The term “innovative startup” is sometimes abused. Not every new company with a new idea is recognised as an innovative startup under Italian law. The opposite is also true: not every startup that is “innovative” by law then proves innovative in practice. There are precise requirements to meet, which in turn give access to a set of benefits and make innovative startups different from any other new company.
To encourage the launch and development of companies with high innovative potential, Italian decree-law no. 179/2012 introduced a set of articles (arts. 25-32) establishing a specific, favourable regime for innovative startups. These provisions derogate from the civil code and other special laws, and their application is conditional on registration in a special section of the Business Register.
The requirements for an innovative startup
Incorporating a new company is not enough to obtain the qualification of innovative startup. Companies that want to be recognised as “innovative startups” must meet certain requirements:
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The company must be newly established. It must not have been incorporated more than five years ago, nor derive from demerger or merger operations, or from the transfer of a business or business unit.
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It must have its main registered office within Italian territory. If, instead, the company is established in another European Union country or in states party to the European Economic Area agreement, it must have a production site or a branch in Italy.
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The annual value of production must not exceed 5 million euros, and profits cannot be distributed.
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It must have “as its exclusive or prevalent corporate purpose, the development, production and commercialisation of innovative products or services with high technological value”.
In addition to these requirements, which are cumulative and must therefore coexist, the innovative startup is required to meet at least one of the following requirements:
a) research and development expenses equal to or greater than 15% of the higher of the innovative startup’s total cost and total value of production
b) an overall workforce made up for at least one third of PhD candidates or researchers, or for at least two thirds of collaborators holding a master’s degree
c) the company holds a registered patent or an original registered computer program, or is the depositary or licensee of the registered patent.
Innovative startup: the benefits
Opting for the innovative startup form proves advantageous already at incorporation. The company benefits from exemption from stamp duty and secretarial fees ordinarily due for filings with the Business Register. The exemption covers all acts carried out by innovative startups, including those subsequent to registration in the Business Register. In addition, the innovative startup is exempt from the annual payment due to the Chamber of Commerce.
The innovative startup enjoys further benefits after its incorporation too, concerning fundamental aspects of company life.
Hiring incentives are recognised. Innovative startups can enter fixed-term contracts with a duration between 6 and 36 months, with the option, at the end of the 36 months, to renew the contract for a further 12 months. They also have the possibility of remunerating their staff through the assignment of quotas, shares, participatory financial instruments or rights to acquire them, thereby derogating from the prohibition on transactions involving a company’s own holdings provided for Italian s.r.l. companies.
Tax incentives are provided for those who choose to invest in an innovative startup. Individuals are granted the possibility of deducting, for IRPEF purposes, 50% of the sum invested up to a maximum investment of 100,000 euros, beyond which a 30% deduction applies up to a maximum investment of 1,000,000 euros. Legal entities, meanwhile, are granted a deduction from the IRES taxable base equal to 30% of the sum invested up to a maximum investment of 1,800,000 euros.
The innovative startup can access the Central Guarantee Fund, which allows it to obtain from the Fund a guarantee covering up to 80% of the credit granted by the Bank, thereby easing the company’s path to obtaining the loan.
The innovative startup can raise the capital it needs through equity crowdfunding campaigns, to be launched on dedicated, authorised online portals.
The special regime reserved for innovative startups provides a set of favourable derogations from the ordinary company law applicable to Italian S.r.l. companies. They are, first of all, granted the possibility of using instruments typical of S.p.a. companies, such as the creation of quotas without voting rights or with voting rights not proportional to the holding, as well as the issuance of participatory financial instruments.
In case of losses, a 12-month extension for carrying losses forward is allowed. Where a loss exceeding one third of the share capital does not reduce the share capital below the legal minimum, the company may bring the loss back below the one-third threshold, without having to reduce the share capital, by the second financial year following the one in which the loss occurred, instead of by the first. Where, instead, losses reduce the capital below the legal minimum, the company may wait until the close of the following financial year to resolve on the reduction of the capital and its simultaneous increase to a figure not below the legal minimum, or to transform or liquidate the company.
Innovative startups, finally, are included among the entities not subject to bankruptcy. In case of failure, then, they can count on crisis-resolution procedures that are faster and less burdensome than those provided by ordinary company law. They are exempt from the insolvency procedures provided by bankruptcy law and remain subject exclusively to the over-indebtedness crisis-resolution procedure.
This is the general framework governing innovative startups in Italy. At Startup Bakery, we create B2B SaaS startups recognised as innovative startups, according to the requirements set by the Law, and which can therefore enjoy all the benefits listed in this article. The goal, of course, is for them to be innovative in form, but also and above all in substance!
Startup Bakery is the Italian startup studio specialised in creating B2B SaaS companies with Artificial Intelligence. We offer aspiring Co-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We help companies in their innovation process.