ITALY Law and Practice Contributed by: Silvia Bordi, Emanuele Bosia, Federico Dettori and Rodrigo Boccioletti, Gianni & Origoni
legal disputes exist. Unresolved legal issues, such as ongoing litigation or imbalanced gov - ernance structures, can be major red flags. Financial due diligence involves a deep dive into the company’s financial health, reviewing financial statements, tax filings and projections. Investors focus on identifying inconsistencies in financial reporting, excessive liabilities or unre - alistic revenue forecasts. Any lack of transpar - ency or accounting irregularities could raise sig - nificant concerns about the company’s financial integrity. The clarity and accuracy of financial data are crucial for building investor confidence. Lastly, technical due diligence is particularly important for start-ups in the technology and biotech sectors. Investors evaluate the compa - ny’s technology, product development progress and IP portfolio. Red flags include unproven or incomplete technology, reliance on immature products or an inadequate technical team. If the technology is easily replicable or lacks a com - petitive edge, it can undermine the start-up’s potential for long-term success. Together, these three areas of due diligence help investors evaluate whether a start-up is a sound investment or presents significant risks. 3.2 Process In Italy, the timeline for a new financing round involving new anchor investors in a growth com - pany typically spans three to six months, though complexity or negotiation intensity may extend it. The process unfolds through preliminary dis - cussions, term sheet negotiation, due diligence and the finalisation of binding agreements, often involving notarial execution for share or quota transfers, particularly in S.r.l. ( Società a Respon- sabilità Limitata ) structures. Regulatory filings
may add further time, especially if foreign inves - tors or cross-border elements are involved. The dynamics between existing and new inves - tors can be delicate. New anchor investors often demand priority rights, requiring adjustments to existing agreements, including anti-dilution pro - tections or exit rights. Existing investors may push back, particularly if the new terms risk diluting their position or influence. Aligning inter - ests often results in intense negotiations. Regarding legal representation, it is common for investors – especially new ones – to appoint separate counsel to avoid conflicts of interest, while companies may have independent advi - sors. However, smaller deals or well-aligned syndi - cates may share counsel for efficiency. Consent requirements are usually governed by shareholders’ agreements. Major corporate decisions, such as approving a new round, often require supermajority votes or unanimous con - sent for protective matters. Pre-emptive rights of existing investors, if not waived, may complicate new investments, requiring careful legal struc - turing to balance majority rule with individual investor protections. Overall, reaching alignment across investor classes is a key factor influenc - ing the timeline and success of a round in Italy. 3.3 Investment Structure In Italy, VC investments often involve instru - ments other than common stock equity. These include special quotas in S.r.l. structures, as well as quasi-equity instruments like SAFEs (Simple Agreements for Future Equity) and convertible loans.
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