plurilateral contract with common purpose, on the other hand, the performance of each party does not immediately benefit the others, but ends up indirectly benefiting all the parties, including the one who performs it.

c) variability of the number of parties: both at the time of the conclusion of the contract and subsequently, the number of parties may vary. This means that the obligation or performance of one of the parties may cease without resulting in the nullity, annulment or termination (due to non-performance or supervening impossibility of performance) of the contract.

Only contracts with these characteristics can be defined as plurilateral (with common purpose) within the meaning of the Civil Code. Therefore, they are not technically plurilateral contracts:

* contracts with more than two parties but characterized by the invariability of the number of parties;
* plurilateral exchange contracts, where the commonality of purpose is lacking. E.g., transaction contract with more than two parties.

=== '''Discipline''' ===
The Civil Code dedicates the following rules to the plurilateral contract:

* art. 1420 c.c.: "In contracts with more than two parties, in which the performance of each is directed to the attainment of a common purpose, nullity affecting the bond of only one of the parties does not amount to nullity of the contract, unless its participation should, according to the circumstances, be considered essential".
* Art. 1446 c.c.: "In the contracts indicated in Article 1420, nullity affecting the bond of only one of the parties does not import nullity of the contract, unless the participation of that party should, according to the circumstances, be considered essential".
* Art. 1459 c.c.: "In the contracts indicated in Article 1420(1) the non-performance of one of the parties does not import the termination of the contract with respect to the others, unless the non-performance should, according to the circumstances, be considered essential".
* Article 1466 of the Civil Code: "In the contracts indicated in Article 1420, the impossibility of performance by one of the parties does not import dissolution of the contract with respect to the others, unless the missed performance should, according to the circumstances, be considered essential".

These rules are, in any case, an application of the principle of contract preservation.

In addition, to these rules dictated generally for the plurilateral contract are added the specific disciplines dictated for the main plurilateral contracts: associative contracts.

=== '''The associative contract''' ===
The prototype plurilateral contract with common purpose is the company contract, as the associative contract. However, not all plurilateral contracts are associative contracts, although in most cases they are: for example, associations, companies, consortia, and temporary business associations are plurilateral associative contracts.

=== '''References''' ===
T. Ascarelli, ''Le unioni di imprese'', in ''Riv. dir. comm. dir. gen. obbl.'', 1935, I, p. 152 ss., in part. p. 178 ss.;

A. Belvedere, ''Contratto plurilaterale'', in ''Digesto Disc. Priv.'', IV, Sez. civ., Utet, Torino, 1989, p. 270 ss.;

S. Maiorca, ''Contratto plurilaterale'', in ''Enc. Giur. Treccani'', X, Roma, 1988;

E. Minervini, ''Contratto plurilaterale'', in ''Enc. Dir. I tematici'', I, ''Contratto'', Giuffré, Milano, 2021, p. 450 ss.

Cooperative corporation (under Italian Law)

2023-07-20T21:30:44Z

Bianconi: definition and main features of cooperative corporations under Italian Law

=== '''Definition''' ===
According to Article 2511 of the Italian Civil Code, "cooperatives are companies with variable capital with a mutual purpose registered in the register of cooperative companies referred to in Article 2512, second paragraph, and Article 223 sexiesdecies of the provisions for the implementation of this code."

Cooperative societies differ, therefore, from other '''corporation'''s precisely because they are not devoted to achieving a profit to be distributed among the members, but are aimed at providing goods or services or employment opportunities directly to the members, on more profitable terms than those offered by the market.

They may be predominantly or not predominantly '''mutual''', depending on whether or not there are clauses in the company's bylaws limiting the distribution of profits or reserves to members, and the activity is carried out primarily for the benefit of the latter.

The organizational model chosen, as well as its regulations, may follow those of the joint-stock company or the limited liability company, depending on the will of the members, except for cooperatives with fewer than 9 members, for which the limited liability company model is mandatory.

Among the special features of cooperative corporations are:

- the variability of capital: this means that there is no need to amend the bylaws when the membership varies (the so-called “open door” principle);

- the need for a resolution by the directors to make a member's admission or exclusion effective;

- the criterion of a capital vote, whereby each shareholder, regardless of the amount of his or her shareholding, is entitled to cast one vote at the shareholders' meeting ("one head - one vote" principle);

- the provision of supervision by the government authority, in order to ensure the smooth administrative and accounting operation of the cooperative society.

In addition to the '''business registry''', cooperative societies are required to register in special registers maintained by the Ministry of Economic Development.

=== '''References''' ===
G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 603 ss.;

''Società cooperative'', in ''Dizionario Treccani Online'', disponibile al sito: https://www.treccani.it/enciclopedia/societa-cooperative/

Legal personality (under Italian Law)

2023-07-20T21:29:11Z

Bianconi: the meaning of legal personality under Italian Law

=== '''Introduction: natural persons and legal persons''' ===
The concept of legal person is one of the most controversial concepts in civil law. If, in fact, the notion of natural person is peacefully referred to human individuals, legal persons, on the other hand, are different entities, phenomena of law.

Identifiable in the legal world are certain phenomena which, although different from human individuals, are treated by law, at least in certain specific and essential respects, like human individuals. It is precisely for this reason that both phenomena are referred to as "persons," with the adjectives "natural" and "legal" then added to mark their substantial difference. In the juxtaposition of adjectives, it is thus made clear that while human individuals have their own, autonomous existence outside of law, in the physical world, the phenomena referred to as "legal persons" exist only because there is law and as a function of law.

In addition, the picture is further complicated by the fact that not all phenomena that are referred to as "legal persons" are always the same, but rather the list of legal persons varies depending on the system and even within the same system.

=== '''The concept of legal personality in Italian law and doctrinal debate''' ===
According to the meaning traditionally attributed to the concept of legal person, if an entity has legal personality, it means that it constitutes an autonomous subject of law, that is, a subject of law distinct from the persons of which it is composed and third to them. Thus, the legal person is the entity endowed with general legal capacity (as the capacity to be the holder of all legal positions related to legally relevant interests) and perfect patrimonial autonomy (it alone is liable for the obligations undertaken).

When, on the other hand, an entity does not have legal personality, it means that it is resolved in the plurality of its members and that the rights and obligations of the entity are nothing but the rights or obligations of its own members.

The idea that entities other than natural persons can enjoy legal capacity and themselves be "persons" is widespread in all modern legal systems. However, it is transposed with difficulty in legal thought. Therefore, various theories have been proposed over time to provide an explanation for the concept of legal personality. The best known are the theory of fiction and the theory of organic reality.

According to the first (fiction theory), legal persons would not have their own subjective reality, but are regulated "as if" they were persons. It is linked to the anthropomorphic preconception that pushes for attributes corresponding to the human person in the legal person.

In contrast, the opposite organic theory, also linked to the anthropomorphic preconception, attributes to legal persons an existence in the real world totally similar to that of natural persons. According to this theory, therefore, corporate entities present themselves in the world as organisms that, like natural persons, express their own will and act through their organs.

However, these theories have been superseded by the more recent approach, for which the reality of legal persons must be admitted on the basis of what is established by law because it is the law that decides who its recipients are (legal reality theory, advocated by F. Ferrara). Regardless of their possible existence outside the law what matters then is only what the law deems relevant for its purposes.

On the other hand, the modern linguistic conception of the phenomenon, supported in particular by F. Galgano, sees in the concept of legal person the synthesis of a special legal regime, dictated by the legislator in relation to the aggregated collectivity. Through the analysis of normative propositions, therefore, it is argued that the term "legal person" does not express any real data of experience but constitutes only a linguistic formula, of synthesis precisely, which summarizes the specific legal treatment reserved by the legislator for the organized collectivity and encompasses the rights and duties that characterize natural persons.

=== '''Phenomena. Specifically, companies "with legal personality" and companies "without legal personality"''' ===
Not all entities are legal persons: such are only those that the law formally qualifies as legal persons. Such are, in particular, foundations, associations and committees that have legal personality under a special act of public authority. Also legal persons are corporations and cooperatives.

With specific regard to companies, the Civil Code distinguishes between corporations with and without legal personality (Article 2331, paragraph 1, Civil Code as well as Articles 19 and 145 of the Civil Code). Thus, this is a co-extensive distinction with that between partnerships and corporations. This may lead one to believe that only corporations are "third parties" to their partners.

However, the legal status of partnerships is not always consistent with the idea that they are resolved in the plurality of partners. The distinction between partners and partnerships manifests itself particularly in the areas of representation in court (Art. 2266(1) Civil Code); corporate assets (Art. 2270 and 2305 Civil Code); and liability for corporate obligations (particularly with regard to the liability of partners in limited and limited partnerships).

Therefore, what in companies with legal personality may appear as a consequence of otherness with respect to the partners therefore ends up being present in companies without personality as well. An analysis of the legislative data of the Italian legal system then concludes for the substantial neutrality of the concept of legal person with respect to the legal status of the company. Any internal differences between types of companies should be more properly traced to the specific discipline of the type and not instead to the mere fact of the presence or absence of legal personality.

=== '''The notion of legal subjectivity (referral)''' ===
On the notion of legal subjectivity see '''Legal Subjectivity (under Italian Law)'''.

=== '''References''' ===
C. M. Bianca, ''Diritto'' civile, 1, La ''norma giuridica. I soggetti'', 2° ed., Giuffré, Milano, 2002, in part. p. 321 ss.;

F. Ferrara, ''Le persone giuridiche'', in ''Trattato di diritto civile italiano'', diretto da F. Vassalli, vol. II, tomo 2, Torino 1956;

F. Galgano, ''Delle persone giuridiche'', in ''Commentario del codice civile'', a cura di A. Scialoja e G. Branca, Bologna-Roma, 1969;

F. Galgano, ''Diritto commerciale'', 2, ''Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 33 ss.;

E. Gliozzi, ''Persona giuridica'', in ''Treccani Online'', available at: https://www.treccani.it/enciclopedia/persona-giuridica_%28Enciclopedia-delle-scienze-sociali%29/;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 163 ss.

Legal Subjectivity (under Italian Law)

2023-07-20T21:26:30Z

Bianconi: the meaning of legal subjectivity under Italian Law

=== '''Introduction: natural persons and legal persons''' ===
The Italian legal system recognizes both natural persons, whose concept refers to human individuals, and legal persons, who are instead different entities, phenomena of law.

Identifiable in the legal world are certain phenomena which, although different from human individuals, are treated by law, at least in certain specific and essential aspects, like human individuals. For this reason, both phenomena are referred to as "persons," with the adjectives "natural" and "legal" then added to mark their substantive difference. In the juxtaposition of adjectives, it is thus made clear that while human individuals have their own, autonomous existence outside of law, in the physical world, the phenomena referred to as "legal persons" exist only because there is law and as a function of law.

=== '''Legal entities: legal subjectivity and legal personality''' ===
Legal entities are organizations endowed with legal capacity, i.e., the ability to hold rights and duties in their own right. Entities may or may not have legal personality: independent of this, however, they are subjects of law, like natural persons. Legal subjectivity is thus the quality of legal subject, that is, the quality that designates one who is legally capable and as such a participant in the legal system. In other words, legal subjectivity is the possibility of being the center of imputation of subjective legal situations, such as rights, duties, etc.

Being a subject of law, the entity is by law a party to legal relations. This means that if the entity incurs a debt, the entity is liable for the debt with its own assets; acts performed in the name of the entity must be carried out by the entity's legal representative.

Although entities are subjects of law, therefore, not all entities are legal persons: only those that the law formally qualifies as such.

In the Italian legal system, legal persons include foundations, associations and committees that have legal personality under a special act of public authority. Also legal persons are corporations and cooperatives.

In contrast, unincorporated entities are unrecognized associations and committees and partnerships.

Although these do not have autonomous personality, they are nonetheless endowed with general legal capacity and can therefore be holders of rights and obligations. In contrast, legal capacity should be denied to all those organizational forms of persons or property that do not constitute unitary centers of legal imputation.

=== '''Legal persons (referral''') ===
On the concept of legal person see: '''Legal personality (under Italian Law)'''.

=== '''References''' ===
C. M. Bianca, ''Diritto'' civile, 1, La ''norma giuridica. I soggetti'', 2° ed., Giuffré, Milano, 2002, in part. p. 311 et seq.;

P. Gallo, ''Soggetto di diritto'', in ''Digesto'' ''Disc. Priv.'', Sez. civ., XVII, Utet, Torino, 1998, p. 576 et seq.;

G. L. Pellizzi, ''Soggettività giuridica'', in ''Enc. Giur. Treccani'', XXXVI, 1990.

Network contract under Italian Law

2023-07-19T10:47:19Z

Bianconi: The network contract: notion and legal issues according to Italian Law

=== '''The network contract: notion and purpose''' ===
In addition to other forms of cooperation between companies (for further details see [[The firm network contract and other forms of business cooperation]]), the network contract was introduced into the national regulatory framework by Law Decree 5/2009, amended by Law Decree 33/2009 (subsequently amended by Law Decree 78/2010, enacted by Law Decree 122/2010; Law Decree 83/2012, enacted by Law 134/2012; Law Decree 179/2012, enacted by Law 221/2012), whose Article 3, paragraphs 4 ter - 4 quinquies, still provide the relevant rules. In particular, pursuant to the above-mentioned paragraph 4 ter, 'with the network contract several entrepreneurs pursue the purpose of individually and collectively increasing their innovative capacity and competitiveness on the market and to this end they undertake, on the basis of a joint network program, to' carry out one or more of the following activities:

# "collaborate in predetermined forms and in predetermined fields relating to the exercise of their respective businesses",
# "or to exchange information or services of an industrial, commercial, technical or technological nature",
# "or to carry on jointly one or more activities falling within the scope of their undertakings".

It is therefore a contract by which several contracting entrepreneurs prepare and implement a cooperation program aimed at improving the innovative capacity and competitiveness of their respective enterprises. This instrument of cooperation between entrepreneurs is undoubtedly similar to the consortium, but differs from it, insofar as it is relevant here, in terms of the purpose pursued, which is to individually and collectively enhance the innovative capacity and competitiveness of the member companies. It is therefore not (or at least not only) an instrument to achieve cost savings in order to generate greater profit, but rather an "instrument to realize individual and collective development policies of the enterprises" through the services to which they oblige themselves.

=== '''Subjective scope of application''' ===
The rule expressly refers to '''entrepreneurs'''. Therefore, only those who are legally qualifiable as such (see Article 2082 of the Italian Civil Code), whether in individual or associated form, may enter into such a contract, i.e., for example, individual entrepreneurs, [[Partnerships (under Italian civil code)|partnerships]], [[Corporations (under Italian Civil Code)|corporations]], '''cooperatives''', '''consortia''', '''social enterprises''', as well as all those further entities qualifying as entrepreneurs insofar as they exclusively or principally carry out business activities, albeit non-profit, such as associations and, as would seem more consistent, ETS entrepreneurs (for further detail see [[collective enterprise]]).

It should be noted that Article 12(3)(a) of Law 81/2017 (the so-called jobs act of the self-employed) extended the possibility of entering into a network contract to professionals as well, in order to allow them to participate in calls for tenders and compete for private assignments and contracts. It thus also allows such persons to set up professional networks or participate in business networks in the form of mixed networks. Thus, the subjective requirement of the exclusively entrepreneurial nature of the members has been dropped.

=== '''Advertising requirements and content of the contract''' ===
The network contract is subject to registration in the section of the '''business registry''' in which each participant is registered (para. 4 quater, cited above). To this end, the contract must be drawn up in the form of a public deed or a notarized private deed or a digitally signed deed (para. 4 ter, cited above). The effectiveness of the contract commences when the last of the prescribed inscriptions has been executed with respect to all the original signatories.

With regard to the content of the network contract, paragraph 4 ter, cited above, provides that it must mandatorily provide:

a) the data relating to each adhering company (whether by virtue of the original signing of the contract or by subsequent adhesion), as well as the name and registered office of the network, if the establishment of a common asset fund is envisaged;

b) an indication of the strategic objectives of innovation and enhancement of the competitive capacity of the participants and the modalities agreed with them to measure progress towards these objectives;

c) the definition of a common network program (see below);

d) the duration of the contract, the modalities for the accession of other entrepreneurs and, if agreed, the causes and modalities for early termination;

e) if the contract provides for its establishment, the information concerning the person chosen to act as joint body for the purpose of performing the contract or one or more parts or stages thereof. The topic is discussed in greater detail below. It should be noted at the outset that where provision is made for such a body, which is merely a contingent body, the contract must also govern its management and representation powers and the rules relating to its possible replacement;

f) the rules for the adoption of decisions by the partners on any matter or aspect of common interest which does not fall within the powers of management delegated to the common body, when established, as well as the rules relating to the manner in which decisions to amend the scheme are to be taken.

=== '''In particular, the network program''' ===
A central role within the network, both at the stage of the conclusion of the contract and of its implementation, is played by the common network program, which pursuant to paragraph 4 ter (c), cited above, must, in particular, contain

- the statement of the rights and obligations assumed by each participant;

- the means of realizing the common purpose;

- the rules governing the joint property fund, if its establishment is envisaged. In particular, provision must be made for the amount and valuation criteria of the initial contributions and of any subsequent contributions that each participant undertakes to make to the fund, as well as the fund's management rules. Moreover, it is specified that if permitted by the plan, the contribution may also be made by means of the contribution of designated assets, established pursuant to Article 2447-bis, par. 1, letter a), of the Civil Code.

=== '''The so-called “open door” principle'''. ===
As mentioned above, the network contract must provide for, inter alia, the modalities for the subsequent accession of new entrepreneurs. In this sense, the network contract takes on the characteristics of a structurally, but not necessarily open contract. It may, however, become so by providing for procedures that do not require the prior consent of the other contracting parties. In that case, the accession of new entrepreneurs would not technically be a subjective modification of the contract, but rather an act of execution thereof. Conversely, where nothing is envisaged, the entry of new participants is subject to the procedures envisaged for other contractual modifications, as a subjective modification of the contract.

=== '''The distinction between 'Contract-Networks' and 'Subject-Networks' and the (past) problem of legal subjectivity''' ===
Under the original legislative framework, the possibility of attributing an autonomous '''legal subjectivity''' to the network was debated. In the absence of an explicit indication, doctrine had come to admit the configuration of the network as an autonomous subject of law depending on the concrete features given to it by the network enterprises.

Following the amendments made in 2012, the aforementioned paragraph 4 ter now expressly excludes that the network be endowed with legal subjectivity, without prejudice, however, to the possibility of its acquisition by the express will of the parties. This means that, unless otherwise chosen, the network is not configured as a legal entity independent of the member undertakings. Indeed, in the event that the network without legal entity is provided with a common body, such body acts as a representative not of the network but of the member undertakings (see paragraph 4 ter, letter e).

This legislative option has led to the definition of the macro subdivision between:

i. contract-networks: networks without legal subjectivity;

ii. subject-networks: networks having legal subjectivity, acquired by free choice of the members through the procedure outlined in the last part of paragraph 4 quater.

=== '''The legal nature of the network''' ===
The acquisition or not of an autonomous subjectivity, together with the network's internal organizational structure, affects its legal nature.

Indeed, with respect to business networks having their own subjectivity, the network contract is configured as a '''plurilateral contract with common purpose''', having associative cause. It is in fact 'an associative contract in the proper sense, which gives rise to an organized organization, endowed with subjective alterity with respect to the individual participants in the network'.

On the other hand, the reconstruction of the legal nature of the network without subjectivity appears more articulated, as in this case a distinction must be made according to the organization of the network. In particular:

i. networks lacking subjectivity but having a common body and an asset fund (so-called structured networks): the network contract retains the nature of a plurilateral contract with a common purpose with external relevance, but without an associative cause. The typical effect to which it gives rise appears to be specifically attributable to assets intended for the achievement of the objectives set forth in the network contract;

networks lacking legal personality and also lacking a common body and an asset fund (so-called unstructured networks): in this case the contract may take on the features of a plurilateral exchange contract or a plurilateral contract with a common purpose, depending on the use of the services of each contracting party. In the latter case, even where a form of internal organization is given (e.g., contributions of the parties) for the purpose of enabling the joint activity to be carried out, the internal organization remains devoid of external relevance and autonomy vis-à-vis third parties.

=== '''The organization of the network: general framework (referral)''' ===
The discipline referring to internal organization is very meagre and flexible. To a large extent it refers back to contractual autonomy for the definition of the organizational structure of the network with reference to the organizational and governance profiles of the network. The subject matter unfolds through three main profiles:

===== '''a) The network bodies''' =====
The only body that is expressly contemplated in the legislative provisions referred to is the "common body", which is merely possible, the establishment of which must be provided for in the contract. In that case, it is always the contract that must govern its powers of management and representation and the rules relating to its possible replacement.

===== '''b) The common fund and the network's asset autonomy''' =====
A further profile that is expressly considered in the articles concerns the possibility of setting up a common fund. Also in this case, its provision is merely eventual and left to the free determination of the parties, who are allowed to endow the network with an asset fund or not. Where, however, the network is endowed with a common body and an asset fund, Articles 2614 and 2615 of the Civil Code, i.e. the rules governing the common fund of consortia with external activity (see paragraph 4 ter, no. 2, cited above), apply to it.

===== '''c) Decision-making processes within the network''' =====
The third profile concerns the decision-making processes within the network. Once again, the legislative discipline is very meagre, if not absolutely silent, limiting itself to deferring to contractual provisions the determination of the rules for the taking of decisions by the network members on any matter or aspect of common interest as well as for the modification of contractual provisions.

For further references on organizational profiles and decision-making processes within the network see: '''...'''

=== '''References''' ===
F. Cafaggi, ''Il contratto di rete nella prassi. Prime riflessioni'', in ''Contratti'', 2011, p. 511 et seq.;

G. F. Campobasso, ''Diritto commerciale'', vol. I, ''Diritto dell’impresa'', UTET Giuridica, Milano, 2022, p. 255-291;

G. F. Campobasso, ''Diritto commerciale'', vol. II, ''Diritto delle società'', UTET Giuridica, Milano, 2022, p. 640 et seq.;

A. Caprara, ''Le “modificazioni soggettive” del contratto di rete: spunti di riflessione'', in G. Meruzzi (a cura di), ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', 11 aprile 2012, p. 29 et seq.;

M. Ceolin, ''Il contratto di rete tra imprese nella legislazione italiana: rete strutturata e non strutturata tra luci e ombre a dieci anni dalla sua introduzione'', in ''Revista de Direito da Cidade'', 2019, p. 413 et seq.;

F. Cirianni, ''Il contratto di rete'', in ''Notariato'', 2010, p. 442 et seq.;

A. Gentili, ''Una prospettiva analitica su reti di imprese e contratti di rete'', in ''Obbli. e contr.'', 2010, p. 87 et seq.;

G. Meruzzi, ''Notazioni in tema di soggettività giuridica della rete'', in Id. (a cura di), ''Il contratto di rete. Dalla teoria giuridica alla realtà operativa'', 11 aprile 2012, p. 15 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019;

P. Saccomanno, ''Il contratto di rete: profili di un’indagine aperta'', in ''Contr. impr.'', 2017, p. 673 et seq.

Business registry (under Italian Law)

2023-07-19T10:32:05Z

Bianconi: The Italian business registry

=== '''Introduction''' ===
Formally established in 1942 "for the registrations provided for by law" (Art. 2188, par. 1, Civil Code), the business registry became operational only in the early 1990s thanks to Art. 8 of Law No. 580 of December 29, 1993 (dedicated to the reorganization of the chambers of commerce, industry, handicrafts and agriculture and establishing the business registry).

The business registry is public and is maintained by the business registry office (Art. 2188, paras. 2 and 3, Civil Code), which was established by Art. 8, paras. 1 and 3, Law 580/1993 at the chamber of commerce. The office maintains the business register under the supervision of a judge delegated by the president of the court of the provincial capital.

=== '''Subjects required to register and effectiveness of registrations''' ===
The following are required to register in the ordinary section of the business register:

(a) non-small commercial individual '''entrepreneurs''', for this purpose providing the information stipulated in Article 2196 of the Civil Code;

(b) all companies, apart from the [[Partnerships (under Italian civil code)|simple company]];

(c) '''consortia''' with external activity;

d) '''European economic interest groups''' based in Italy;

e) the other entities listed in Art. 7, par. 2, Decree 581/1995.

Registration has declaratory effect, that means it is functional to the enforceability against third parties of the registered acts. This implies that:

* the facts of which the law prescribes registration, if they have not been registered, cannot be opposed to third parties by the person who is obliged to request their registration, unless he proves that the third parties had knowledge of them (art. 2193, par. 1, Civil Code);
* ignorance of the facts of which the law prescribes registration cannot be opposed by third parties from the moment the registration took place (art. 2193, par. 2, Civil Code).

Registration thus enables the entrepreneur to oppose the registered news to third parties, replacing actual knowledge with a legal presumption of knowledge.

There are also special sections of the business register, to which are registered, for example:

(a) agricultural entrepreneurs (Art. 2135 of the Civil Code);

(b) small entrepreneurs (Art. 2083 Code);

(c) persons exercising management and coordination activities;

(d) '''social enterprises'''.

Law 580/1993 (art. 8, para. 5) introduced a special regime for the publicity of registrations in the special sections, providing that these had the effect of mere publicity notice, unless otherwise provided by law. Legislative Decree 228/2001 then gave declaratory effect to the registration of agricultural enterprises in the relevant special section, with the result that today such registration has an effect equal to that provided for commercial entrepreneurs.

Registration with the business registry sometimes takes constitutive effect. This implies that the effectiveness of the legal act is subject to its registration with the register. This effectiveness is provided in particular for the registration of joint stock companies and, in general, of the articles of incorporation of corporations (Article 2331(1) of the Civil Code). In the absence of registration therefore the company legally does not exist.

Pursuant to Decree 581/1995, setting forth the implementing regulations for Article 8 l. 580/1993, the entities provided for by law (listed in Article 7, par. 1, Decree 581/1995) and the acts provided for by law (Article 7, par. 2, Decree 581/1995) must be registered with the business registry.

=== '''References''' ===
G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, p. 110 et seq.;

A. Riccio, ''L’iscrizione nel registro delle imprese e la designazione dei membri del consiglio della camera di commercio'', in ''Contr. impr''., 2000, p. 1401 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 73 et seq.

Profit-making purpose

2023-07-19T10:27:37Z

Bianconi: definition of profit-making purpose according to Italian Law

=== '''Definition. Objective profit and subjective profit''' ===
Profit-making is defined as the intent to achieve personal gain or profit.

Traditionally, a distinction is made between subjective profit and objective profit. Subjective profit concerns the production of profit as the psychological motive of the entrepreneur. It requires the parties to act for the purpose of sharing among themselves the profits made in the business (subjective profit).

Objective profit, on the other hand, concerns the production of profit in terms of the objective manner in which the activity is carried out. In this sense, the purpose of profit refers to the fact that the business activity is aimed at making profit (objective profit).

=== '''Profit-making purpose and business activity''' ===
Article 2082 Italian Civil Code defines entrepreneur as "anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services." Among the requirements of business activity it introduces, in particular, the economic character of the activity carried out (i.e., economicity). This requirement is understood by doctrine and jurisprudence as the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability (for more on the notion and requirements of business activity under the Italian Civil Code see '''Entrepreneur (under Italian Law)''').

What characterizes entrepreneurial activity is thus the fact that the activity is carried out at least on a balance-sheet basis (economic method). On the other hand, it is not required that the activity be carried out in a manner tending to the realization of revenues in excess of costs (profit-making method) and thus to the accrual of a profit to be eventually attributed to the entrepreneur.

Therefore, according to Article 2082 of the Civil Code, business activity is that carried out by the economic method, while the pursuit of a profit-making purpose is not necessary.

=== '''Profit-making purpose and companies''' ===
Under Article 2247 of the Civil Code, "by the contract of partnership two or more persons contribute goods or services for the joint pursuit of an economic activity with a view to sharing the profits thereof."

The purpose of profit characterizes the company contract. Thus, companies are required to operate on a profit-making basis, in the twofold sense that the business activity must be aimed at making profits (objective profit) and that the profit must be distributed among the members (subjective profit).

Within the framework of collective forms of business operation, corporations are those business forms aimed at profit. However, there are alternative models of collective exercise of enterprise for non-profit purposes, on which see [[Collective enterprise]].

=== '''Profit-making purpose, mutualistic purpose and consortium purpose (outline)''' ===
The Italian legal system also includes among companies '''cooperative enterprises''', distinguished by a mutualistic rather than a profit-making purpose. The mutual enterprise is aimed at realizing a patrimonial advantage for the members as it operates to "provide goods or services or work opportunities directly to the members of the organization on more advantageous conditions than they would obtain on the market" (see Report to the Civil Code, no. 1025).

Still different, finally, is the purpose that distinguishes '''consortia''' and consortium companies, namely, the consortium purpose, understood as cost savings. The activity carried out by the entrepreneurs who are members of the consortium is not aimed at the goal of maximizing profit, but at an expense-saving purpose, similar as such to the mutualistic purpose. However, it differs from this because in the consortium, the expense saving is functional to the pursuit of each consortium member's typical purpose (which is generally a profit-making purpose).

=== '''References''' ===
F. Galgano, ''Diritto commerciale'', 1, ''L’imprenditore'', 13° ed., Zanichelli, Bologna, 2013, p. 23 et seq.;

F. Galgano, ''Diritto commerciale'', 2, ''Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 15 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 99 et seq.;

G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, 2022, p. 31 et seq.

Third Sector Entities

2023-07-19T10:22:47Z

Bianconi: definition and main features of the Third Sector Entities

=== '''Introduction''' ===
Legislative Decree No. 117/2017 (the so-called Third Sector Code, or “TSC”) introduced and regulated Third Sector Entities (“TSE”), which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code.

=== '''Third Sector Entities: definition and main features''' ===
Third Sector Entities are defined as 'voluntary organizations, associations for social promotion, philanthropic entities, '''social enterprises''', including social cooperatives, association networks, mutual aid societies, associations, whether recognized or unrecognized, [[Foundation (under Italian Civil Code)|foundations]] and other private entities other than [[Corporations (under Italian Civil Code)|companies]] set up for the pursuit of non-profit purposes, the purpose of which is to promote the development of the economy and the environment, and to promote the development of the economy and the environment, non-profit, civic, solidarity and socially useful purposes through the performance, exclusively or principally, of one or more activities of general interest in the form of voluntary action or the free provision of money, goods or services, or mutuality or the production or exchange of goods or services, and registered in the single national register of the Third Sector' (Art. 4, par. 1, Legislative Decree No. 117/2017).

The definition is therefore articulated, as it first includes a list of entities typologically identified ('voluntary organizations, associations for social promotion, philanthropic entities, social enterprises, including social cooperatives, association networks, mutual aid societies). These are the so-called 'named types' of entities, some of which were already subject to special regulations which, in some cases, were repealed and replaced with a new one (as precisely in the case of social enterprises: see Article 40, paragraph 1, TSC; Article 17, paragraph 3, Decree 112/2017) and, in other cases (as for mutual aid societies), remained governed by the original regulations. Other entities, such as 'associative networks' and philanthropic entities, on the other hand, have been regulated ex novo. The regulation then goes on to provide a general definition to include in the ETS the recognized and unrecognized associations, foundations and other private entities other than companies that meet the following requirements:

* pursuit, on a non-profit basis, of civic, solidarity and socially useful purposes;
* carrying out, exclusively or principally, one or more of the activities of general interest typified in Article 5;
* the general interest activity may be carried out indifferently in a free, mutual or entrepreneurial form;
* registration in the Single National Register of the Third Sector.

=== '''The enterprise in the Third Sector''' ===
The Third Sector Code introduced a general legal regime, applicable to all TSEs regardless of the specific legal form adopted from time to time by the individual entity and largely modelled on the rules laid down in the Civil Code for [[Corporations (under Italian Civil Code)|corporations]]. In this sense, see for instance Art. 23 et seq. Code of the Third Sector, which subject Third Sector associations and foundations to governance rules largely similar to those of companies.

Moreover, the Third Sector Code expressly recognizes the possibility that non-profit organizations may carry out business activities either exclusively or principally or only secondarily. In the first case, it will be the same activity of general interest that will be carried out in an entrepreneurial form, but on a non-profit basis and for civic, solidarity or socially useful purposes. If the entity carries out its activity exclusively or principally in the form of a commercial enterprise:

- is obliged to register not only in the Single National Register of the Third Sector but also in the '''Business Register''' (Art. 11 CTS);

- is obliged to keep civil-law accounting records (Art. 13, para. 4, CTS);

- is obliged to draw up the annual balance sheet in the form of the balance sheet of a stock corporation and consequently to file it with the business register (Art. 13, para. 5, CTS).

Alternatively, TSEs may only carry out business activities on a secondary basis, as a way of obtaining financial resources to invest in carrying out their main non-profit activity (Art. 6 CTS). In that case then the business activity will be aimed at generating a profit, which is, however, ancillary and instrumental to the general interest activity.

=== '''References''' ===
D. Foresta, ''Sugli enti del terzo settore. Tipi e funzione nell’articolazione del registro unico'', in ''Nuove leggi civ. comm.'', 2022, p. 1461 et seq.;

C. Ibba, ''Codice del terzo settore e diritto societario'', in ''Riv. soc''., 2019, p. 64 et seq.;

G. Marasà, ''La ‘commercializzazione’ degli enti del libro I del codice civile'', in ''Riv. dir. civ''., 2023, p. 210 et seq.;

G. Marasà, ''Appunti sui requisiti di qualificazione degli enti del Terzo settore: attività, finalità, forme organizzative e pubblicità'', in ''Nuove leggi civ. comm''., 2018, p. 675 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 36 et seq.;

G. Ponzanelli, ''Enti del terzo settore: un primo commento'', 2017, in ''I quaderni della fondazione italiana del notariato'', available at: https://elibrary.fondazionenotariato.it/risultati.asp?q=Enti%20del%20terzo%20settore%3A%20un%20primo%20commento;

E. Quadri, ''Il terzo settore tra diritto speciale e diritto generale'', in ''Nuova giur. civ. comm''., 2018, p. 708 et seq.

=== '''Websites''' ===
The updated version of the Third Sector Code can be found here: https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=2017-08-02&atto.codiceRedazionale=17G00128&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=4200499a-cfce-483e-84e2-703cb6f79c7e&tabID=0.08454119083690514&title=lbl.dettaglioAtto

Further information and links are also available at the following site: https://italianonprofit.it/risorse/definizioni/enti-terzo-settore/

Social Enterprise (Italian Law)

2023-07-19T10:15:33Z

Bianconi: Definition and main features of the social enterprises under Italian Law

=== '''Definition and legal framework''' ===
Social enterprises were introduced into the Italian legal system by Legislative Decree 24 March 2003 no. 155. Art. 1 defined them as 'all private organizations, including the bodies referred to in Book V of the Civil Code, which carry out, on a stable and principal basis, an organized economic activity for the purpose of producing or exchanging goods or services of social utility, aimed at achieving aims of general interest, and which meet the requirements set out in Articles 2, 3 and 4' of the same decree.

This decree was repealed by Legislative Decree 3 July 2017 No. 112 on the 'revision of the regulations on social enterprises', which sets the current regulations on the matter.

Pursuant to Article 1(1) of Legislative Decree 112/2017, 'all private entities, including those established in the forms set out in Book V of the Civil Code, which, in accordance with the provisions of this decree, carry out on a stable and principal basis a business activity in the general interest, without profit and for civic, solidarity and socially useful purposes, adopting responsible and transparent management methods and favoring the widest involvement of workers, users and other stakeholders in their activities, may acquire the status of social enterprise'. The status of Social Enterprise can therefore be acquired by private entities, such as associations and foundations, and companies that carry out on a stable and principal basis a business activity in the general interest, without profit and for civic, solidarity and socially useful purposes. Social Enterprises include, by right, Social Cooperatives and their consortia.

A Social Enterprise can only permanently and principally carry out the business activities of general interest provided for in Article 2 of Legislative Decree 112/2017. An enterprise activity in the general interest is considered to be carried out on a principal basis if its revenues exceed seventy per cent of total revenues. Also considered of general interest, independent of its object, is the business activity in which, for the pursuit of civic, solidarity and socially useful purposes, very disadvantaged workers and disadvantaged or disabled persons are employed, as well as persons benefiting from international protection, homeless persons, who are in a condition of poverty such that it is not possible for them to find and maintain a home of autonomy.

=== '''Incorporation and Registration with the Business Registry''' ===
The social enterprise is established by notarial deed and the relevant articles of incorporation must make explicit the social character of the enterprise in accordance with the rules of Legislative Decree no. 112/2017, indicating in particular the corporate purpose and the absence of the purpose of profit-making.

The articles of incorporation, their amendments and other deeds relating to the company must be filed by the notary or the directors with the Office of the '''Business Registry''' in whose district the registered office is established, for registration in the appropriate section, within thirty days of their completion.

The annual balance sheet (Article 9 of Legislative Decree 112/2017) and the social balance sheet drawn up according to specific Guidelines (see below) must be filed at the same Register.

=== '''Social Enterprises and Third Sector Entities.''' ===
Legislative Decree No. 117/2017 (the so-called 'Third Sector Code' or 'TSC') introduced and regulated '''Third Sector Entities''' (“TSE”), which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code. Generally speaking, it can be stated - with a good degree of approximation - that, by virtue of the provisions of the TSC, the set of TSEs encompasses a heterogeneous set of types of entities:

* certain named types of entities, some of which were already subject to a special regulation that, in some cases, was repealed and replaced with a new one (as in the case of social enterprises: see Article 40, paragraph 1, TSC; Article 17, paragraph 3, Decree 112/2017) and, in other cases (such as mutual aid societies), remained governed by the original regulations, without prejudice, however, to the possibility of transforming into entities now regulated by the TSC. Other entities, on the other hand, have been regulated ex novo despite being de facto already widespread in the 'third sector' market (e.g. the so-called 'associative networks' and philanthropic entities).
* Non-typical TSEs, the establishment of which is permitted by the residual provision set out in Article 4 of the Third Sector Code: this, however, provided that the entities in question - in addition to being private in nature and meeting the constituent elements laid down by the legislator in general for typical TSE - never take corporate form.

Social enterprises are therefore included among the typified types of TSEs. This has led to the establishment of a special section of the Single National Register of the Third Sector, in which TSEs must be registered, dedicated to social enterprises and, among them, to social cooperatives, which, being social enterprises by law, are also third sector entities by law (see Art. 46, par. 1, lett. d), Legislative Decree No. 117 of 2017). From the point of view of the legal framework, they are therefore subject in the first place to the special rules laid down by Legislative Decree 112/2017, as well as to the rules of Legislative Decree 117/2017, insofar as they are compatible with the provisions of Decree 112/2017. In their absence and for the aspects not regulated, the rules of the Civil Code and its implementing provisions concerning the legal form in which the social enterprise is established apply to them.

=== '''References''' ===
E. Cusa, ''Frammenti di disciplina delle cooperative con la qualifica di impresa sociale'', in ''Nuove leggi civ. comm.'', 2021, p. 267 et seq.;

A. Fici, ''Tipo e'' status ''nella nuova disciplina dell’impresa sociale'', in ''Contr. impr.'', 2023, p. 112 et seq.;

D. Foresta, ''Sugli enti del terzo settore. Tipi e funzione nell’articolazione del registro unico'', in ''Nuove leggi civ. comm.'', 2022, p. 1461 et seq.;

M. L. Vitali, ''Riforma del terzo settore, nuova disciplina dell’impresa sociale e regole societarie'', in ''Osservatorio del diritto civile e commerciale'', 2020, p. 79 et seq.

=== '''Websites''' ===
For further information and links, see the following site: https://italianonprofit.it/risorse/definizioni/imprese-sociali/

For the legal framework, with direct links to the current regulations, see: https://www.lavoro.gov.it/temi-e-priorita/terzo-settore-e-responsabilita-sociale-imprese/focus-on/impresa-sociale/pagine/default

Entrepreneur (under Italian Law)

2023-07-19T10:10:48Z

Bianconi: definition and requirements of the "enterpreneur" under Italian Law

=== '''Introduction: the entrepreneur from an economic point of view''' ===
In the economic sense, the entrepreneur is the activator of the system, the one who organizes and combines the factors of production in order to create new wealth. For this reason, he bears the business risk, i.e. the risk of not being able to cover the costs incurred with the revenues from production, and takes the general profits from the business. He also organizes the means employed and directs production, deciding what, how and how much to produce.

=== '''The legal definition''' ===
The former Italian Commercial Code, reflecting the mercantile origin of commercial law as a law proper to the merchant class, focused its discipline on the figure of the merchant, who was defined as the one who performs acts of commerce 'by habitual profession' (Art. 8 Commercial Code 1882). Commercial acts were listed in detail in Art. 3 of the Commercial Code, which also included factories and manufacturing enterprises.

Instead, the adoption of the 1942 Civil Code placed the entrepreneur at the centre of the system, giving it a legal definition consistent with the economic substance of the phenomenon. According to Article 2082 of the Italian Civil Code, 'an entrepreneur is anyone who professionally carries out an organized economic activity for the purpose of producing or exchanging goods or services'. Also from a legal point of view, therefore, an entrepreneur is one who, through his activity, aims to create new wealth by producing goods and services or by increasing the usefulness of those already produced by intervening in their circulation. An essential requirement is therefore that the goods and services produced are intended for exchange: an entrepreneur is not one who carries out the activity with the sole purpose of satisfying exclusively personal needs.

The definition of entrepreneur given by the civil code also provides a subjective qualification: not the enterprise itself, but rather the entrepreneur is defined, because the person is seen as the activating subject of the economic system.

=== '''Requirements for business activity''' ===
The legal definition determines the scope of application of the discipline of the enterprise, in the sense that by defining who is an entrepreneur, it identifies the subjects who will be required to comply with the rules set out in Art. 2083 et seq. of the Civil Code.

The civil law notion of entrepreneur introduces three requirements for the activity carried out, if directed at the market, to qualify as entrepreneurial:

===== '''a) Professionalism''' =====
Professionalism means the stability or non-occasionality of the activity performed. It may also be a periodic activity (e.g. seasonal hotel business) or a secondary activity, as long as it is not occasional. It may possibly also be a single act when it is of such complexity as to exclude the possibility of it being an isolated affair.

===== '''b) Economicity''' =====
Economic efficiency means the abstract suitability of the income generated by the activity to cover the costs of production on the basis of reasonable ex ante predictability. It is generally referred to as the 'objective cost-efficiency' of the activity. It is therefore not legally necessary for the entrepreneur to pursue a profit-making purpose (the objective of making a profit from the business), it being sufficient that he or she pursues a balanced budget.

The requirement of cost-efficiency marks the boundary between activities that are or are not entrepreneurial in nature, even if they have the same object and are professionally exercised. For example, a company canteen that carries out its activity according to the balanced budget criterion may be considered an undertaking; a charity canteen, even if habitually carried out, is not an entrepreneurial activity.

===== '''c) Organization''' =====
Article 2082 of the Civil Code refers to an 'organized' activity, i.e. an activity carried out through the coordinated use of one's own or others' factors of production (capital and/or labour). Normally, in fact, the entrepreneur makes use of a stable and complex production apparatus, comprising persons and goods that are organized by the entrepreneur for the purposes of the activity.

However, from a strictly legal point of view, it is now considered that:

* it is not necessary that the entrepreneur's organizational function also involves the labour force of others. Therefore, anyone who operates using only the capital factor and his own labour, provided the other requirements are met, is also an entrepreneur;
* the presence of a material organization is also not necessary: anyone who operates without the creation of a physically perceptible instrumental apparatus (machinery, premises, furniture, ...), but using only financial means, can also be legally qualified as an entrepreneur.

However, it is debated whether anyone who professionally carries out an economic activity using only his own personal labour can qualify as an entrepreneur.

Those who answer the question in the affirmative, believing that an entrepreneur is 'any self-employed person who performs activities of a non-intellectual nature of work or services, even if in the performance of the activity he does not avail himself of anything other than his own labour', conclude that the organization is in reality only a 'pseudo-requisite', useful to distinguish small from non-small enterprise but not to exclude the entrepreneurial character of the activity (Meruzzi, 2019, p. 15, adhering to the thesis of Galgano, 2013, p. 28 et seq.).

This doctrine is contrasted by a different orientation that, by emphasizing the requirement of organization, considers that a minimum amount of organization is always necessary to be an enterprise: what qualifies an enterprise is the use of productive factors and their coordination for a productive purpose even if the type of instrumental apparatus employed by the entrepreneur can be very varied and can also consist of a minimal apparatus (Campobasso, 2022, p. 25 et seq.). According to this approach, the organization requirement would mark the difference between entrepreneurs (even small ones) and the self-employed.

=== '''Entrepreneurs and intellectual professionals''' ===
Intellectual professionals also engage in activities that produce goods or services. However, for such activities even if professionally exercised, the entrepreneurial qualification is expressly excluded. This follows from Article 2238(1) of the Civil Code for which 'if the exercise of the profession constitutes an element of an activity organized in the form of an undertaking, the provisions of Title II shall also apply'. Therefore, in the Italian legal system, the exercise of an intellectual profession in itself does not constitute a business activity and is therefore not subject to the rules governing businesses. Self-employed persons become entrepreneurs only if and to the extent that the profession is exercised in the context of an activity qualifying as an enterprise. For example, a doctor who manages the private clinic in which he operates is an entrepreneur: in that case, two distinct activities are carried out (intellectual profession and business) and both the specific rules laid down for the profession and the rules on business apply to the same person.

=== '''References''' ===
F. Galgano, ''Diritto commerciale'', 1, ''L’imprenditore'', 13° ed., Zanichelli, Bologna, 2013, p. 28 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 11 et seq.;

G. F. Campobasso, ''Diritto commerciale'', 1, ''Diritto dell’impresa'', 8° ed., Utet Giuridica, Milano, 2022, p. 19 et seq.

Jurisdiction (Under Italian Law)

2023-07-19T10:03:55Z

Bianconi: jurisdiction under Italian Law

=== '''Introduction: the debated notion of jurisdiction''' ===
The concept of jurisdiction is indeed difficult to define. The search for a definition of jurisdiction has often led scholars to overlook the fact that it can only be understood by locating it in social and legal life.

Jurisdiction is generally characterised as a function of the State, as opposed to the administrative and legislative functions that constitute the three functions of the State, exhaustive of all its tasks and powers. In this sense, it is commonly referred to as the enforcement of law, the settlement of disputes, the implementation of sanctions, or the substitution of public activity for the activity of others.

One of the most famous definitions of jurisdiction is that provided by Chiovenda, for whom jurisdiction is 'implementation of the law by substituting the activity of public bodies for the activity of others'.

The definition available on the website of the Italian Ministry of Justice is similarly expressed, where it says that jurisdiction is one of the fundamental functions of the State, exercised by the magistrates that make up the judicial order and directed to the application of legal norms to individual cases.

According to a different approach, which detaches the concept of jurisdiction from the functions of the State, jurisdiction represents the assertion of the legal system in the concrete case. Depending on the diversity of the concrete case, jurisdiction can then manifest itself concretely in different ways.

=== '''The Italian judicial system: ordinary jurisdiction and special jurisdictions''' ===
The judicial system is composed of all the organs of the State called upon to perform the function that is technically called ius dicere, i.e. to take a decision on a given dispute according to the rules of law.

These organs constitute, depending on their organizational structure and the type of matter on which they are called upon to judge, constitutional jurisdiction, ordinary jurisdiction or special jurisdictions.

The judicial system distinguishes between two jurisdictions in civil and criminal matters, which are exercised by ordinary judges (Art. 1 of the Judicial System Act and Art. 1 of the Code of Civil Procedure). Ordinary jurisdiction is exercised by ordinary magistrates and concerns matters that the law does not reserve for special courts. The organs of ordinary jurisdiction are, for example, the General Court, the Court of Appeal and the Court of Cassation. Other jurisdictions are called special jurisdictions. They include administrative jurisdiction. Special jurisdiction, therefore, concerns matters that the law reserves to a special judiciary. Organs of special jurisdiction are, for example, the Regional Administrative Courts and the Council of State. Depending on the areas and competences, jurisdiction is differentiated into constitutional, civil, criminal, administrative, accounting, tax and military. The main instrument of jurisdictional activity is the trial, which through the adversarial process of the parties aims at the pronouncement of a measure, e.g. a judgment, by which the law is interpreted and applied to the concrete case.

=== '''The limits of jurisdiction. In particular, jurisdiction in private international law''' ===
Our legal system contains a set of rules specifically designed to determine, by means of specific criteria, the disputes to be submitted to the jurisdiction of the Italian State.

The rules on jurisdiction perform their function by identifying the circumstances in disputes that are suitable for determining whether that dispute should be submitted to the State's jurisdiction. A distinction is made between special and general jurisdiction rules. The former are those intended to apply with respect to specific categories of disputes. E.g. disputes concerning obligations. Among the general jurisdiction criteria, on the other hand, the main core of rules were Articles 1-5 and 37 of the Code of Civil Procedure. Articles 2, 3 and 4 were repealed by Law 218/1995, which in Articles 3, 4 and 7 contains the current rules on the subject.

In private international law, the general criterion for identifying Italian jurisdiction is the defendant's domicile or residence in Italy (Art. 3 L.218/1995). Italian jurisdiction exists when the defendant is domiciled or resident in Italy or has a representative there authorized to stand trial pursuant to Article 77 of the Code of Civil Procedure and in the other cases where it is provided for by law.

Jurisdiction also exists on the basis of the criteria established by Sections 2, 3 and 4 of Title II of the 1968 Brussels Convention (made enforceable by Law No. 804 of 21 June 1971), replaced first by Regulation (EC) No. 44/2001 and subsequently by Regulation (EU) No. 1215/2012, also known as the "Brussels I bis" Regulation, in force since 10 January 2015. The "Brussels I bis" Regulation applies in civil and commercial matters, regardless of the nature of the court.

=== '''References''' ===
G. Chiovenda, ''Istituzioni di diritto processuale civile'', II, Napoli, 1934, p. 7 ss., in part. p. 8, from whom the quotation above;

R. Iannotta, ''Art. 1'', in ''Codice di procedura civile'', a cura di N. Picardi – B. Sassani – A. Panzarola, I, VI ed., Giuffrè, Milano, 2015, p. 3 et seq.;

S. Satta, ''Giurisdizione (nozioni generali)'', in ''Enc. Dir.'', XIX, Giuffré, Milano, 1970, p. 218 et seq.;

V. Starace, ''Limiti della giurisdizione (diritto internazionale)'', in ''Enc. Dir.'', XIX, Giuffré, Milano, 1970, p. 428 et seq.

=== '''Websites''' ===
For the definition of jurisdiction available on the website of the Italian Ministry of Justice see: https://www.giustizia.it/giustizia/it/mg_14_3_1.page?contentId=GLO53027&previsiousPage=mg_14_3;

For a review of the structure of the Italian judicial system see: https://www.csm.it/web/csm-internet/magistratura/il-sistema-giudiziario

About jurisdiction in private international law see:

D. G. Daleffe, ''Diritto internazionale privato e giurisdizione italiana'', 25 novembre 2016, available at: https://www.altalex.com/documents/news/2016/11/22/diritto-internazionale-privato-e-giurisdizione-italiana

Treccani Online, voce ''Competenza giurisdizionale. Diritto internazionale privato'', available at: https://www.treccani.it/enciclopedia/competenza-giurisdizionale-diritto-internazionale-privato/

Articles of incorporation and bylaws (under Italian Law)

2023-07-19T09:59:39Z

Bianconi: definition and content of the articles of incorporation and by-laws according to the Italian Civil Code

=== '''Definition and content''' ===
Article 2328 of the Italian Civil Code introduces a distinction between articles of incorporation and by-laws.

In particular, the articles of incorporation contain the manifestation of will relating to the constitution of the company and the fundamental provisions of its organizational structure. They must be drawn up by notarial deed (Art. 2328(2) of the Civil Code).

Paragraph 2 of Art. 2328 then provides for the content of the articles of incorporation, which must indicate:

1) the surname and first name or name, date and place of birth or state of incorporation, domicile or registered office, citizenship of the shareholders and any promoters, as well as the number of shares allocated to each of them;

2) the name and municipality where the company's registered office and any secondary offices are located;

3) the activity that constitutes the object of the company;

4) the amount of the subscribed and paid-up capital;

(5) the number and nominal value, if any, of the shares, their characteristics and the manner of their issue and circulation;

6) the value attributed to receivables and assets transferred in kind;

7) the rules according to which profits are to be distributed;

8) the benefits, if any, granted to the promoters or founding members;

9) the system of administration adopted, the number of directors and their powers, indicating which of them shall represent the company;

10) the number of members of the board of auditors;

11) the appointment of the first directors and statutory auditors or the members of the supervisory board and, where applicable, the person appointed to perform the statutory audit of the accounts;

12) the total amount, at least approximately, of the formation expenses charged to the company;

13) the duration of the company or, if the company is incorporated for an indefinite period of time, the period of time, in any event not exceeding one year, after which the shareholder may withdraw.

It should be noted that, although in practice the content of the articles of incorporation is broader and more articulate than the minimum required by law, not all the indications are essential. Moreover, only the absence of any indication as to the name of the company, the contributions, the amount of the share capital or the object of the company entails the nullity of the articles of incorporation pursuant to Article 2332 of the Civil Code.

The last paragraph of Art. 2328, on the other hand, regulates the by-laws, i.e. the document containing the rules relating to the functioning of the company. The rule provides that even if it is contained in a separate deed, it constitutes an integral part of the articles of incorporation. It is therefore generally agreed that the by-laws must also be drawn up by public deed. In the event of a conflict between the provisions of the articles of incorporation and those of the by-laws, the latter shall prevail.

=== '''Amendments to the articles of incorporation''' ===
Amendments to the articles of incorporation are subject to special rules, contained in Articles 2436 et seq. of the Civil Code. It should be noted that amendments to the articles of incorporation may have the most diverse content, as they may affect the company’s organizational structure in various ways. However, the regulation to all amendments to the articles of incorporation is very meagre: it is limited to the regulation of the procedure. On the other hand, the law lays down specific rules for certain particular amendments to the articles of incorporation, such as increases and reductions in share capital.

As far as the procedure is concerned, under Article 2436 of the Italian Civil Code, the shareholders' resolution to amend the by-laws, which is the responsibility of the extraordinary shareholders' meeting pursuant to Article 2365 of the Italian Civil Code, must be recorded in the minutes by a notary public, who, within thirty days, after verifying the fulfillment of the conditions set forth by law, must request registration in the '''business registry''' at the time of filing. The business registry office, having verified the formal regularity of the documentation, must enter the resolution in the registry. The effects of the resolution are produced by the registration.

In order to make the content of the statutes easier to understand, the full text of the articles of incorporation and by-laws, as amended, must be filed with the register after each amendment.

=== '''The articles of incorporation of a limited liability company''' ===
The provisions on the [[Corporations (under Italian Civil Code)|limited liability company]] do not mention the word 'by-laws', but always refer to the term 'articles of incorporation' and the expression 'rules relating to the functioning of the company'. Although the rules do not require the drawing up of two separate documents for the drafting of the limited liability company, but instead suggest that the articles of incorporation must themselves contain the rules of the company's by-laws, notarial practice applies by analogy the provisions on limited liability companies and thus inserts the clauses on the operation of the limited liability company into the by-laws, understood in the formal sense as a document annexed to the articles of incorporation and containing the rules of the company's relationship that are not transitory in nature. The articles of incorporation of a limited liability company must also be drawn up by notarial deed and must contain the particulars set out in Article 2463 of the Civil Code.

The Decree of 26 July 2022, no. 155 of the Ministry of Economic Development (containing the "Regulation on the definition of the models of the articles of incorporation of limited liability companies having their registered office in Italy and whose capital is paid up by means of cash contributions") provided for the possibility that the deeds of incorporation in question may be received by the notary public by means of a public electronic deed, with the participation by videoconference of the requesting parties or some of them, through the use of a telematic platform prepared and managed by the National Council of Notaries, also using the uniform standard models approved by the Minister. For further details see: https://www.ipsoa.it/documents/quotidiano/2022/10/22/srl-definizione-modelli-atti-costitutivi. Standard models are available at: https://www.re.camcom.gov.it/gestire-limpresa/registro-imprese-rea/costituzione-in-videoconferenza-di-srl-e-srls-1

=== '''References''' ===
G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 149 et seq., 493 et seq. and 564 et seq.;

F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 171 et seq. e 389 et seq.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 35 et seq.;

G. Migliorati, ''Atto costitutivo di s.r.l.'', in ''Ilsocietario.it'', 8 May 2019;

G. M. Nigro, ''La costituzione online di srl e di srls: le novità del decreto all’esame del Parlamento'', 15 October 2021, in https://www.altalex.com/documents/2021/10/15/la-costituzione-online-di-srl-e-di-srls-le-novita-del-decreto-all-esame-del-parlamento.

DAOs: essential legal issues

2023-07-12T16:14:07Z

Bianconi: links to other Wiki pages

= DAOs: an essential definition =
DAOs can be defined as "''non-hierarchical organizations that perform and record routine tasks on a peer-to-peer, cryptographically secure, public network, and rely on the voluntary contributions of their internal stakeholders to operate, manage and evolve the organization through a democratic consultation process''<ref>Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.</ref>" .

The operation of the DAO, its structure, organization and the interactions that its participants enact, are contained within a blockchain.

DAOs are also described, as suggested by the same acronym, as decentralized, autonomous and organized organizations, and it is precisely from the integration of these principles that the phenomenon emerges as a "''new organizational design''<ref>C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.</ref>".

Some peculiar features of DAOs, considered by a large proportion of scholars as advantageous elements, are:

* stability: every transaction is recorded and stored;
* anonymity: participants can register with their usernames, avoiding exposing their identities;
* knowability: transactions are validated and can be easily verified;
* transparency: the proposals made, the decision-making process, and the allocation and content of powers and duties among participants are knowable.

== Distributed and decentralized ==
Decentralization is imposed by the use of DLTs (Distributed Ledger Technologies) and operates on two distinct levels:

* on the one hand, it eliminates the need for an intermediary in product placement procedures;
* on the other, it marginalizes the role of the corporate model in the conduct of business activity.

The revolutionary profile of DAOs lies in the second of these issues, considering that [[the token-holders]] – i.e., those who have obtained, as a counter-performance of the made contribution of cryptocurrencies, tokens attributing the right to vote – directly control the organization and the management of the entity, without the said function being delegated to another entity, tending to be different from the owner, and thus eliminating those so-called [[Agency Theory|agency relationships (and costs)]] that characterize corporations.

In other words, hierarchical and centralized authority (typically the managers) is dispensed with a structure based on cooperation and equality of its participants.

It is precisely the decentralized nature of the DAO that allows to distinguish (partially) such organizations from the increasingly common entities established through [[DAO formation|Initial Coin Offerings]] or through [https://economiapertutti.bancaditalia.it/chiedere-prestito/crowdfunding/index.html?com.dotmarketing.htmlpage.language=3 crowdfunding] activities.

== Autonomous and automated ==
DAOs operate according to the rules contained in the whitepaper, drafted and signed by [[THE FOUNDERS OF A DAO|the founders]], which are encoded in a [[SMART CONTRACT AND ESSENTIAL LEGAL ISSUES|smart contract]] that in turn is executed automatically using the blockchain protocol. Essentially, the smart contract is a computational program consisting of a series of provisions that are applied automatically and autonomously, irreversibly, and which, thanks to blockchain technology, are recorded and stored over time. The rules contained in the code, therefore, enable the operation of the organization without the need for human intervention and coordination.

In other words, the smart contract constitutes the foundational element of the DAO, which defines the [[DAO's self-regulation]], according to the fundamental rule-of-code principle, and preserves its assets by tracking its movements.

Again, the automatisms arising from this technology enable the implementation of trust in the organization while reducing transaction costs and costs related to the exchange of information between participants.

== Organized and ordered ==
Blockchain technology, together with the clearly defined rules on it, allows for full transparency regarding the powers and duties of both members of the organization (token holders) and other [[stakeholders]]. This transparency allows for increased trust in the functioning of the organization and efficiency of management.

= The distinction between DOs and DAOs =
Part of the doctrine distinguishes between DAOs and DOs: in the former, the functions are automatic and self-executing, as the blockchain and smart contracts constitute the communication protocol to enable interaction between algorithmic systems; in the latter, the decision-making and consultation role of the human being is included, while the algorithm acts only as a function of streamlining and automating the governance of the group.

Some authors distinguish instead between “'''''participatory DAOs'''''” in which smart contracts are used to collect votes from participants, and “'''''algorithmic DAOs'''''” organizations that are entirely algorithmic in their operation.

= DAO formation =
The establishment of a DAO is a complex procedure, carried on by the so-called [[THE FOUNDERS OF A DAO|founders]], as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles.

For further details see: [[DAO formation]].

= DAO governance =
The peculiarities of DAOs, deriving in particular from its decentralized nature, are reflected in the decision-making processes of its participants, which constitute the essential core of Corporate Governance. The horizontal structure of the organization actually has advantages and disadvantages, and its specificities with respect to traditional corporations still need to be explored.

What is certain is that if, on the one hand, an attempt has been made to identify certain essential rules of its functioning, such as the principle of collegiality, the principle of one-token-one-vote or the principle of the rule of code, it is also true that some of them suffer inevitable exceptions, which constitute full demonstration of the complexity of the structure.

For further information see: [[DAO governance]].

= DAO subjects =
According to some scholars, a fundamental challenge in the elaboration of a good governance scheme “''is the creation of clearly delineated organs whose members have certain rights and duties''<ref>P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.</ref>”. In this sense, DAOs should establish organs for [[The core developers of a dao|core developers]], [[The miners|miners]], and [[The token holders|token holders]].

= The legal status of the DAO: doctrinal proposals =
DAOs, a phenomenon that has developed essentially online without serious reflection on their legal structure, often operate without a clear and predetermined legal status. This leads to uncertainties about the relationship between token holders and between them and the DAO, with the risk that, as they carry out business activities, they are qualified as partnerships. Consequently, there is a risk that the participants will find themselves subject to unlimited liability for corporate obligations, in the absence of adequate awareness of this. It is therefore appropriate that a legally secure framework be created, or at least employed, primarily for the consumers themselves who participate in the business of the DAO.

Most common solutions:

* Establishment of DAOs in the form of corporate entities. Among [[Corporations (under Italian Civil Code)|corporations]], the creation of DAOs in the form of a joint stock company seems more difficult, while creation as a limited liability company seems feasible. Obstacles may arise from the impossibility of representing quotas by means of tokens, which would introduce a circulation mechanism similar to that for shares. An assimilation to one of the [[Partnerships (under Italian civil code)|partnerships]] is suggested.
* Establishment of DAOs in the form of a foundation. The DAO is comparable to the [[Foundation (under Italian Civil Code)|foundation]] by the tendency of immutability of purpose (in the one, the founder's purpose; in the other, the purpose set out in the code) and autonomy from the founder and developers. Among the most commonly used jurisdictions for establishing DAOs as foundations are Switzerland, which has a more flexible foundation law, and the Cayman Islands.

= The purpose of the organization =
The analysis of the legal models used for the establishment of DAOs and the sectors in which they are concretely employed suggests that DAOs can be used for the pursuit of both lucrative and non-lucrative purposes.

In particular, those entities that could potentially benefit by operating as a DAO are:

* '''Charities or other non-profit organizations'''. The lack of transparency in modern charitable organizations is a significant concern, leading to a loss of trust between donors and these organizations. However, DAOs offer a solution to this problem, since they operate transparently on a blockchain, making all activities and transactions visible and auditable by donors.
* '''Financial industry'''. As the case study of MakerDAO suggests, DAOs could address some of the challenges in traditional banking systems. DAO-based currency systems have the ability to connect the vast number of unbanked individuals worldwide, estimated to be around 1.7 billion adults. This connectivity could enable these individuals to participate in investment and borrowing activities. Although financial DAOs are unlikely to replace traditional financial institutions entirely, they provide a new avenue for investing and engaging in financial activities, resembling traditional financial markets.
* '''E-government systems'''. In this sector, DAOs could offer significant benefits, since current government systems are often complex, centralized, and prone to errors due to human involvement. These systems lack transparency and often involve lengthy and costly processes. By incorporating DAOs into government services, operations can be automated, leading to increased efficiency and improved transparency, accountability, and resource management.
* '''Healthcare industries'''. In healthcare, a blockchain-based health information exchange (HIE) could reduce transaction costs and data errors. It would enable efficient sharing of patient medical records among healthcare providers, giving patients control over their data sharing.
* '''Insurance industry'''. In this sector, applying a decentralized and autonomous approach can reduce information asymmetry, administrative and operational costs and enables regulators to detect suspicious transaction patterns. Automation of insurance business processes can improve security by ensuring confidential client data accessible only to authorized parties.

Limits to the purpose that can be pursued may be imposed by individual national jurisdictions. This means that depending on the jurisdiction and the legal form in which the DAO is incorporated, there may be specific limitations to the purpose.

The Coalition of Automated Legal Applications (COALA)’s “''Model Law for Decentralized Autonomous Organizations (DAOs)''”, recently published in its finalized version, expressly acknowledges that a DAO may not only be a for profit entity, but may be used for multiple non-commercial purposes. For this reason, it suggests that “''the DAO is a legal entity than can be used for commercial, mutualistic, social, environmental or political purposes, the nature of which will be specified in its By-Laws''” (Article 1).

= The applicable law and jurisdiction =
A further issue of complexity concerns the difficulty of identifying the jurisdiction to which the DAO belongs.

As regards the determination of the applicable law, two criteria can be abstractly followed: criterion of incorporation or criterion of actual seat.

The problem is that if the DAO is not incorporated in a particular place, as is the case for companies, the first criterion cannot be applied. At the same time, with respect to DAOs, the second is difficult to apply, as they typically do not have a physically identifiable material organization in a given place; they are managed by nodes from all over the world; they are not connected to servers that could serve to identify a physical place of activity since they run on the nodes of a blockchain, and thus everywhere and nowhere. They are structurally 'open to the world': naturally vocated to attract participants from all over the world and to operate worldwide via distributed nodes. They are therefore by their very vocation opposed to the traditional search for a spatial center of gravity, to the law of which to subject them.

The same problem arises with regard to the identification of the competent judge in disputes involving them.

= Current form of regulation of DAOs: an overview =
In order to solve the uncertainties relating to the absence of a clear legal form and the identification of the applicable law and court of jurisdiction, there has been a tendency to set up DAOs according to clear legal models. In this sense, DAOs are sometimes established in the form of a company or a foundation, thus relying on general models that, due to their characteristics, are suitable for incorporation of DAOs. Moreover, in recent years, several countries have introduced ad hoc forms of regulation of the phenomenon, such as:

* Wyoming Decentralized Autonomous Organization Supplement (Wyoming, U.S.A.), which regulates the so-called DAO Limited Liability Company;
* Decentralized Autonomous Organization Act (The Republic of the Marshall Islands), which instead introduces the so-called MIDAO LLC.

For further details see: [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]].

= Case study: The Dao =
The DAO was “''the first high-profile realization''<ref>Q. DuPont, ''Experiment in algorithmic governance. A history and ethnography of “The Dao”, a failed decentralized autonomous organization'', 2018, p. 160.</ref>” of a decentralized autonomous organization (DAO) running on the Ethereum platform, the history of which, with its splendors and failures, could be read on “[[The DAO]]”.

= References =

* C. Bellavitis, C. Fisch, P. P. Momtaz, ''The rise of decentralized autonomous organizations (DAOs): a first empirical glimpse'', 2022, pp. 2-5, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4074833
* P. Hacker, ''Corporate Governance for Complex Cryptocurrencies ? A framework for Stability and Decision Making in Blockchain-Based Organizations'', in ''Regulating Blockchain. Techno-Social and Legal Challenges,'' edited by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos, and Stefan Eich, Oxford University Press, 2019, p. 25.
* Y. Hsieh, J. P. Vergne, P. Anderson, K. Lakhani, M. Reitzig, ''Bitcoin and the rise of decentralized autonomous organizations'', in ''Journal of Organization Design'', 2018, p. 2.
* G. Kondova, R. Barba, ''Governance of Decentralized Autonomous Organizations'', in ''Journal of Modern Accounting and Auditing'', 2019, p. 406.
* R. Lener, S. L. Furnari, ''Prime riflessioni su DAO e principi generali del diritto dell’impresa'', in ''Riv. dir. priv.'', 2022, p. 335 ss.
* B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.
* R. Piselli, ''Quando la decentralizzazione delle'' DLT ''incontra il mercato dei capitali. Appunti sulle organizzazioni decentralizzate'', in ''AGE'', 2019, pp. 373 ss.
* C. Santana, L. Albareda, ''Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda'', in ''Technological Forecasting & Social Change'', 2022, p. 3.
* B. Schneider, R. Ballesteros, P. Moriggl, P. M. Asprion, ''Decentralized Autonomous Organizations – Evolution, Challenges, and Opportunities'', in ''Workshop and Models at Work Papers'', 23-25 Nov 2022, p. 3.
* N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, p. 313 ss.
* A. Wright, ''The rise of decentralized autonomous organizations: opportunities and challenges'', in ''Stanford Journal of Blockchain Law & Policy'', 2021, p. 156.
* F. Zatti, ''Nuove tecnologie e modelli di governance nello sport: le'' Decentralized Autonomous Organization, in ''Nuovo diritto societario'', 2022, pp. 2155 ss.
* Coalition of Automated Legal Applications (COALA), ''Model Law for Decentralized Autonomous Organizations (DAOs)'', 2021, available at: https://coala.global/wp-content/uploads/2022/03/DAO-Model-Law.pdf

DAOs’ current forms of regulations: an overview

2023-07-12T13:19:42Z

Bianconi:

== '''Introduction.''' ==
The legislative models that provide a legal status for the enterprise collectively carried out in the form of a DAO can be divided into two categories, depending on whether they provide a specific legal model for DAOs, or they are general models that can also be used with reference to them. In this second category, we can then further distinguish between cases in which DAOs are traced back to the corporate or foundational form.

== '''Legislative models introducing ad hoc regulations for DAOs.''' ==
There are only regulations that provide for the incorporation of DAOs in corporate form, in particular as Limited Liability Companies. See:

==== '''a) Wyoming Decentralized Autonomous Organization Supplement, Wyoming.''' ====
Passed on April 2021, effective from 1 July 2021 (available at: <nowiki>https://www.wyoleg.gov/</nowiki> o <nowiki>https://wyoleg.gov/NXT/gateway.dll?f=templates&fn=default.htm</nowiki>). It is essentially an amendment to the Wyoming Limited Liability Company Act. It has been amended with:

1. SF0068, Decentralized Autonomous Organization Supplement Amendments, May 2022;

2. SF0075, of February 2023, effective 1 July 2023.

This law granted limited liability company status to DAOs operating on blockchain, organized under the Wyoming Limited Liability Company Act. It thus introduced the so-called DAO LLC (DAO Limited Liability Company). This protects participants by recognizing their limited liability.

The DAO is defined in § 17-31.102 (a) (ii), pursuant to which “Decentralized autonomous organization means a limited liability company organized under this chapter”.

In terms of management, § 17-31-109 provides that “management of a decentralized autonomous organization shall be vested in its members or the members and any applicable smart contracts. All smart contracts utilized by a decentralized autonomous organization shall be capable of being updated, modified or otherwise upgraded”. The law therefore recognizes two types of DAO:

a. Member-managed DAOs, similar to the LLC, where some members are responsible for maintaining and managing the organization;

b. Algorithmically-managed DAOs, which can register as an LLC if the governing smart contract system is already in place at the time of filing. In this case, the computer protocols for managing the DAO must be able to be updated or modified.

A further point of interest is that the law defines the membership interest in § 17-31.102 (a) (vi), as “member’s ownership right in a decentralized autonomous organization, which may be determined by the organization’s articles of organization or operating agreement or ascertainable from a blockchain on which the organization relies to determine a member’s ownership right. A membership interest may also be characterized as either a digital security or a digital consumer asset as defined in W.S. 34-29-101, if designated as such in the organization’s articles of organization or operating agreement”. An issue of proportionality is also introduced with respect to the DAO’s participation quota under § 17-31-111, whereby the participation “(i) (…) shall be calculated by dividing a member’s contribution of digital assets to the organization by the total amount of digital assets contributed to the organization at the time of a vote; or

(ii) If all members have not contributed digital assets to an organization as a prerequisite to becoming a member, each member shall possess one (1) membership interest and be entitled to one (1) vote”.

It should be noted that due to the Treaty of Friendship, Commerce and Navigation between the Federal Republic of Germany and the United States of America of 29 October 1954, this law also has concrete effects on the German and European business landscape. This means that a DAO LLC from Wyoming is also recognised as a limited liability company in Germany and can operate in Europe. For Italy, see Law No. 385 of 18 June 1949, ratifying and executing the Treaty of Friendship, Commerce and Navigation (Art. II, c. 2, Treaty), the Protocol of Signature, the Additional Protocol and the Exchange of Notes concluded in Rome between Italy and the United States of America on 2 February 1948.

==== '''b) Decentralized Autonomous Organization Act, The Republic of the Marshall Islands.''' ====
Outside the US context, reference is made to the experience of the so-called MIDAO LLCs, introduced by the Republic of the Marshall Islands with the Decentralized Autonomous Organization Act of 2022. In that case, too, they are regulated as limited liability companies subject, insofar as compatible, to the regulations of the Limited Liability Company Act of 1996, Chapter 4 of Title 52. It is presented as the legislation that will soon become the reference jurisdiction for the registration of DAOs, due to the fact that it is not a country on the European black list and the legislation is more flexible than that of North American countries. In particular:

- no board members or officers are required;

- every member gets equal liability protection;

- blockchain and smart contracts are officially recognized by law for use in governance and membership tracking;

- costs are lower than other non-US options;

- compliance requirements are optimized for DAOs;

- no taxes on the entity or the members;

- not on any blacklists, sanctions lists, or tax evasion lists.

The DAO is defined in §102 (c) as “a resident domestic limited liability company organized under this chapter”. It also contains a more detailed list of definitions, including those of digital asset, digital security, blockchain, membership interest, and smart contract.

Similarly to the Wyoming regulations, in terms of management it provides that (§ 108) “management of a decentralized autonomous organization shall be vested in its members, if member managed, or the smart contract, if algorithmically managed, unless otherwise provided in the certificate of formation or limited liability company agreement”. It therefore contemplates the possibility of the DAO being managed by the members or algorithmically, i.e. managed by the smart contract.

From the point of view of purpose, it is made clear that a decentralized autonomous organization may form and operate for any lawful purpose, regardless of whether for profit (§105).

From the point of view of membership participation, however, it is expected that, unless otherwise provided for in the certificate of formation, limited liability company agreement or smart contract, membership interests in a member managed decentralized autonomous organization shall be calculated by dividing a member’s governance tokens held divided by the total amount of the organization at the time of a vote. However, it is possible that members do not hold governance tokens of an organization as a prerequisite to becoming a member. In this case, each member shall possess one membership interest and be entitled to one vote.

== '''Legislative models which, although not specifically considering DAOs, are usually used to provide DAOs with legal status.''' ==

=== '''A) As corporations''': ===

==== '''a) Blockchain-based Limited Liability Company, Vermont.''' ====
On 30 May 2018, Vermont passed a law (Senate Bill 269, available at: <nowiki>https://legislature.vermont.gov/statutes/section/11/025/04171</nowiki>; alternatively, available at the unofficial website: <nowiki>https://law.justia.com/codes/vermont/2018/title-11/chapter-25/</nowiki>): “an Act Related to Blockchain Business Development”, which came into effect on the following 1 July. The law was designed to stimulate Vermont’s economic development through the promotion of blockchain technology. To this end, it introduced Blockchain-based Limited Liability Companies (BBLLCs). The regulatory intervention took place through the introduction in Title 11, dedicated to “Corporations, Partnerships and Associations”, “Chapter 25 - Limited Liability Companies”, of “Subchapter 12 - Blockchain-based limited liability companies”.

It has thus opened up the possibility of setting up limited liability companies as DAOs, allowing for full governance via blockchain. In this case, we do not have a definition of a DAO, as the regulatory intervention addresses the Blockchain-based Limited Liability Company more generally, as a “limited liability company organised pursuant to this title for the purpose of operating a business that utilises blockchain technology for a material portion of its business activities” (§4172).

With respect to the governance of these companies, the act specifies that “a BBLLC may provide for its governance, in whole or in part, through blockchain technology” (§4173 (1). See §4175). In addition, the operating agreement shall specify whether the decentralized consensus ledger or database utilized or enabled by the BBLLC will be fully decentralized or partially decentralized (§4173 (2)).

==== '''b) Legal DAO, Delaware.''' ====
DAOs are often incorporated under Delaware law: they are the so-called LAO (Legal DAO). The LAO provides a legal structure to allow members to invest in blockchain-based projects in exchange for tokens. It is a “legal wrapper” created by structuring the DAO as an LLC, with the aim of ensuring limitation of liability to members, clarifying applicable law, and providing tax benefits.

The Delaware statute governing limited liability companies (LLCs) is found in Chapter 18 of Title 6 of the Delaware Code, available at: ''<nowiki>https://delcode.delaware.gov/title6/c018/index.html</nowiki>''. It provides, inter alia, the laws relating to the formation, management, governance, mergers and dissolution of LLCs.

Thus, in this case, a Delaware-based LLC holds full ownership rights and serves as the beneficiary of the funds, or part thereof, collected in a token sale launched by a DAO. While Wyoming now has ad hoc legislation, Delaware allows a DAO to be created as a single legal entity, with legal protections similar to any other LLC, but DAOs are only at the “front” side. In the “back” part, there is a regulated corporate structure as an LLC.

=== '''B) As foundations''': ===
Alternatively to the corporate form, DAOs are often taken to the legal structure of the foundation, as phenomena that are characterized by:

- immutability of purpose;

- tendential autonomy from the founder.

Although these profiles lead to the DAO being approached in this legal form, the following obstacles should be noted:

- the possibility of including virtual assets, such as the tokens typically used by the DAO in its operations, in the list of assets that may constitute the foundation's assets;

- the legal form of the foundation in many countries requires the presence of directors, who legally represent the foundation. A profile that evidently can come into friction with the need for decentralization typical of DAOs.

The following models are mentioned:

==== '''a) Cayman Foundation Companies, Cayman Islands.''' ====
Cayman Foundation Companies were introduced because in recent years many common law jurisdictions such as the Isle of Man and Channel Islands have moved to create legal structures that emulate civil law foundations in an effort to remain competitive on the world stage. Cayman seized the opportunity to do the same by enacting the Foundation Companies Law in 2017.

The foundations have separate legal personality and provides for limited liability. They can be structured without shareholders. In that case, the foundation companies can be supervised by a supervisor. Limitations on roles and duties of the directors can be set by the bylaws. In 2022 the Caymans enacted the Virtual Assets Service Providers Act, (cd. VASP), which can be useful for those DAOs which want to carry out Virtual Assets activities.

==== '''b) Swiss Foundations, Switzerland'''. ====
This is not ad hoc legislation, but a general legal model that is used for the incorporation of DAOs as it is considered more flexible than the corresponding European models.

==== '''c) Others.''' ====
- Virtual Assets Service Providers Act, 2022 (Cd. VASP), Virgin Islands.

- Panama Foundation.

== '''Conclusive remarks.''' ==
The following conclusions can be drawn from the analysis of legal precedents:

1. In terms of governance, two types of DAOs are generally accepted: those managed by members and those managed by algorithms. Member-managed DAOs are governed through blockchain-based voting mechanisms, while retaining decision-making power in the hands of the members. Algorithmically managed DAOs, on the other hand, are entirely controlled by their smart contracts.

2. From the point of view of decentralization, totally or only partially decentralized DAOs are allowed.

3. Although they are often used in the context of cryptocurrency brokering activities, regulation does not only consider this type of activity.

4. The regulation does not require the pursuit of a profit-making purpose, as DAOs may well be established and used for the performance of non-profit activities.

==== '''Notes''' ====
F. Sarzana di S. Ippolito e M. Nicotra, ''Diritto della blockchain, intelligenza artificiale e IoT'', Wolters Kluwer, Milano, 2018, p. 126 ss.;

B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.;

G. Weinstein, S. Lofchie, and J. Schwartz, ''A primer on DAOs'', in ''Harvard'' ''Law School Forum on Corporate Governance'', September 17, 2022, available at: https://corpgov.law.harvard.edu/2022/09/17/a-primer-on-daos/;

Tyros Consulting, ''Decentralized Autonomous Organization (Organizzazione Autonoma Decentralizzata) DAO – aspetti legali e societari'', March 24, 2022, available at: https://tayros.bg/index.php/2022/03/24/decentralized-autonomous-organization-organizzazione-autonoma-decentralizzata-dao-aspetti-legali-e-societari/.

==== '''Websites''' ====
Regulations are available at:

- Wyoming Decentralized Autonomous Organization Supplement, Wyoming: https://wyoleg.gov/NXT/gateway.dll?f=templates&fn=default.htm;

- Blockchain-based Limited Liability Company, Vermont: https://legislature.vermont.gov/statutes/section/11/025/04171; alternatively, available at the unofficial website: https://law.justia.com/codes/vermont/2018/title-11/chapter-25/;

- Legal DAO, Delaware: the Delaware statute governing limited liability companies (Chapter 18 of Title 6 of the Delaware Code) is available at: https://delcode.delaware.gov/title6/c018/index.html.

A Comparison between the different legal entity options available worldwide is provided here: https://www.midao.org/.

DAO formation

2023-07-08T09:59:52Z

Bianconi: considerations on DAOs constitution.

==== '''1. A complex procedure: empirical and technological profiles.''' ====
The establishment of a DAO is a complex procedure, as it involves an intersection between empirical-technological profiles, concerning the elaboration of the underlying IT structure of the DAO, and purely legal profiles, in particular when a clear legal form is to be given to it.

From an empirical point of view, the founders need to establish the rules governing the organization and operation of the DAO and incorporate them into the code. Before it is officially established, they must also set out how the DAO will be financed. In addition, the code of the DAO must be checked before the system can be fully implemented, since it could include possible bugs and security problems.

The creation of a DAO requires the development of the smart contract, in which the rules of operation are incorporated, and the definition of the DAO's governance structure. It then involves raising the necessary capital, which is done by issuing tokens. Finally, the operation of the DAO is implemented and everything is sent to the blockchain. In the event that the DAO needs to make a decision, community members must vote on these changes.

==== '''2. Forms of incorporation of the DAO.''' ====
In order to be given a clear legal status, it is necessary to incorporate the DAO into one of the currently available legal models. There are various organizational models according to which a DAO can be incorporated (for more details see [[DAOs’ current forms of regulations: an overview|DAOs' current forms of regulations: an overview]]). An analysis of the best-known legal models in the international regulatory landscape shows that the formation of a DAO can take place according to the forms provided for limited liability companies or foundations, depending on the legal nature of the chosen entity. In particular:

===== a) Legislative models introducing ad hoc regulations for DAOs: =====

* '''Wyoming''' (§ 17-31-105). § 17-31-106 provides for the adoption of a statute with the obligation to provide certain information (including an indication that it is a DAO and those matters required by the general provisions of the Wyoming Limited Liability Act under § 17-29-201. In addition, the articles of organization shall include a publicly available identifier of any smart contract directly used to manage, facilitate or operate the decentralized autonomous organization.
* '''The Republic of the Marshall Islands'''. According to the Decentralized Autonomous Organization Act (§105) any person may form a decentralized autonomous organization which shall have one or more members by signing and delivering one original and one exact or conformed copy of the certificate of formation and limited liability company agreement to the Registrar for filing. The person forming the decentralized autonomous organization need not be a member of the organization. Each decentralized autonomous organization shall have and continuously maintain in the Republic a registered agent as if they had a place of business in the Republic as provided in the Limited Liability Act (52 MIRC Chapter 4 §5). A statute must be adopted, regulating all matters listed in §106.

===== b) Legislative models which, although not specifically considering DAOs, are usually used to provide DAOs with legal status: =====

* '''Blockchain-based Limited Liability Company, Vermont''': according to § 4176, except as expressly provided otherwise, this subchapter does not exempt a BBLLC from any other judicial, statutory, or regulatory provision of Vermont law or federal law, including State and federal securities laws. Except to the extent inconsistent with the provisions of this subchapter, the provisions of the Vermont Limited Liability Company Act govern. For this reason, the formation of the BBLLC should be governed by the rules on limited liability companies.
* With regard to the various general legal models also used for the establishment of DAOs (in particular Delaware law and foundations), the rules laid down with reference to the individual models considered should apply.

==== '''3. Overlap profiles with Initial Coin Offerings (ICOs).''' ====
A key step in the establishment of DAOs concerns the raising of the capital needed to start the project.

DAOs obtain the necessary capital through the issuance of DAO voting tokens against the transfer of cryptocurrencies native to the blockchain on which the DAO is established. DAO tokens are generally allocated in proportion to the funds transferred. The initial offering of tokens constitutes an Initial Coin Offering (ICO) and is therefore subject to the relevant regulations.

In particular, the tokens underlying the DAO qualify as digital native security tokens, i.e. programmable financial instruments created as smart contracts and resident on a DLT. If the tokens issued qualify as security tokens, they are comparable to financial instruments. Therefore, their issuance is governed by the regulation of offers of financial products to the public (for further details see: [[Initial Coin Offerings (ICOs): legal issues according to Italian law]]).

==== '''References.''' ====
P. Carrière, N. de Luca, M. de Mari, G. Gasparri e T.N. Poli, ''Tokenizzazione di azioni e azioni tokens'', Quaderni giuridici Consob, 25 gennaio 2023, consultabile al sito: https://www.consob.it/documents/1912911/1916538/qg25.pdf/0cc70f0f-49ac-7ee4-f8cc-c07f7affbf35;

N. Tse, ''Decentralised Autonomous Organisations and the Corporate Form'', in ''Victoria University of Wellington Law Review'', 2020, p. 313 ss.;

J. Wanguba, ''What is a DAO LLC?'', in ''E-Crypto News'', available at: https://e-cryptonews.com/what-is-a-dao-llc/#:~:text=A%20Decentralized%20Autonomous%20Organization%20(DAO,organization%20holds%20any%20majority%20rule;

C. Hamman, ''DAO creation: A Basic How To'', in ''E-Crypto News'', available at: https://e-cryptonews.com/how-can-anyone-create-a-dao/.

Initial Coin Offerings (ICOs): legal issues according to Italian law

2023-07-08T09:49:56Z

Bianconi: legal issues on ICOs (Initial Coin Offerings) under Italian Law

==== '''1. Definition.''' ====
Initial Coin Offering (ICO) refers to the initial offerings of cryptographic '''tokens''' that can be traced back to a blockchain and are made by the issuer itself. When coin offerings are launched via an exchange platform, they are generally referred to as Initial Exchange Offerings (IEO).

From an empirical point of view, initial token offerings have emerged in practice by means of a basically recurring scheme, which consists of the following phases:

1. preliminary disclosure of the project through specialized internet channels (such as new technology forums), followed by the so-called executive summary, aimed at disclosing the project to potential interested parties in order to receive their feedback;

2. publication of the so-called white paper containing detailed information on the project;

3. publication of the so-called yellow paper, containing all the technical specifics of the project;

4. launch of the offer, sometimes preceded by the so-called pre-ICO reserved for selected investors;

5. subscription of the tokens by private investors through the issuer's electronic structure or through an exchange platform;

6. as a general rule, tokens are then listed on exchange portals.

The initial offer of crypto-assets traces back to the public offer of financial products, but the discipline to which the offer is subject depends, in the Italian context, on the type of token considered and is affected by recent regulatory interventions adopted in the European context. In fact, in the absence of an organic regulation of crypto-activities, the classification of tokens constitutes the discriminating element in identifying the discipline applicable to ICOs.

==== '''2. Offerings of “security tokens”.''' ====
Security tokens are to all intents and purposes considered as [[Financial products, financial instruments and securities (Italian Law)|financial instruments]]. From this qualification derives the application of the relevant discipline regardless of whether the financial instrument consists of a crypto-asset. Therefore, initial offers of security tokens, insofar as they qualify as financial instruments, are subject to the rules that apply to offers of financial products to the public, as set forth in Articles 94 et seq. TUF and the so-called Prospectus Regulation (EU Reg. 2017/1129).

The further trading of security tokens (the issuance of which is, as mentioned, governed by the general rules for financial instruments) has been considered in two recent regulatory interventions.

At the European level, EU Regulation 2022/858 "on a pilot scheme for market infrastructures based on distributed ledger technology and amending Regulations (EU) No 600/2014 and (EU) No 909/2014 and Directive 2014/65/EU" (so-called Pilot Regulation) was adopted on May 30, 2022. It entered into force the following June 22, 2022 and receives application from March 23, 2023. This regulation is intended to set up an initial regulatory framework for market infrastructures using DLT technology. It only concerns tokens that qualify as financial instruments under MIFID (so-called security tokens) and are defined as 'DLT financial instruments' (instruments that, as will be seen, are exempt from the application of the MiCAR Regulation).

At the domestic level, the provisions of the above-mentioned Regulation were implemented by Decree-Law No. 25/2023, converted into Law No. 52/2023, setting forth "Urgent provisions concerning the issuance and circulation of certain financial instruments in digital form and the simplification of FinTech experimentation" (so-called Fintech Decree).

==== '''3. Offerings of “utility tokens” and “monetary tokens”.''' ====
While the regulation of offers of security tokens has found complete regulation through the assimilation of this type of crypto-asset to financial instruments, the reconstruction of the regime applicable to issues of other types of tokens, which do not qualify as financial instruments, has been more uncertain.

The first hint of domestic regulation came from Consob consultation document dedicated to 'Initial offers and exchanges of crypto-assets' of March 19, 2019, which was followed, as a result of the consultation, by the final report published on January 2, 2020. In that document, Consob postulated an opt-in regime for those wishing to initiate crypto-asset offerings in Italy, outlining an optional framework that the issuer could elect to access or not.

A roughly uniform framework for crypto-assets has been provided for by the EU digital finance regulatory package and, in particular, the recently adopted [[MiCAR (Reg. EU 2023/1114)|MiCAR (EU) Regulation 2023/1114]]. This regulation, which regulates both the issuance and the trading phase of crypto-assets, applies, however, only to crypto-assets other than those listed in Article 2(4) MiCAR (EU Reg. 2023/1114), among which are, in particular, also those falling under the definition of financial instruments. The Regulation applies, therefore, only to "utility tokens" and "monetary tokens". The latter include those tokens which under the Regulation itself are defined as "asset-referenced tokens" and "e-money tokens". The MiCAR Regulation, adopted on May 31, 2023, will apply in its entirety as of December 30, 2024 (see Art. 149).

Pursuant to Article 3(1)((12)), an offer to the public is defined as “a communication to persons in any form, and by any means, presenting sufficient information on the terms of the offer and the crypto-assets to be offered so as to enable prospective holders to decide whether to purchase those crypto-assets”.

In general terms, the regulation makes the publication of the white paper mandatory and introduces powers of control and approval in the hands of the supervisory authorities of the member states. Specific disciplines are introduced for public offerings of:

===== '''a) utility tokens: art. 4 ss.''' =====
The offering is reserved for legal persons who have prepared and notified the competent authority of the white paper, the content of which is specifically regulated in Article 6 below. The crypto-asset white paper shall contain all of the following information:

(a) information about the offeror or the person seeking admission to trading;

(b) information about the issuer, fi different from the offeror or person seeking admission to trading;

(c) information about the operator of the trading platform in cases where ti draws up the crypto-asset white paper; (d) information about the crypto-asset project;

(e) information about the offer to the public of the crypto-asset or its admission to trading; (f) information about the crypto-asset;

(g) information on the rights and obligations attached to the crypto-asset;

(h) information on the underlying technology;

(i) information on the risks;

(i) information on the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue the crypto-asset.

In cases where the crypto-asset white paper is not drawn up by the persons referred to in the first subparagraph, points (a), (b) and (c), the crypto-asset white paper shall also include the identity of the person that drew up the crypto-asset white paper and the reason why that particular person drew ti up.

Consumers who have purchased such tokens are granted a right of withdrawal that can be exercised freely and without cost within 14 days (Art. 13).

===== '''b) asset-referenced tokens: art. 16 ss.''' =====
The offer of such tokens may only be made by entities authorized by the competent supervisory authorities of the Member States. Authorization may only be granted to entities established in the Union and on the basis of a specific application accompanied by the white paper. Additional requirements are foreseen for the issuance of significant tokens.

===== '''c) e-money tokens: art. 48 ss.''' =====
With respect to these, the offer may only be made by an authorized issuer such as a credit institution or e-money institution, which has notified a White Paper on crypto-assets to the competent authority and has also published it. Even then, additional obligations are introduced for significant tokens.

==== '''4. The U.S. context (referral).''' ====
On the test applied by the Security and Exchange Commission (SEC) in order to establish whether or not a certain activity is referable to the offering of financial products (i.e. investment contracts) in the U.S. and is therefore subject to U.S. Securities Law see: [[Howey test]].

==== '''References.''' ====
S. Schlegelmilch, E. Newman and C. Wolfe, ''SEC’s Inaction Against Most Initial Coin Offerings Sends More Mixed Messages on Crypto Enforcement'', January 6, 2023, available at: https://wp.nyu.edu/compliance_enforcement/2023/01/06/secs-inaction-against-most-initial-coin-offerings-sends-more-mixed-messages-on-crypto-enforcement/;

P. Carrière, ''Decreto Fintech e MICAR: il quadro normativo sulle cripto-attività'', in ''Dirittobancario.it'', May 30, 2023;

P. Carrière, N. de Luca, M. de Mari, G. Gasparri and T.N. Poli, ''Tokenizzazione di azioni e azioni tokens'', Quaderni giuridici Consob, January 25, 2023, available at: https://www.consob.it/documents/1912911/1916538/qg25.pdf/0cc70f0f-49ac-7ee4-f8cc-c07f7affbf35;

G. Farina, ''L’emissione di token digitali nell’assetto normativo attuale'', in A. Blandini, ''Diritto dell’innovazione'', Wolters Kluwer, Milano, 2022, p. 471 ss.;

P. Carrière, ''Initial Coin Offerings (ICOs): Italia-Francia, due approcci regolatori a confronto'', in ''Dirittobancario.it'', January 15, 2020;

M. Nicotra, ''Il regime giuridico delle ICOs. Analisi comparata e prospettive regolatorie italiane'', in ''Dirittobancario.it'', April 18, 2019;

M. Nicotra, ''ICO, Initial Coin Offering: una ricostruzione giuridica del fenomeno'', 2017, available at: https://www.blockchain4innovation.it/esperti/ico-initial-coin-offering-ricostruzione-giuridica-del-fenomeno/.

==== '''Websites.''' ====
Consob consultation document on “Le offerte iniziali e gli scambi di cripto-attività” of May 19, 2019 is available at: https://www.consob.it/documents/1912911/1972122/doc_disc_20190319.pdf/2044537e-487c-5093-112e-3eacc69b12d4;

Consob Final Report on “Le offerte iniziali e gli scambi di cripto-attività” of January 2, 2020 is available at: https://www.consob.it/documents/1912911/1938506/ICOs_rapp_fin_20200102.pdf/e83b06b8-6e7a-2dd7-9fe5-f742e9f2621e.

Financial products, financial instruments and securities (Italian Law)

2023-07-08T09:34:01Z

Bianconi: Definitions of financial products, financial instruments and securities under Italian Law.

==== '''1. Introduction.''' ====
Financial market regulation is based on the notions of financial products, financial instruments and securities. The three definitions outline a system of concentric circles, whereby:

- the category of financial products includes that of financial instruments;

- the category of financial instruments includes that of securities.

==== '''2. Financial products.''' ====
Pursuant to Article 1(1)(u) of Legislative Decree 58/1998 (“Testo unico delle disposizioni in materia di intermediazione finanziaria”, the Consolidated Law on Finance, commonly referred to in Italian as “TUF”), financial products are 'financial instruments and every other form of investment of a financial nature; bank or postal deposits without the issue of financial instruments shall not constitute financial products'.

This is an open category, which includes but is not limited to financial instruments. The legally atechnical term 'other form of investment of a financial nature' is apt to embrace any transaction carried out with the use of capital that entails the assumption of a risk related to the expectation of a profit. For a transaction to be of a financial nature, it must have the following essential elements:

1) investment of money;

2) expectation of profit;

3) associated risk.

It therefore includes all the atypical and unnamed forms of investment gradually created by the market.

The category of financial products is decisive for the purposes of the application of the regulatory complex of provisions designed to protect savers, including the regulation of the public savings appeal (Art. 94 ff. TUF).

==== '''3. Financial instruments.''' ====
Pursuant to Article 1(2) TUF, financial instruments are 'any instrument listed in Section C of Annex I, including instruments issued using distributed ledger technology. The payment instruments are not financial instruments'.

Section C of Annex I includes, among others: transferable securities, money market instruments, units of a collective investment undertaking, option contracts, standardized financial futures, swaps, agreements for future exchange of interest rates and other derivative contracts listed therein. Financial instruments are thus divided into derivative and non-derivative instruments.

==== '''4. Securities.''' ====
Pursuant to Article 1(1 bis) of the Consolidated Law on Finance, transferable securities are the 'categories of security that can be traded in capital markets, such as:

a) company shares and other titles equivalent to company shares, of partnership or of other parties and share deposit receipts;

b) bonds and other debt titles including the deposit receipts relative to said shares;

c) any other transferable security that permits buying or selling transferable securities indicated in letters a) and b) or that involve spot settlement determined with reference to transferable securities, foreign exchange, interest rates or rates of return, commodities or other indices or measurements".

The rule introduces an illustrative list. Accordingly, the notion identifies an open category.

==== '''References and Websites.''' ====
V. Calandra Buonaura, ''Commentario breve al testo unico della finanza'', Wolters Kluwer, Milano, 2020, ''sub'' art. 1, p. 26 ss.;

Consob, ''I titoli di credito e gli strumenti finanziari'', in https://www.consob.it/web/investor-education/i-titoli-di-credito.

The Consolidated Law on Finance (“Testo Unico dell’intermediazione finanziaria”) and its Annex I are available at: https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=1998-03-26&atto.codiceRedazionale=098G0073&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=e46a3848-5759-4380-9c61-a768655f3e28&tabID=0.5407578726849629&title=lbl.dettaglioAtto.

The English version is available at: https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/fr_decree58_1998.htm?hkeywords=&docid=0&page=0&hits=19&nav=false.

The Consob guidelines on the notion of financial product/instrument can be found at: https://www.consob.it/web/area-pubblica/servizi-di-investimento-nozione-di-prodotto/strumento-finanziario.

A stylised representation of the configuration of the current financial system is accessible at the Consob website: https://www.consob.it/web/investor-education/il-sistema-finanziario-attuale-una-stilizzazione.

For the definition and identification of the main derivative instruments, see Consob, ''I derivati'', in https://www.consob.it/web/investor-education/i-derivati.

Issuers (legal matters according to Italian law)

2023-07-08T09:28:11Z

Bianconi: definition of issuers according to Italian Law.

==== '''1. Definition.''' ====
According to Borsa Italiana’s Financial Glossary, issuers are entities that, for the financing of their activities, issue financial instruments suitable for circulation and therefore for being traded on a market. Companies organized as corporations, public bodies and the State are the most important issuers of financial instruments.

==== '''2. Definition of listed issuers.''' ====
Pursuant to Article 1(1)(w) of Legislative Decree No. 58/1998 (Consolidated Law on Finance, commonly referred to in Italian as “TUF”), listed issuers are subjects, Italian or foreign, including trusts, which issue financial instruments listed on a regulated Italian market. In the case of deposit receipts admitted for trading on a regulated market, the term issuer refers to the issuer of the securities represented, even if such securities are not admitted for trading on a regulated market.

==== '''3. Definition of issuers of financial instruments distributed to the public to a significant extent.''' ====
Issuers of financial instruments widely distributed among the public to a significant extent, pursuant to Article 116 of Legislative Decree No. 58/1998 (TUF), are defined by Article 2-bis of Consob Regulation no. 11971 of 14 May 1999, concerning the discipline of issuers, with reference to both shares and bonds.

==== '''4. Definition for MiCAR purposes.''' ====
According to Article 3(1)(10) of the recent '[[MiCAR (Reg. EU 2023/1114)|MiCAR' Regulation (Regulation EU 2023/1114)]], for the purposes of that Regulation issuer means “a natural or legal person, or other undertaking, who issues crypto-assets”.

==== '''References and Websites.''' ====
Borsa Italiana’s financial glossary is available at: https://www.borsaitaliana.it/borsa/glossario/emittenti.html.

The definition and the list of issuers of financial instruments that are widely distributed among the public is available on the Consob website, ''Emittenti strumenti finanziari diffusi fra il pubblico in misura rilevante'', at: https://www.consob.it/web/area-pubblica/emittenti-titoli-diffusi.

The Consolidated Law on Finance (“Testo Unico dell’intermediazione finanziaria”) and its Annex I are available at: https://www.normattiva.it/atto/caricaDettaglioAtto?atto.dataPubblicazioneGazzetta=1998-03-26&atto.codiceRedazionale=098G0073&atto.articolo.numero=0&atto.articolo.sottoArticolo=1&atto.articolo.sottoArticolo1=10&qId=e46a3848-5759-4380-9c61-a768655f3e28&tabID=0.5407578726849629&title=lbl.dettaglioAtto.

The English version is available at: https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/fr_decree58_1998.htm?hkeywords=&docid=0&page=0&hits=19&nav=false.

The English version of Regulation implementing Italian Legislative Decree no. 58 of 24 February 1998, concerning the discipline of issuers, adopted by CONSOB under resolution no. 11971 of 14 May 1999 as subsequently amended, is available at: https://www.consob.it/web/consob-and-its-activities/laws-and-regulations/documenti/english/laws/reg11971e.htm?hkeywords=&docid=2&page=0&hits=19&nav=false.

The official, updated version of the MiCAR Regulation, Reg. (UE) 2023/1114, is available in all official laguages at: https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX%3A32023R1114&qid=1688044240930.

MiCAR (Reg. EU 2023/1114)

2023-07-08T08:50:32Z

Bianconi: MiCAR Regulation

==== '''1. Definition.''' ====
The regulation known as 'MiCAR' means the Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937.

==== '''2. Content and scope of application.''' ====
The regulation has caused great excitement among scholars and practitioners because it sets out for the first time uniform requirements for the public offer and admission to trading on a trading platform of certain crypto assets as well as requirements for service providers for crypto assets.

It applies only to:

- utility tokens;

- "monetary tokens", including those tokens which under the Regulation itself are defined as "asset-referenced tokens" and "e-money tokens".

Under Art. 3, par. 1:

an ‘asset-referenced token’ is a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies (n. 6);

an ‘electronic money token’ or ‘e-money token’ means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency (n. 7);

an ‘utility token’ is a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer (n. 9).

According to Art. 2, par. 4, the Regulation does not apply to crypto-assets that qualify as financial instruments. Consequently, it does not apply to those tokens that are known as “security tokens”. Paragraph 5 below then defers to ESMA to develop, by 30 December 2024, guidelines in accordance with Art. 16 of Regulation (EU) No 1095/2010 on the conditions and criteria for the qualification of crypto-assets as financial instruments.

==== '''3. Implementation.''' ====
The Regulation was enacted on 31 May 2023 and was published in the Official Journal of the European Union on 9 June 2023. It shall apply from 30 December 2024, except for Titles III and IV, which shall apply from 30 June 2024.

==== '''References and Websites.''' ====
For more details see:

A. Lanotte, ''L’avvento del MiCA mette davvero fine al Crypto Far West in Europa?'', in Econopoly, 24 Aprile 2023, available at: https://www.econopoly.ilsole24ore.com/2023/04/24/mica-crypto-regolamento-europa/;

P. Carrière, ''Decreto Fintech e MICAR: il quadro normativo sulle cripto attività'', in ''Dirittobancario.it'', 30 maggio 2023, available at: https://www.dirittobancario.it/art/decreto-fintech-e-micar-il-quadro-normativo-sulle-cripto-attivita/.

The full text of the MiCAR Regulation, Reg. (UE) 2023/1114, is available at: https://www.dirittobancario.it/art/regolamento-mica-il-testo-del-regolamento-ue-2023-1114-in-gu-ue/#.

The official, updated version of the Regulation is available at: https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX%3A32023R1114&qid=1688044240930.

Howey test

2023-07-08T08:45:59Z

Bianconi: explanation of the "Howey test" used by the SEC.

==== '''1. Definition.''' ====
Evaluation test used by the Security and Exchange Commission (SEC) in order to establish whether or not a certain activity is referable to the offering of financial products (i.e. investment contracts) and is therefore subject to US Securities Law.

On the basis of these principles, a concrete case falls within the definition of an 'investment contract' in consideration of a criterion of prevalence of the substantial aspect over the formal one, i.e. when, regardless of the type of contract agreed upon between the parties through the agreement, there is an 'investment of money in an enterprise with the reasonable expectation of profits from the managerial or entrepreneurial efforts of others'. The three elements of the test are therefore:

1) the investment of money;

2) the expectation of profit;

3) the fact that such profit is derived from the labour of others.

==== '''2. The origin: SEC v. W.J. Howey Co.''' ====
The case concerned two corporations, the W. J. Howey Company and Howey-in-the-Hills Service Inc., which were Florida corporations under direct common control and management. The Howey Company, which owned large tracts of citrus acreage in Lake County, Florida, used to plant about 500 acres annually, while the Howey-in-the-Hills Service Inc., was a service company engaged in cultivating and developing many of these groves. The case arose because the company owning the land had offered contracts on the basis of which it undertook to cultivate the land with citrus fruits and the investors would be paid a portion of the harvest resulting from the cultivation as remuneration for the capital invested. Upon the facts of that case, the US Supreme Court ruled that an offering of units of a citrus grove development, coupled with a contract for cultivating, marketing, and remitting the net proceeds to the investor, was an offering of an "investment contract" within the meaning of that term as used in the provision of § 2(1) of the Securities Act of 1933 defining "security" as including any "investment contract," and was therefore subject to the registration requirements of the Act. The test of whether there is an "investment contract" under the Securities Act is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others; and, if that test be satisfied, it is immaterial whether the enterprise is speculative or non speculative, or whether there is a sale of property with or without intrinsic value.

==== '''3. TheDAO case.''' ====
A popular example of the application of the Howey test to a DAO concerned the TheDAO case, in which the SEC qualified the initial offering of TheDAO tokens as investment contracts on the basis of the following considerations:

- the investment does not have to be 'monetary' in nature, but can be made by other means of contribution of value. In the present case, the value was Ether (with which a monetary value was associated) contributed to the project in exchange for DAO Tokens;

- the investors' participation was motivated by an expectation of profit. TheDAO's promotional materials, in fact, clearly emphasized the goal of creating an entity that would finance projects and provide investors with a return on their investment;

- profit for investors depended on the management efforts of others. In fact, decisions within TheDao on which projects to submit for funding evaluation were made by a small group of individuals. Founders and curators monitored the activities, safeguarded the interests of investors, and selected projects to be nominated for potential investment.

As a result, TheDAO was held to be subject to the Securities Law with the consequent obligations for the issuing entity to register the offers and sales of the securities (an obligation not complied with by the organizers of TheDAO in violation of Section 5 of the aforementioned law); to inform potential investors; and with related obligations to register as a "national securities exchange" for the entities that allowed through their exchange platforms the trading of the aforementioned tokens.

==== '''References and Websites.''' ====
A. Dhanani e B. J. Hausman, ''Decentralized Autonomous Organizations'', in ''Intellectual Property and Technology Law Journal'', 2022, vol. 34, n. 5, p. 1 ss.;

M. Nicotra, ''Il regime giuridico delle ICOs. Analisi comparata e prospettive regolatorie italiane'', in ''dirittobancario.it'', 18 aprile 2019.

US Supreme Court, SEC v. W.J. Howey Co., 328 U.S. 293, May 27, 1946, is available at: https://supreme.justia.com/cases/federal/us/328/293/

Collective enterprise

2023-07-08T08:31:35Z

Bianconi: The forms of collective enterprise.

==== '''1. Individual and collective enterprise.''' ====
In the Italian legal system, the enterprise can take the dual form of individual enterprise or collective enterprise.

The individual enterprise is that headed by a single person; the collective enterprise is instead exercised by an organized group of people. While in individual enterprise the notion of entrepreneur (Art. 2047 of the Civil Code) corresponds to a single individual, when the enterprise is exercised collectively the entrepreneur corresponds instead to a collective entity.

==== '''2. The forms of collective enterprise.''' ====
The typical legal forms of collective enterprise are those of the company, in the various types governed by Book V, Titles V and VI of the Civil Code. However, although they are the most frequent, they are not the exclusive forms.

According to Article 2247 of the Civil Code, with the company contract 'two or more persons confer goods or services for the joint exercise of an economic activity with a view to sharing the profits'. Thus, only the collective enterprise exercised for the purpose of sharing profits, i.e. for profit (subjective profit), qualifies as a company.

However, the enterprise may also be collectively exercised to produce a profit (objective profit) that is not, however, distributed among the parties. In this case, the enterprise is functional to produce the financial resources necessary to carry out a further activity, aimed at realizing an ideal purpose of the group. This represents a form of collective exercise of economic activity that differs from companies, carried out not for the purpose of profit but for cultural, recreational, charitable or otherwise ideal purposes. Associations and foundations realize forms of non-corporate collective enterprise insofar as they carry out business activities.

==== '''References.''' ====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 3 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 144 ss.

Corporations (under Italian Civil Code)

2023-07-08T08:26:17Z

Bianconi: Corporations under Italian Civil Code.

==== '''1. Introduction.''' ====
In the Italian legal system, there are two types of companies: partnerships and corporations.

==== '''2. Corporations: types and main characteristics.''' ====
Corporations include:

- joint-stock company (“società per azioni”);

- limited liability company (“società a responsabilità limitata”);

- partnership limited by shares (“società in accomandita per azioni”).

These three types of corporations are grouped together because of the following common features:

===== '''a) Limited liability of the shareholders.''' =====
From an economic point of view, the partners risk in the enterprise only the money or assets they have contributed to the company. The so-called 'benefit of limited liability' is enjoyed by all partners in the joint-stock company and the limited liability partnership. In the limited partnership with share capital, on the other hand, there are two categories of partners: the limited partners, who have limited liability, and the general partners, who retain unlimited liability for the company's obligations.

===== '''b) The power to administration is separate from partner status.''' =====
Membership automatically confers only the power to concur in the appointment of directors.

The internal organization of the company is divided into a plurality of bodies, each with a specific competence:

- Shareholders' Meeting. The body representing the shareholders, competent on matters determined by law. In particular, in the traditional system, it is competent to appoint and dismiss directors.

- Administrative body (usually, a board of directors), which may be composed of non-members and is competent for the management of the social enterprise.

- Control body: mandatory in the joint-stock company; merely possible in the limited liability company.

===== '''c) Membership is freely transferable.''' =====
In such partnerships, the personal qualities of the partner lose their importance and the partners are only taken into account for the share of capital subscribed. Therefore, the substitution of the partner's person does not require any amendment of the partnership contract and does not imply the consent of the other partners. Membership becomes an exchange value and is intended for circulation. In the joint-stock company, circulation is facilitated by the fact that shareholder status is represented by a title: the share, transferable according to its law of circulation.

==== '''3. Partnerships (referral).''' ====
For more details see page: [[Partnerships (under Italian civil code)]].

==== '''References.''' ====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 29 ss.;

G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 38 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 159.

Partnerships (under Italian civil code)

2023-07-08T08:19:41Z

Bianconi: Partnerships under italian civil code.

==== '''1. Introduction.''' ====
In the Italian legal system, there are two types of companies: partnerships and corporations.

==== '''2. Partnerships: types and main characteristics.''' ====
Partnerships include:

- the simple partnership (“società semplice”);

- the general partnership (“società in nome collettivo”);

- the limited partnership (“società in accomandita semplice”).

These three types of partnerships are grouped together under the name 'personal partnerships' because of the following common features:

===== '''a) Unlimited and joint liability of the partners for corporate obligations.''' =====
In the general partnership, all partners, without exception, are unlimited and jointly liable for the company's obligations (Art. 2291 of the Civil Code), whereas in the simple partnership, liability limitation agreements are admissible with effect vis-à-vis third parties, but only for partners who do not act in the company's name and on its behalf (Art. 2267 of the Civil Code).

The limited partnership, on the other hand, is characterized by the presence of two categories of partners: limited partners (“accomandanti”) and general partners (“accomandatari”). Only the latter are unlimitedly liable.

The partner in a partnership (albeit with the differences noted) therefore bears an unlimited business risk from an economic point of view: he will be liable for the company's obligations with all his present and future property.

===== '''b) The power of administration is directly linked to the status of partner (unlimited partner).''' =====
In partnerships, each partner with unlimited liability is for that reason solely a director of the company. Each thus contributes to the management of the partnership enterprise. The unlimited liability and the correlative participation in the administration make the personal qualities and conditions of the partner relevant. Hence the name 'partnerships' because the persons of the partners are crucial in them.

===== '''c) Untransferability of membership without the consent of the others.''' =====
Given the centrality of the persons of the partners, the partnership contract is set up as an intuitus personae, i.e. a contract in which the identity or qualities of the contracting parties are determinative of the consent of the others. The substitution of the person therefore implies a modification of the original agreements and requires the consent of the other partners.

==== '''3. Corporations (referral).''' ====
For more details see page: '''Corporations (under Italian Civil Code)'''.

==== '''References.''' ====
F. Galgano, ''Diritto commerciale. Le società'', 18° ed., Zanichelli, Bologna, 2013, p. 29 ss.;

G. F. Campobasso, ''Diritto commerciale'', 2, ''Diritto delle società'', 10° ed., Utet Giuridica, Milano, 2020, p. 38 ss.;

G. Meruzzi, ''Complemento di diritto commerciale'', 1, ''Impresa, società in generale e società di persone'', 2° ed., Egea, Milano, 2019, p. 159.

Foundation (under Italian Civil Code)

2023-07-08T07:42:54Z

Bianconi: Definition and main characteristics of the foundations according to the Italian Civil Code.

==== '''1. Collective entities in the Italian Civil Code: a taxonomy.''' ====
The Italian Civil Code sets out two macro-categories of collective entities:

- those for profit, governed by Book V, Title V, of the Civil Code;

- those not-for-profit, governed by Book I, Title II, of the Civil Code.

While the legislator has precisely identified the purpose of profit-making companies (the division of profits, according to art. 2247 of the Civil Code), it has not specified the purpose of the entities governed by Book I. However, it is unanimously considered that they may pursue any purpose, as long as it is not for profit (e.g. cultural, political, religious, philanthropic, sporting, ...): they may carry out any type of activity, including economic ones, and even make a profit, which, however, shall not be distributed among the members, hence the term 'non-profit organizations'.

Within the framework of non-profit organizations, a distinction is made between:

- Associations;

- Foundations.

==== '''2. Foundations: definition and main characteristics.''' ====
According to the earliest classification, associations were defined as 'universitas personarum', as groups of persons brought together for the pursuit of a common purpose, where persons prevailed over assets. In contrast, foundations were defined as 'universitas bonorum', as entities intended by the founder's will to take care of goods linked to a specific work, in which the patrimonial element prevailed. This categorization has, however, been superseded.

A foundation can be defined as a permanent organization established to allocate assets to the pursuit of a purpose. The assets are withdrawn from the disposal of the founder and the trustees to be used solely for the realization of the statutory purposes.

The foundation has legal personality. It has full legal capacity and capacity to act, implemented through its organs.

==== '''3. The foundation act.''' ====
The foundation is established by a unilateral, non-receptive act, by which the founder (or the founders, if they are a plurality: the act nevertheless retains its unilateral character) manifests the will to establish the foundation by allocating a certain amount of assets to a certain purpose. Founders may be both natural persons and legal entities, including companies.

Article 16 of the Civil Code, which governs the content of the foundation agreement, applies to the foundation agreement.

==== '''4. The purpose of the foundation.''' ====
In spite of the silence of the Civil Code, it is considered that foundations, like associations, may pursue any purpose as long as it is non-profit making. However, the prevailing doctrine holds that the foundation must pursue purposes of general interest.

==== '''5. The administration of the foundation.''' ====
The only body provided for by the Civil Code for the administration of the foundation is the board of directors. In its traditional structure, however, there is no assembly body. The administrative body derives its power directly from the foundation act.

The method of appointment and composition of the governing body is generally laid down in the foundation deed, which must also stipulate its powers and functions and indicate to whom powers of representation are conferred.

==== '''6. ETS foundations.''' ====
Legislative Decree No. 117/2017 (the so-called Third Sector Code) introduced and regulated Third Sector Entities, which now enjoy a more articulated and comprehensive discipline than that traditionally reserved for non-profit entities in Book I of the Italian Civil Code. Third Sector Entities are, in particular, 'voluntary organizations, associations for social promotion, philanthropic entities, social enterprises, including social cooperatives, association networks, mutual aid societies, associations, whether recognized or unrecognized, foundations and other private entities other than companies set up for the pursuit of non-profit purposes, the purpose of which is to promote the development of the economy and the environment, and to promote the development of the economy and the environment, non-profit, civic, solidarity and socially useful purposes through the performance, exclusively or principally, of one or more activities of general interest in the form of voluntary action or the free provision of money, goods or services, or mutuality or the production or exchange of goods or services, and registered in the single National Register of the Third Sector' (Art. 4, c. 1, of Decree-Law No. 117/2017).

==== '''References''' '''and''' '''Websites.''' ====
F. Galgano, ''Trattato di diritto civile'', I, 3° ed., Cedam, Padova, 2015, p. 299 ss.;

A. Trabucchi, ''Istituzioni di diritto civile'', 48° ed., Wolters Kluwer, Milano, 2017, p. 345 ss.;

M. Ferrari, ''Le fondazioni: la guida completa'', 17 May 2021, available at: <nowiki>https://www.altalex.com/guide/fondazioni</nowiki>.

DAOs’ current forms of regulations: an overview

2023-06-26T15:50:21Z

Bianconi: An overview about the current legislative models that provide a legal status for DAOs.

== '''Introduction.''' ==
The legislative models that provide a legal status for the enterprise collectively carried out in the form of a DAO can be divided into two categories, depending on whether they provide a specific legal model for DAOs, or they are general models that can also be used with reference to them. In this second category, we can then further distinguish between cases in which DAOs are traced back to the corporate or foundational form.

== '''Legislative models introducing ad hoc regulations for DAOs.''' ==
There are only regulations that provide for the incorporation of DAOs in corporate form, in particular as Limited Liability Companies. See:

==== '''a) Wyoming Decentralized Autonomous Organization Supplement, Wyoming.''' ====
Passed on April 2021, effective from 1 July 2021 (available at: <nowiki>https://www.wyoleg.gov/</nowiki> o <nowiki>https://wyoleg.gov/NXT/gateway.dll?f=templates&fn=default.htm</nowiki>). It is essentially an amendment to the Wyoming Limited Liability Company Act. It has been amended with:

1. SF0068, Decentralized Autonomous Organization Supplement Amendments, May 2022;

2. SF0075, of February 2023, effective 1 July 2023.

This law granted limited liability company status to DAOs operating on blockchain, organized under the Wyoming Limited Liability Company Act. It thus introduced the so-called DAO LLC (DAO Limited Liability Company). This protects participants by recognizing their limited liability.

The DAO is defined in § 17-31.102 (a) (ii), pursuant to which “Decentralized autonomous organization means a limited liability company organized under this chapter”.

In terms of management, § 17-31-109 provides that “management of a decentralized autonomous organization shall be vested in its members or the members and any applicable smart contracts. All smart contracts utilized by a decentralized autonomous organization shall be capable of being updated, modified or otherwise upgraded”. The law therefore recognizes two types of DAO:

a. Member-managed DAOs, similar to the LLC, where some members are responsible for maintaining and managing the organization;

b. Algorithmically-managed DAOs, which can register as an LLC if the governing smart contract system is already in place at the time of filing. In this case, the computer protocols for managing the DAO must be able to be updated or modified.

A further point of interest is that the law defines the membership interest in § 17-31.102 (a) (vi), as “member’s ownership right in a decentralized autonomous organization, which may be determined by the organization’s articles of organization or operating agreement or ascertainable from a blockchain on which the organization relies to determine a member’s ownership right. A membership interest may also be characterized as either a digital security or a digital consumer asset as defined in W.S. 34-29-101, if designated as such in the organization’s articles of organization or operating agreement”. An issue of proportionality is also introduced with respect to the DAO’s participation quota under § 17-31-111, whereby the participation “(i) (…) shall be calculated by dividing a member’s contribution of digital assets to the organization by the total amount of digital assets contributed to the organization at the time of a vote; or

(ii) If all members have not contributed digital assets to an organization as a prerequisite to becoming a member, each member shall possess one (1) membership interest and be entitled to one (1) vote”.

It should be noted that due to the Treaty of Friendship, Commerce and Navigation between the Federal Republic of Germany and the United States of America of 29 October 1954, this law also has concrete effects on the German and European business landscape. This means that a DAO LLC from Wyoming is also recognised as a limited liability company in Germany and can operate in Europe. For Italy, see Law No. 385 of 18 June 1949, ratifying and executing the Treaty of Friendship, Commerce and Navigation (Art. II, c. 2, Treaty), the Protocol of Signature, the Additional Protocol and the Exchange of Notes concluded in Rome between Italy and the United States of America on 2 February 1948.

==== '''b) Decentralized Autonomous Organization Act, The Republic of the Marshall Islands.''' ====
Outside the US context, reference is made to the experience of the so-called MIDAO LLCs, introduced by the Republic of the Marshall Islands with the Decentralized Autonomous Organization Act of 2022. In that case, too, they are regulated as limited liability companies subject, insofar as compatible, to the regulations of the Limited Liability Company Act of 1996, Chapter 4 of Title 52. It is presented as the legislation that will soon become the reference jurisdiction for the registration of DAOs, due to the fact that it is not a country on the European black list and the legislation is more flexible than that of North American countries. In particular:

- no board members or officers are required;

- every member gets equal liability protection;

- blockchain and smart contracts are officially recognized by law for use in governance and membership tracking;

- costs are lower than other non-US options;

- compliance requirements are optimized for DAOs;

- no taxes on the entity or the members;

- not on any blacklists, sanctions lists, or tax evasion lists.

The DAO is defined in §102 (c) as “a resident domestic limited liability company organized under this chapter”. It also contains a more detailed list of definitions, including those of digital asset, digital security, blockchain, membership interest, and smart contract.

Similarly to the Wyoming regulations, in terms of management it provides that (§ 108) “management of a decentralized autonomous organization shall be vested in its members, if member managed, or the smart contract, if algorithmically managed, unless otherwise provided in the certificate of formation or limited liability company agreement”. It therefore contemplates the possibility of the DAO being managed by the members or algorithmically, i.e. managed by the smart contract.

From the point of view of purpose, it is made clear that a decentralized autonomous organization may form and operate for any lawful purpose, regardless of whether for profit (§105).

From the point of view of membership participation, however, it is expected that, unless otherwise provided for in the certificate of formation, limited liability company agreement or smart contract, membership interests in a member managed decentralized autonomous organization shall be calculated by dividing a member’s governance tokens held divided by the total amount of the organization at the time of a vote. However, it is possible that members do not hold governance tokens of an organization as a prerequisite to becoming a member. In this case, each member shall possess one membership interest and be entitled to one vote.

== '''Legislative models which, although not specifically considering DAOs, are usually used to provide DAOs with legal status.''' ==

=== '''A) As corporations''': ===

==== '''a) Blockchain-based Limited Liability Company, Vermont.''' ====
On 30 May 2018, Vermont passed a law (Senate Bill 269, available at: <nowiki>https://legislature.vermont.gov/statutes/section/11/025/04171</nowiki>; alternatively, available at the unofficial website: <nowiki>https://law.justia.com/codes/vermont/2018/title-11/chapter-25/</nowiki>): “an Act Related to Blockchain Business Development”, which came into effect on the following 1 July. The law was designed to stimulate Vermont’s economic development through the promotion of blockchain technology. To this end, it introduced Blockchain-based Limited Liability Companies (BBLLCs). The regulatory intervention took place through the introduction in Title 11, dedicated to “Corporations, Partnerships and Associations”, “Chapter 25 - Limited Liability Companies”, of “Subchapter 12 - Blockchain-based limited liability companies”.

It has thus opened up the possibility of setting up limited liability companies as DAOs, allowing for full governance via blockchain. In this case, we do not have a definition of a DAO, as the regulatory intervention addresses the Blockchain-based Limited Liability Company more generally, as a “limited liability company organised pursuant to this title for the purpose of operating a business that utilises blockchain technology for a material portion of its business activities” (§4172).

With respect to the governance of these companies, the act specifies that “a BBLLC may provide for its governance, in whole or in part, through blockchain technology” (§4173 (1). See §4175). In addition, the operating agreement shall specify whether the decentralized consensus ledger or database utilized or enabled by the BBLLC will be fully decentralized or partially decentralized (§4173 (2)).

==== '''b) Legal DAO, Delaware.''' ====
DAOs are often incorporated under Delaware law: they are the so-called LAO (Legal DAO). The LAO provides a legal structure to allow members to invest in blockchain-based projects in exchange for tokens. It is a “legal wrapper” created by structuring the DAO as an LLC, with the aim of ensuring limitation of liability to members, clarifying applicable law, and providing tax benefits.

The Delaware statute governing limited liability companies (LLCs) is found in Chapter 18 of Title 6 of the Delaware Code, available at: ''<nowiki>https://delcode.delaware.gov/title6/c018/index.html</nowiki>''. It provides, inter alia, the laws relating to the formation, management, governance, mergers and dissolution of LLCs.

Thus, in this case, a Delaware-based LLC holds full ownership rights and serves as the beneficiary of the funds, or part thereof, collected in a token sale launched by a DAO. While Wyoming now has ad hoc legislation, Delaware allows a DAO to be created as a single legal entity, with legal protections similar to any other LLC, but DAOs are only at the “front” side. In the “back” part, there is a regulated corporate structure as an LLC.

=== '''B) As foundations''': ===
Alternatively to the corporate form, DAOs are often taken to the legal structure of the foundation, as phenomena that are characterized by:

- immutability of purpose;

- tendential autonomy from the founder.

Although these profiles lead to the DAO being approached in this legal form, the following obstacles should be noted:

- the possibility of including virtual assets, such as the tokens typically used by the DAO in its operations, in the list of assets that may constitute the foundation's assets;

- the legal form of the foundation in many countries requires the presence of directors, who legally represent the foundation. A profile that evidently can come into friction with the need for decentralization typical of DAOs.

The following models are mentioned:

==== '''a) Cayman Foundation Companies, Cayman Islands.''' ====
Cayman Foundation Companies were introduced because in recent years many common law jurisdictions such as the Isle of Man and Channel Islands have moved to create legal structures that emulate civil law foundations in an effort to remain competitive on the world stage. Cayman seized the opportunity to do the same by enacting the Foundation Companies Law in 2017.

The foundations have separate legal personality and provides for limited liability. They can be structured without shareholders. In that case, the foundation companies can be supervised by a supervisor. Limitations on roles and duties of the directors can be set by the bylaws. In 2022 the Caymans enacted the Virtual Assets Service Providers Act, (cd. VASP), which can be useful for those DAOs which want to carry out Virtual Assets activities.

==== '''b) Swiss Foundations, Switzerland'''. ====
This is not ad hoc legislation, but a general legal model that is used for the incorporation of DAOs as it is considered more flexible than the corresponding European models.

==== '''c) Others.''' ====
- Virtual Assets Service Providers Act, 2022 (Cd. VASP), Virgin Islands.

- Panama Foundation.

== '''Conclusive remarks.''' ==
The following conclusions can be drawn from the analysis of legal precedents:

1. In terms of governance, two types of DAOs are generally accepted: those managed by members and those managed by algorithms. Member-managed DAOs are governed through blockchain-based voting mechanisms, while retaining decision-making power in the hands of the members. Algorithmically managed DAOs, on the other hand, are entirely controlled by their smart contracts.

2. From the point of view of decentralization, totally or only partially decentralized DAOs are allowed.

3. Although they are often used in the context of cryptocurrency brokering activities, regulation does not only consider this type of activity.

4. The regulation does not require the pursuit of a profit-making purpose, as DAOs may well be established and used for the performance of non-profit activities.

==== '''Notes''' ====
F. Sarzana di S. Ippolito e M. Nicotra, ''Diritto della blockchain, intelligenza artificiale e IoT'', Wolters Kluwer, Milano, 2018, p. 126 ss.;

B. Mienert, ''How can a decentralized autonomous organization (DAO) be legally structured'', in ''E-Zeitschrift für Wirtschaftrecht & Digitalisierung'', 2021, Rn. 336 ss.;

G. Weinstein, S. Lofchie, and J. Schwartz, ''A primer on DAOs'', in ''Harvard'' ''Law School Forum on Corporate Governance'', September 17, 2022, available at: <nowiki>https://corpgov.law.harvard.edu/2022/09/17/a-primer-on-daos/</nowiki>;

Tyros Consulting, ''Decentralized Autonomous Organization (Organizzazione Autonoma Decentralizzata) DAO – aspetti legali e societari'', March 24, 2022, available at: https://tayros.bg/index.php/2022/03/24/decentralized-autonomous-organization-organizzazione-autonoma-decentralizzata-dao-aspetti-legali-e-societari/.

==== '''Websites''' ====
Regulations are available at:

- Wyoming Decentralized Autonomous Organization Supplement, Wyoming: <nowiki>https://wyoleg.gov/NXT/gateway.dll?f=templates&fn=default.htm</nowiki>;

- Blockchain-based Limited Liability Company, Vermont: <nowiki>https://legislature.vermont.gov/statutes/section/11/025/04171</nowiki>; alternatively, available at the unofficial website: <nowiki>https://law.justia.com/codes/vermont/2018/title-11/chapter-25/</nowiki>;

- Legal DAO, Delaware: the Delaware statute governing limited liability companies (Chapter 18 of Title 6 of the Delaware Code) is available at: <nowiki>https://delcode.delaware.gov/title6/c018/index.html</nowiki>.

A Comparison between the different legal entity options available worldwide is provided here: https://www.midao.org/.