Significant Amendments to the Regulation of Third Sector Entities (ETS)

With Law 104/2024 (published in the Official Gazette No. 168 on July 19, 2024, and effective from August 3, 2024), significant changes have been made to both Legislative Decree 117/2017 (Third Sector Code) and Legislative Decree 112/2017, which regulates the social enterprise, a commercial Third Sector entity by definition.

The measure, titled "Provisions on Social Policies and Third Sector Entities," consists of eight articles and introduces changes to other regulatory provisions, including the Civil Code, but always concerning social issues.
Summary of Key Changes.
 

Different Activities and Sponsorships (Amendment to Article 6, Paragraph 1 of the CTS)
A new paragraph has been added at the end of Article 6 of the CTS, focusing on amateur sports associations and clubs, setting conditions under which Third Sector Entities (ETS) may conduct activities beyond those of general interest. Specifically, for entities registered in the National Register of Amateur Sports Activities that are also Third Sector Entities, revenues from sponsorships, advertising, sale of rights, and athlete training-related compensation, as well as management of sports facilities, must still be allocated to activities of general interest related to amateur sports activities.

Social Enterprises: Acquisition of Legal Personality (Amendment to Article 11, Paragraph 3 of the CTS)
For social enterprises established as associations or foundations, registration in the special section of the business register will be effective for acquiring legal personality under Article 22 of the CTS.
The control and powers provided in Articles 25, 26, and 28 of the Civil Code will be exercised by the business register offices for foundations.

Simplification of Financial Statements for Small ETS (Amendment to Article 13 of the CTS)
The threshold for ETS to prepare financial statements in the form of cash accounting, instead of accrual accounting, is raised from €220,000 to €300,000.
ETS with revenues not exceeding €60,000 may prepare cash-based financial statements, indicating aggregated income and expenses.
It is foreseen for commercial ETS, other than social enterprises, the possibility of preparing the financial statements according to the mandatory formats provided for ETS, instead of those required by the Civil Code.

Online Meetings (Amendment to Article 24, Paragraph 4 of the CTS)
ETS associations may hold ordinary online meetings unless expressly prohibited by their constitutive act or statute. Electronic voting is allowed, provided the identity of participants can be verified, in compliance with principles of good faith and equal treatment.

Increased Thresholds for the Appointment of the Supervisory Body (Amendment to Article 30, Paragraph 2)
The thresholds triggering the obligation to appoint a supervisory body have been increased:

Two of these limits must be exceeded for two consecutive financial years.

Increased Thresholds for Statutory Audit Requirements (Amendment to Article 31, Paragraph 1)
The thresholds for statutory audit obligations have been increased:

Two of these limits must be exceeded for two consecutive financial years.

Labor Relations in Social Promotion Associations (Amendment to Article 36 of the CTS)
For social promotion associations (APS), the percentage of employees or self-employed workers that an APS can hire has been increased from 5% to 20% of the number of members. However, the predominance of voluntary activity must still be maintained, as provided by Article 35, Paragraph 1.

Associative Networks (Amendment to Article 41 of the CTS)
If, after registration in the National Register of the Third Sector (RUNTS), the number of members of associative networks falls below the legal requirement (100), the shortfall must be rectified within one year, after which the network will be removed from the Register.

RUNTS Registration Application by a Delegate (Amendment to Article 47, Paragraph 1 of the CTS)
The application for registration in the RUNTS may be submitted by a delegate of the legal representative of the entity or the network to which the entity belongs.

RUNTS Registration Deadlines for Financial Statements (Amendment to Article 48, Paragraphs 3 and 4 of the CTS)
The June 30 deadline for the filing of financial statements with the RUNTS has been replaced with a 180-day deadline, with a 60-day deadline from the approval of financial statements for ETS with commercial status.

RUNTS Registration for Retired Military and Pensioner Associations (Amendment to Article 89 of the CTS)
Retired military and pensioner associations, registered in the relevant register under Presidential Decree 90/2010, may now register in the RUNTS.

Transitional Rules for ONLUS (Amendment to Article 101 of the CTS)
Further cases have been added for ONLUS where registration in the RUNTS does not trigger dissolution. Specifically, ONLUS trusts and ONLUS entities subject to public entity direction are exempt from dissolution.

Amendments to Social Enterprise Regulation (Legislative Decree 112/2017)
 

Allocation of Profits in Social Enterprises (Amendment to Article 16 of Legislative Decree 112/2017)
Article 16, Paragraph 1 of Legislative Decree 112/2017 has been amended, setting a fixed 3% allocation of net annual profits to funds specifically and exclusively designated for the promotion and development of social enterprises.

Amendments to the Unified Law on Inheritance and Donations Tax (Legislative Decree 346/1990)
 

Exemption from joint liability in matters of inheritance and donations (amendment to Article 36 of Legislative Decree 346/1990)
ETS beneficiaries of inheritance transfers are excluded from joint liability where they are exempt from the application of inheritance and donation taxes, as well as mortgage and cadastral taxes, pursuant to Article 3 of Legislative Decree 346/1990 and Article 82, Paragraph 2 of the Third Sector Code (CTS).
 

Exemption from succession duties (Article 705 of the Civil Code)
Article 705 of the Civil Code is amended regarding the exemption from the sealing and inventorying of estate assets when Third Sector entities are called to inherit. The possibility of derogation applies, in particular, when only non-profit private legal entities and ETS are called to inherit, and is always subject to the provision of suitable guarantees for the estate’s debts. The criteria and methods for providing these guarantees will be established by a ministerial decree.