ITALY Law and Practice Contributed by: Silvia Bordi, Emanuele Bosia, Federico Dettori and Rodrigo Boccioletti, Gianni & Origoni
In Italy, while standard templates are frequently used, particularly in early-stage deals, the spe - cifics of each deal often lead to customised agreements. Major law firms often create their own templates based on their experience with VC transactions. 3.5 Investor Safeguards In Italy, VC investors typically negotiate strong downside protections to secure priority over founders, employees and junior stakeholders in adverse scenarios like liquidation or winding up. Liquidation preferences are standard, ensuring that investors recover their capital, sometimes with a multiple, before common sharehold - ers receive proceeds. Participating liquidation preferences, allowing investors to recover their investment plus share remaining proceeds, are becoming more common, especially in uncertain market conditions. Anti-dilution protections are a well-established market standard in Italy, particularly in early and growth-stage deals. They are typically structured as either full ratchet or weighted average provi - sions. Full ratchet clauses fully adjust the inves - tor’s price to the lowest subsequent round price, while weighted average provisions offer a more moderate adjustment based on the volume and price of the new issuance. These clauses are triggered by down rounds where new shares are issued at a lower valuation. Pre-emption or subscription rights over new shares are also common and contractually agreed in shareholder agreements, giving inves - tors the option to maintain their pro-rata owner - ship in future rounds. Such rights are critical in an ecosystem where exits are less frequent, and ownership dilution is a major concern.
Recent market volatility has led to tougher inves - tor terms, including more prevalent participating liquidation preferences, compounded preferred returns and stricter anti-dilution clauses. These reflect investors’ increased risk sensitivity and desire for better downside protections in Italy’s In Italy, VC investors typically secure meaning - ful influence over management and corporate governance through both formal board repre - sentation and contractual rights in sharehold - ers’ agreements. Investor-nominated board seats are common, particularly from Series A rounds onward, enabling direct involvement in strategic decisions and oversight of manage - ment. Investors often negotiate for veto rights over specific material actions, such as issuing new equity, altering the business plan, acquiring or selling significant assets, changing corporate governance structures, or hiring and firing key executives. still-maturing venture market. 3.6 Corporate Governance Shareholder agreements frequently define these governance rights, balancing investor protec - tions with operational flexibility. These rights may include consent requirements for extraordinary transactions, dividend distributions, changes to company by-laws or capital increases. For S.r.l. structures, particular attention is paid to drafting powers in the by-laws to ensure enforceability under Italian civil law, where quota transfers or special rights require explicit statutory regula - tion. Additionally, information rights allow investors to access regular financial reports, budgets and strategic updates. In some cases, inves - tors obtain observer rights on the board, ena - bling participation without formal voting power, especially when they do not hold a board seat.
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