The so called “Network Agreement”, a useful agreement that is not commonly used
The network agreement has been introduced by the Italian legislator with art. 3, par. 4-ter, D.L. 5/09, subsequently converted in Law 33/09. This kind of agreement has to be mandatory stipulated by public deed, by authenticated private deed or by a digitally signed deed. This contract has not been particularly used in practice despite its positive and innovative aspects. The low utilization of such agreement is probably due the several times of legislative reformulation of its rules (probably connected to the innovativeness that lies behind such agreement).
The network agreement allows companies to achieve in a straight way all those aims that in practice are usually reached with contractual or equity joint ventures or through the incorporation of new legal entities or assets in order to carry out a dedicated business.
Indeed, within the respect of the core business of the involved companies and their legal autonomy, it allows the identification of a common purpose which will be achieved by dedicating a governance structure. The scope of the network agreement is therefore a “parallel scope” for the parties that has to be common to all the involved parties.
From a brief description of the main aspects of the agreement it is clear that it potentially works especially within the Italian economic system, because it makes the small and medium Italian enterprises, which share capital is historically owned by families, competitive on the international market.
The aim of the legislator is therefore to allow small and medium-sized enterprises to enter in new and larger markets: “increase, individually and collectively, their innovative capacity and their competitiveness on the market” (art. 3, par. 4).
From the above it is clear that the parties of the network agreement have to be mandatory qualified as entrepreneur in accordance to art. 2082 of the Italian civil code.
Once the common aim has been defined, which can be either the performance of commercial or industrial activities or the exchange of know-how, one of the great advantages connected to the network agreement is the possibility to limit the risk of such particular activity or project only to the common fund that the parties have agreed to make available to the network. So, such common fund is the only guarantees for the obligations entered by the parties of the network.
This creates a limitation of liability similar to the one which would be created if the parties would incorporate a new company.
In the presence of a common fund, the network becomes a legal person and needs: i) a name; ii) a registered office; iii) to file the registration with the company register; iv) to prepare an annual financial statement.
Differently, if the network has not a common fund, all parties are jointly and severally liable for the debts arising from network.
It is also doubtful whether in case of non-registration with the company register the agreement is invalid, or if it is still valid between the parties without the benefits of the asset segregation mentioned above.
With reference to the common found and its ownership the parties have a great discretion in order to determine “the measure and the criteria of evaluation of the initial contributions and of the possible further contributions that each party is obliged to pay as well as the rules of management of the fund” (Article 17, c).
As mentioned above, the achievement of the aim of the network is carried out by a corporate structure that can be organized in any way deemed appropriate by the parties (legal person, individual or collective body, several persons with separate powers).
Although nowadays the tax benefits connected to the network agreement that made such kind of agreements an attractive instruments of internationalization are no more in force (tax suspension for all those profits deriving from the common aim and not distributed to the parties), the benefit of segregation of the assets are still such to impose to the professionals to not overlook such kind of agreement.
Last but not least, unlike other sectors, the network agreement is commonly used in the agricultural sector. Indeed, a survey carried out by Confagricoltura has shown that nowadays in Italy there are more than 6 thousand agricultural companies participating in network agreements.
The particular success in the agricultural field is mainly due to the fact that – together with the mentioned above advantages – the network on the one hand allows to share all the assets – thus reducing fixed costs – on the other hand is supported by benefits that affect positively the employers and the tax regime of goods produced by the network.