Milleproroghe Decree: 2021 operating losses are frozen until 2026

By Carlo Locatelli

The maneuver to sterilize operating losses, already provided for in article 6 of Legislative Decree no. 23 of 2020, subsequently amended by article 1, paragraph 266, of law no. 178/2020 (i.e. the “2021 Budget Law”) has been extended again thanks to a new postponement of the deadlines included in the amendment of the D.L. n. 228 of 2021, also known as the Milleproroghe decree. The amendment directly concerns art 6 in paragraph 1, whose reference to the date of 12/31/2020 is replaced with 12/31/2021.

Through this regulation, all joint-stock companies (spa, sapa, srl and cooperatives) will be able to cover the losses recognized in the 2021 administrative period by the date of approval of the financial statements relating to the fifth subsequent financial year (therefore by the end of the 2026 administrative period).

Remaining the reference "to the financial year in progress as of 31 December 2021", it can be deduced that the facilitation maneuver can also be used by entities having as their financial year the currently open administrative period 1/07/2021-30/06/2022, rather than the canonical 1/01/2021-31/12/2021.

Furthermore, the five-year period envisaged for the coverage of losses arising in 2021 will be independent and autonomous from the time frame relating to the coverage of losses relating to the 2020 administrative period. The latter, therefore, must necessarily be covered by the date of approval of the financial statements relating to the fifth financial year following 2020, i.e. the date of approval of the financial statements for the 2025 financial year.

As for the maneuver envisaged for the losses of the year 2020, the sterilization of the losses detected during the 2021 financial year allows the suspension of capital reduction obligations in the event of losses exceeding one third or recapitalization (in derogation of the provisions of articles 2446 of the Civil Code and 2447 of the Civil Code for spas and 2482 e ter of the Civil Code for limited liability companies, while is regulated by article 2545 – duodecies of the civil code for cooperatives). 

For methodological purposes, it is therefore noted that:

• if the loss, given its extent, "erodes" the share capital, the company will not be able to distribute its dividends until the capital is duly replenished, or reduced by a corresponding amount (as provided for by art. 2433 of the Civil Code, paragraph 3);
• losses change the limits within which joint-stock companies can issue bond loans (indicated by art. 2412 of the Civil Code, or to the extent of double the share capital);
• The legal reserve must be replenished until it reaches a value equal to fifth of the share capital, as provided for by art. 2430 of the Civil Code, and the loss is relevant for the purposes of this necessity.

Finally, the real consistency of the capital, net of all losses previously ascertained, must emerge for the purposes of indication in the company's documents and correspondence (art. 2250 of the Civil Code, paragraph 2).

With regards to the treatment of losses that emerged in the period in question, it is worth mentioning that the losses must be appropriately indicated and specified in the explanatory notes, specifying their origin in adequate schemes and statements.

To find out more about the Milleproroghe decree, do not hesitate to contact one of our tax consultants.