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Publicly owned companies in Italy: directors, auditors and suppliers

Publicly controlled companies: pay caps and crisis duties for directors, oversight by statutory auditors, hiring, split payment and credit risk for suppliers.

A company in which a public body holds an interest remains an ordinary joint-stock company (spa) or limited liability company (srl) under general law, but the 2016 Consolidated Act adds its own rules. Where the public body controls the company, caps apply to the remuneration of directors, statutory auditors, executives and employees; the directors must detect a crisis in good time and the statutory auditors must ensure that they do so; staff are recruited through transparent, publicly advertised selection procedures. For suppliers, the split payment mechanism (scissione dei pagamenti) applies in many cases.

The framework

The rules are laid down in Legislative Decree no. 175/2016, the Consolidated Act on companies with public shareholdings (Testo unico in materia di società a partecipazione pubblica, TUSP). A public body may hold interests only in joint-stock and limited liability companies, including consortium companies and companies in cooperative form, and only for activities strictly necessary to pursue its institutional purposes (Articles 3 and 4). Many rules apply to companies “under public control”, namely those in which one or more public administrations exercise control within the meaning of Article 2359 of the Italian Civil Code (codice civile, c.c.), including joint control (Article 2, letters b and m).

• Corporate bodies: as a rule, a sole director; a board of three or five members only by a reasoned resolution of the shareholders’ meeting, sent to the Court of Auditors (Corte dei conti) and to the Ministry of Economy and Finance (MEF) (Article 11, paragraphs 2-3). In publicly controlled srls a supervisory body or an auditor is always mandatory; in publicly controlled spas the statutory audit may not be entrusted to the board of statutory auditors (collegio sindacale) (Article 3, paragraph 2).
• Remuneration: a cap of 240,000 euros gross per year on the remuneration of directors, supervisory bodies, executives and employees, including amounts received from other public administrations or publicly controlled companies (Article 11, paragraph 6); pending the MEF decree establishing remuneration bands, the limits of Article 4, paragraph 4, second sentence, Decree-Law no. 95/2012 and of Ministerial Decree no. 166/2013 continue to apply (paragraph 7). Members of corporate bodies may not receive attendance fees, performance bonuses resolved upon after the activity has been carried out or end-of-term payments (paragraph 9, letter c); for executives, end-of-term payments beyond those provided for by law and the collective agreement, and non-compete agreements, including those under Article 2125 c.c., are prohibited (paragraph 10).
• Crisis: a crisis risk assessment programme, described in the corporate governance report published together with the financial statements (Article 6, paragraphs 2 and 4). If crisis indicators emerge, a recovery plan must be adopted “without delay”; otherwise there is a serious irregularity within the meaning of Article 2409 c.c. (Article 14, paragraphs 2-3), which any public shareholder may report to the court, whatever the size of its stake, including in srls (Article 13).
• Staff: the employment relationship is governed by private law, but recruitment must follow criteria and procedures published on the website and consistent with the principles of transparency, publicity and impartiality and with Article 35, paragraph 3, Legislative Decree no. 165/2001; without those procedures the contract is null and void, save for the remuneration due for work already performed (Article 19, paragraphs 2-4; Article 2126 c.c.).
• In-house companies: more than 80% of turnover must derive from tasks entrusted by the shareholder bodies, with three months to remedy any shortfall (Article 16, paragraphs 3-5). A direct award requires a reasoned measure by the public body (Article 7, paragraph 2, Legislative Decree no. 36/2023), and the company procures goods and services under the Public Contracts Code (Article 16, paragraph 7, TUSP; Article 226, paragraph 5, Legislative Decree no. 36/2023).
• Rationalisation: by 31 December of each year the public body reviews its shareholdings and, in the cases listed in paragraph 2, adopts a restructuring plan; by 31 December of the following year it approves a report on its implementation (Article 20; paragraph 9-bis excludes shareholdings in listed companies and those held by them).

What changes in concrete terms

A limited liability company wholly owned by a municipality (Comune) has reported turnover of 1,150,000, 980,000 and 820,000 euros over the last three financial years: an average of 983,333 euros, below the one-million threshold of Article 20, paragraph 2, letter d). The municipality must include it in its December restructuring plan, specifying the measure and the timing. If the company has also recorded losses for three consecutive years, the municipality may not subscribe capital increases, extend credit to it or provide guarantees, save for the exceptions in Article 14, paragraph 5, or a business restructuring plan which, by way of derogation, makes it possible to cover the losses (paragraph 4); without such a plan, covering the losses is not an adequate remedy.

The company’s board of statutory auditors, or its sole statutory auditor, must therefore request the crisis risk assessment programme and check that it is consistent with the organisational arrangements required by Article 2086 c.c. and Article 3, Legislative Decree no. 14/2019. Before granting extended payment terms, a supplier should read the financial statements: a shareholder that cannot recapitalise is no guarantee.

For VAT purposes, for as long as the EU derogation permitting it remains in force, the split payment mechanism applies to companies controlled in law (Article 2359, paragraph 1, no. 1, c.c.), including indirectly, by public administrations, to companies controlled, including de facto, directly by the Presidency of the Council of Ministers or by the Ministries, and to companies in which public administrations or entities already subject to split payment hold at least 70%, as shown in the lists published by the Department of Finance (Dipartimento delle finanze) (Article 17-ter, paragraphs 1-bis and 1-ter, Presidential Decree no. 633/1972). A company controlled only jointly or de facto by several municipalities, with less than 70% public capital, falls within the Consolidated Act but may remain outside split payment. On a supply of 10,000 euros plus VAT, the supplier collects 10,000 euros; the 2,200 euros of tax are paid over by the company. Fees subject to withholding tax are excluded (paragraph 1-sexies): on a taxable professional fee of 5,000 euros, the professional receives 5,100 euros (5,000 plus 1,100 of VAT, less 1,000 of withholding at 20%) and pays over the VAT themselves. From 1 January 2027 the provision moves, with new numbering, into the consolidated VAT code (testo unico IVA, Legislative Decree no. 10/2026); until then Article 17-ter cited above applies.

In practice

• Directors, before accepting office: check the grounds of ineligibility and incompatibility under Legislative Decree no. 39/2013 and the accumulation of public remuneration; an employee of the controlling administration may not be appointed (Article 11, paragraphs 8 and 14).
• Board of directors, with each set of financial statements: corporate governance report including the crisis risk programme (Article 6, paragraph 4).
• Statutory auditors and external auditors, during the year: minute their review of the indicators and, where indicators emerge, their request for the plan; before capital increases or shareholder loans, verify the limits of Article 14, paragraph 5.
• Suppliers, when the contract is signed: request the certification under Article 17-ter, paragraph 1-quater; in public contracts, notify the dedicated bank account and state the tender identification code (CIG, codice identificativo gara) (Article 3, Law no. 136/2010).
• Human resources, before hiring: published regulations and a documented selection procedure (Article 19, paragraphs 2-3).
• Human resources, before setting pay and agreements: check the cap under Article 11, paragraph 6, adding any other public remuneration, and do not include in executives’ contracts non-compete agreements or end-of-term payments beyond those provided for by law and the collective agreement (paragraph 10).

Mistakes to avoid

• Hiring by direct appointment, without the required selection procedure: the contract is null and void.
• Assuming that the remuneration cap concerns directors only: it also applies to statutory auditors, executives and employees.
• Invoicing in the ordinary way a company subject to split payment, or applying split payment to a fee subject to withholding tax.
• Mistaking the public shareholder’s coverage of losses for a recovery plan.
• In in-house companies, accepting third-party orders without checking the 80% threshold.

References

Legislative Decree no. 175 of 19 August 2016, Articles 2, 3, 4, 6, 11, 12, 13, 14, 16, 19 and 20

Articles 2086, 2125, 2126, 2359, 2409, 2447 and 2482-ter c.c.

Legislative Decree no. 14 of 12 January 2019, Article 3

Legislative Decree no. 36 of 31 March 2023, Articles 7 and 226

Legislative Decree no. 39 of 8 April 2013

Legislative Decree no. 165 of 30 March 2001, Article 35

Decree-Law no. 95 of 6 July 2012, Article 4

Ministerial Decree no. 166 of 24 December 2013

Presidential Decree no. 633 of 26 October 1972, Article 17-ter

Legislative Decree no. 10 of 19 January 2026 (consolidated VAT code, from 1 January 2027)

Presidential Decree no. 600 of 29 September 1973, Article 25

Law no. 136 of 13 August 2010, Article 3