This content is from: Local Insights


Italy's regions, provinces, municipalities and other local entities can now securitize proceeds derived from the divestment of real estate assets under Law No 289 (December 27 2002). These territorial entities have become equal, in this respect, to the central government, which can finalize this kind of transaction under Law Decree No 351 (September 25 2001) as converted with amendments into Law No 419 (November 23 2001). For more details see IFLR, International briefings, January 2002.

In particular, article 84 of the 2003 Budget Law states that the territorial entities are authorized to incorporate or to promote the incorporation of limited liability companies with an initial capital of €10,000 ($10,670) with the exclusive aim of securitizing proceeds from the divestment of assets. The above-mentioned provision extends to the territorial entities the applicability of the rules contained in Law Decree No 351 and especially in its article 2. As a result, securitization transactions can be structured either through the issue of securities or by the vehicle making loans. In respect of each transaction, the principle of the segregation of portfolios introduced by Law No 130 (April 30 1999) will apply. No action therefore will be allowed against each separate portfolio by any creditor different from the noteholders or lenders in relation to the relevant securitization transaction.

Furthermore, vehicles incorporated under article 2 are exempt from the registration requirements under article 107 of the Banking Law approved by Legislative Decree No 385 (September 1 1993), unlike vehicles incorporated under Law No 130. Hence, the vehicles will not be entered in the special register provided by article 107 and consequently will not be subject to the supervision of the Bank of Italy.

Because transactions to be finalized by the territorial entities undergo the same regime as is applicable to similar transactions when finalized by the central government, special rules also apply concerning the tax regime of article 2 transactions. The most relevant effect is the tax neutrality of the real estate transfer. Also, notes issued pursuant to article 2 by territorial authorities will benefit from the same tax regime applicable to public securities issued abroad, to the extent that such notes are admitted to listing on at least one regulated foreign market or the notes are placed on foreign markets.

Finally, article 84 of Law No 289 provides that the rules as described also apply to both public entities making the relevant request to their respective territorial entities of belonging, and local healthcare units and hospitals. In such cases, the relevant assets will be transferred for consideration to the relevant territorial entity, which will then complete the securitization transactions in compliance with the provisions of article 84 of Law No 289.

In each case, the entities willing to finalize an article 2 transaction must file a prior communication to the Ministry of the Economy and Finance. The proceeds from such securitization transactions will be used for the repayment of tax debts or, alternatively in ways specified by a decree of the Ministry of the Economy and Finance.

It is clear that the new regime provided in respect of securitization transactions to be finalized by territorial entities under article 2 represents a further step within the legislative framework aimed at granting wider financial autonomy to territorial entities, although such new provisions must be read also as an important complement to the existing legislation on securitization transactions.

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