Innovative startups: what are the requirements and advantages?

The term “innovative startup” is sometimes abused. Not all new companies with a new idea are recognized as innovative startups by law. It is also true the opposite: not all startups that are legally “innovative” are effective in practice. There are specific requirements that must be met, which then grant the right to a series of benefits and ensure that innovative startups are different from any other new company. 

In order to promote the establishment and development of companies characterized by a high innovative potential, in fact, articles (art. 25-32) have been included within decree-law no. 179/2012, which introduces specific and favorable regulations regarding innovative startups. They have derogatory characteristics compared to the civil code and other special laws, whose application is subject to enrollment in a special section of the Companies Register.

The requirements for an innovative startup

It is not enough to establish a new company to obtain the qualification of an innovative startup. Companies that wish to be recognized as “innovative startups” must meet certain requirements:

1.  The enterprise must be newly established. It must not be more than five years old or derived from splitting or merging operations or from the sale of a business or a business branch.

2.  It must necessarily have its main seat within Italian territory. If, instead, the company has established itself in another EU country or in states adhering to the agreement on the European Economic Area, it must have a production site or a branch in Italy.

3.  The annual production value must not exceed 5 million euros, and profits cannot be distributed.

4.  It must have “as its exclusive or predominant corporate purpose, the development, production, and marketing of innovative products or services of high technological value.”

In addition to these requirements, which are cumulative in nature and must therefore coexist, the innovative startup is required to meet at least one of the following requirements:

a) that research and development expenses are equal to or greater than 15% of the greater value between the cost and the total production value of the innovative startup

b) that the overall workforce is made up of at least 1/3 doctoral students or researchers or at least 2/3 by collaborators with a master's degree

c)  that the company holds a registered patent or a registered original computer program, or is either the holder or licensee of the registered patent.

Innovative startup: the advantages

Opting for the form of an innovative startup is beneficial already at the time of establishment. It is possible to benefit from’exemption, in fact, from the payment of the stamp duty and administrative fees, ordinarily due for obligations to be fulfilled at the Companies Register. The exemption applies to all acts carried out by innovative startups even if subsequent to enrollment in the Companies Register. Additionally, the innovative startup is exempt from the annual payment due to the Chamber of Commerce.

The innovative startup enjoys further advantages even after its establishment regarding fundamental aspects of corporate life.

• There are recognized incentives for hiring. Innovative startups can enter into fixed-term contracts lasting between 6 and 36 months, with the option to renew the contract for an additional 12 months at the end of the 36 months. They also have the possibility of compensating their personnel through the granting of shares, stock, financial instruments, or rights related to their acquisition, thus derogating from the prohibition of operations on their own shares set for limited liability companies.

• Tax benefits are provided for those who choose to invest in an innovative startup. In fact, individuals are recognized the possibility of deducting, for IRPEF purposes, 50% of the invested amount for a maximum investment value of 100,000 euros, beyond which a deduction of 30% is foreseen up to a maximum investment value of 1,000,000 euros. Meanwhile, legal entities are recognized a deduction from the taxable IRES equal to 30% of the invested amount up to a maximum investment value of 1,800,000 euros.

• The innovative startup can access the Central Guarantee Fund, which allows for a guarantee from the Fund for coverage of up to 80% of the credit provided by the Bank, thereby facilitating the company in obtaining the loan.

• The innovative startup can raise the necessary capital through equity crowdfunding campaigns, to be held on appropriate online portals specifically designated and authorized.

• The special regulations reserved for innovative startups provide for a series of favorable derogations with respect to the ordinary corporate discipline provided for limited liability companies. In fact, they are first granted the opportunity to use instruments typical of joint-stock companies, such as the creation of shares without voting rights or with voting rights not proportional to the shareholding, as well as the issuance of financial participatory instruments.

• In case of losses, an extension of 12 months for the “carry forward” of losses is allowed. In the case of a loss exceeding one third of the share capital that does not reduce the share capital below the legal minimum, the company may carry the loss below the one third limit, without having to reduce the share capital, within the second financial year following that in which the loss occurred, instead of within the first succeeding financial year. In the case of losses that reduce the capital below the legal minimum, the company may wait until the closure of the following financial year to decide on the reduction of capital and simultaneously increase it to an amount not less than the legal minimum, or transform or liquidate the company.

• Innovative startups, finally, are included among non-bankrupt subjects.  In case of failure, therefore, they can rely on faster and less burdensome crisis resolution procedures compared to those provided by ordinary corporate discipline. They are, in fact, exempt from the bankruptcy procedures provided by bankruptcy law and remain subject only to the crisis resolution procedure for over-indebtedness.

This is the general framework that regulates innovative startups. At Startup Bakery, we create B2B SaaS startups recognized as innovative startups, according to the requirements set by law, and for this reason, they can enjoy all the benefits we have outlined in this article. Of course, the goal is that they are innovative in form but also, and above all, in substance!

Startup Bakery is the Italian startup studio specialized in creating B2B SaaS companies with Artificial Intelligence. We offer aspiringCo-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We help companies in the innovation process.