Introduction
The extraordinary crisis created by COVID-19 emergency will have extremely serious economic consequences on Italian companies, especially for small and medium-sized companies (SMEs), which largely depend on funding from the banking system.
The important measures adopted by the Italian Government and the European Union in order to support companies' businesses is extremely important, but there are also further instruments that can provide additional liquidity to Italian companies and, thereby, can help assure the resilience of Italy's economic and social system.
Therefore, the use of alternative financing instruments by Italian enterprises, normally referred to as the FinTech sector (e.g. investment-based crowdfunding platforms, applications of the blockchain technology to financial markets, etc.) should be encouraged; also considering their advantages in terms, for example, of the timing for receiving the funds, which - due to the digitisation of the whole processes - is much quicker than the timing of traditional financing.
In light of the important role that alternative financing instruments can play for providing the necessary liquidity for the survival of Italian companies, the Italian Regulator should simplify and promote their use, also through some simple "maintenance" interventions on the current legislation.
1. Extension of equity crowdfunding to all companies
Currently, the possibility to make use of the crowdfunding portals authorised by Consob (the Italian correspondent of the FCA) in order to receive equity investments or issue bonds is reserved to SMEs (i.e. companies which meet at least two of the following three requirements: (i) less than 250 as average number of employees during the financial year, (ii) total amount of the balance sheet not exceeding EUR 43 million, (iii) annual net turnover not exceeding EUR 50 million).
Such limitation should be overcome, in order to allow also larger companies (which are also heavily affected by the current economic crisis caused by COVID-19) to raise investments through public offers of equity or debt financial instruments through online portals.
As a matter of fact, while on the one hand larger companies need to use new alternative channels to obtain liquidity, on the other hand, no particular issues in relation to the protection of retail investors are envisaged in the proposed solutions, since generally, larger companies do not involve a greater investment risk than start-up or SMEs. This position seems to be confirmed also by the fact that the EU Regulation regarding the "European Crowdfunding Service Providers" – which is currently under discussion among the EU institutions - and which, in the near future, will harmonise the investment crowdfunding regulations of the single Member States – does not provide any limitation in relation to the size of the issuing companies, nor such limitation is provided in the relevant regulations of the other European countries.
2. Extension to all retail investors of the possibility to subscribe bonds through online portals
Still referring to investments through crowdfunding portals authorised by Consob, it is deemed necessary to extend to all retail investors the possibility to subscribe debt financial instruments (bonds) through such portals, currently reserved to professional investors and (with sole reference to bonds issued by joint-stock companies) to other particular categories of investors having specific requirements.
Such extension would lead to a substantial increase in the number of the subjects who can contribute to bring liquidity to the Italian businesses by means of bonds subscriptions, without bearing more risks for the retail investors, as the investments in bonds are normally less risky than the investments in equity.
3. Simplified access to FinTech "sandbox" and attraction of foreign FinTech operators
The implementation of the Italian FinTech Regulatory Sandbox is currently in a fine-tuning phase, after the conclusion in March of the public consultation opened by the Italian Ministry of Economy and Finance. Such regulation shall provide the conditions and procedures of the testing period (the sandbox, of a maximum of 18 months), to which companies operating in the FinTech sector will have access.
In this respect, we hope that the Sandbox will be implemented soon in Italy and that it will provide simplified selection mechanisms for the applicants, encouraging (or at least not obstructing) the possibility to make use of the Sandbox by foreign FinTech operators, which will surely contribute to the digitisation and innovation of the Italian financial services market.
4. Introduction of rules regulating the issuance and exchange of crypto-assets
At the beginning of 2020 Consob published its final report on a possible regulation in Italy of the crypto-assets issued and exchanged (usually by means of payments in crypto-currencies, but also in FIAT money) through blockchain or other distributed ledger technologies ("DLTs") and therefore, by means of a disintermediated method with respect to subjects typically operating on capital markets. Such report followed a public consultation held between March and June 2019 and a public hearing held at Bocconi University in Milan on May 21st, 2019.
Consob's initiative is aimed at offering the Italian Government a proposal of regulation regarding, among others: (i) a possible definition of crypto-assets (generally called also "tokens"), (ii) their issuing (through the so-called initial coin offerings "ICOs", or initial exchange offerings (IEOs"), as well as (iii) the following phase of their negotiation and exchange by means of the so-called "exchanges", and (iv) the services related to their safekeeping and transfer provided by the so-called "wallet providers".
The approval of such proposal (that could take into due account the initiatives that have been recently implemented by the European Union and other EU- and non-EU countries, such as Germany or the Republic of Albania) would allow Italy to provide Italian investors a clear and effective regulation of this phenomenon through the right balance of regulatory derogations and the protection of retail investors, offering at the same time to Italian companies a further innovative financing instrument.
5. Tax incentives
With the aim of increasing investments to support the real economy by means of the above-mentioned alternative financing instruments, it would be advisable to introduce significant tax benefits such as, for example:
- the extension to all SMEs of the tax benefits currently provided for investments in the equity of innovative start-ups and innovative SMEs;
- the increase of up to (at least) 50% of the aforementioned tax benefit;
- the reduction of the tax rates currently applicable in relation to incomes resulting from any kind of investment carried out through alternative financing instruments; and
- the implementation of a favourable tax regime for FinTech companies.
If you require guidance on any of the above, please reach out to Giovanni Cucchiarato.