Entrepreneurs who want to start their own business without significant start-up capital often opt for a simple Ss company . Setting up an Ss, even as regards taxes, is relatively simple. However, as a member, you have a great responsibility in terms of risk , since by law it is established that each member is liable without limitation with his private assets. Precisely for this reason it is essential to evaluate all the eventualities that such a corporate form entails and to record in writing all the important internal agreements and regulations with a memorandum of association, also called a social contract, thus making them legally binding.
This document represents the heart of your simple society. With it, your partnership is ready to face the future, even in the event of a possible dissolution . We explain how to draw up a social contract for a simple company and what it should contain.
- What is the constitutive act of a simple society?
- Key points of your articles of association
What is the constitutive act of a simple society?
The articles of association enter into force when at least two members agree on the establishment of an SS and serve to regulate all the rights and obligations that you and your members have both mutually and towards the same company. The written contract is not subject to mandatory forms except those required by the nature of the goods conferred.
The law deduces the existence of a simple company even if only through the concluding behavior ( facta concludentia in Latin) of the parties, or from the tacit manifestation of a willingness to negotiate. In fact, you can also limit yourself to establishing an agreement of a verbal nature (in this case we are talking about Ss de facto), however if complications arise within the company, it will be much more complicated to be faithful to the agreements made, since they are formulated exclusively by voice.
Therefore, the drafting of a articles of association and of the statute in writing makes work in a simple society much easier. This is mainly due to the fact that the law does not give precise provisions, therefore the articles of association can help to fill those gaps left by the law thus helping to prevent ambiguities and conflicts .
The social contract of a simple written company is mandatory pursuant to article 1350 of the Civil Code only if movable property or other real estate rights are conferred. In principle, however, we recommend that each SS draft a deed of incorporation in writing, have it signed by each member and submit it to a lawyer for verification.
Members can benefit greatly from the establishment of a simple company with a written act, which includes both the articles of association and the statute. The first document defines first of all the economic activity that the shareholders intend to exercise together; furthermore, the contributions, the criteria for the distribution of profits and losses, the power of the directors and all other indications that they deem appropriate are determined.
The importance of the written agreement as a legal reference document is revealed in particular if one of the following situations arises:
- Disadvantageous economic situation : in times of crisis, the contract can serve to regulate the distribution of skills. At times like these you are faced with difficult decisions. The contract can determine whether important decisions are to be made by a particular member or whether they are to be discussed at the plenary assembly.
- Conflicts between members : conflicts of interest and personal differences can jeopardize the existence of the SS. Even in these cases, the written agreement constitutes an important reference for the resolution of conflict situations. This particularly applies to financial disputes.
- Profit distribution : a written agreement becomes practically indispensable in case of profit to be distributed among the members.
- Dissolution of the SS : if the shareholders agree that the SS must be dissolved, without a written agreement it is not clear the exact development of this process. If some partners want to maintain the company, while the other party wants to dissolve it, the parties will face a dilemma. In this case, the statute can help, which ideally regulates the conditions for the dissolution and its implementation.
Key points of your articles of association
As already mentioned, in practice the articles of association are associated with the statute in a written agreement. The first defines the will to create the company, while the second regulates its management. A written agreement must contain:
- Membership data
- The company name and the seat of the Ss
- The social object
- The nature and amount of the contributions
- Administrative organization
- The duration of the company
- The rules on the distribution of profits
“The shareholder is obliged to make the contributions that are subject to economic evaluation determined in the social contract.
If the contributions are not determined, the shareholders are presumed to be obliged to give, in equal parts, what is necessary for the achievement of the corporate purpose. ”
Article 2253 of the Civil Code
With this formulation art. 2253 of the Civil Code stresses the importance of the commitment made with the establishment of the simple company which you can further highlight with the drafting of the articles of association. But what exactly should this document contain? Below you will find all the important points that your social contract should cover.
On the web there are several examples of social contracts for companies that are simple to download for free. Make sure, however, that they address all the important aspects for the establishment of your SS
A simple society is defined by its purpose, the real reason why people come together to form an Ss. In the contract this point must be at the top and represent the binding creed of the company . To this end it is necessary to define it in the most common way possible, as it applies equally to all shareholders.
Use the clearest formulation possible: describe in the shortest and most precise way what your Ss wants to be and achieve, possibly using only one period. The company name can be associated or follow the company name and registered office in the first paragraph of the articles of association. Here are some examples:
- “The company has the cultivation and sale of tomatoes as its business name.”
- “The aim of the company is the correct management of an organic farm.”
- “Le Sigg. Greta Bartolomei and Marta Sandrolini constitute the simple company called ‘Biological Farm Pomi D’Oro’ with the aim of jointly providing for the cultivation of organic tomatoes, based in Bologna, via de Carolis n. 12. “
The company name of a simple company should be discussed, decided and formulated together with all the partners. It is not a matter of individual interests, but only of the purpose of simple society: make a clear distinction before setting up the Ss
Conferences of members
As contained in article 2253 cited above, each shareholder undertakes to contribute to the common purpose of the company with the contribution of goods and services. Specifically, reference is made to:
- movable or immovable property in kind
- working activity
Then indicate the share capital and how it is conferred.
Breakdown of profits and losses
After approving the report, each shareholder has the right to collect their share of profit, unless otherwise decided. In the articles of association you must therefore regulate the criteria for the distribution of profits . If you don’t, the law will take care of defining the breakdown as follows:
- each of the shareholders holds the right to receive part of the profits, in proportion to its contribution
- unless specified in the articles of association, the contributions are considered equal for all members
- if the contribution is represented by work or services, the profit to be distributed must be calculated by a judge according to an equity principle
The administration of the company must have the sole purpose of acting to carry out the economic activity (and to work to achieve the purpose of the company) through the so-called management deeds. You can choose between three different types of administration:
- disjunctive : each shareholder has an administrative role separately;
- conjunctiva : any management act must be carried out with the consent of all the shareholders;
- mixed : different categories of management acts can be established for which the administrative roles vary.
However, you can decide to elect even a single director ( sole director ).
You can decide to give a limited life to your simple society by defining the date of its dissolution in advance. Alternatively, you can establish that the SS exists until its corporate purpose is achieved.