Left behind comments on enterprise:

Cc 2082 very general definition of enterprise and entrepreneur:

 PROFESSIONAL BASIS
 Organized economic activity.
 Production or trade
 Goods or services
 Entrepreneur

You need to check if that person is carrying out if its activity is STEADLY, ECONOMIC RELATED, ON A
PROFESSIONAL BASIS, AN ACTIVITY THAT CARES NOT JUST ABOUT THE FINAL RESULT PROFIT, BUT
ALSO CARES ABOUT THE WAY YOU CARRY OUT THAT ACTIVITY, with economic method, with a view
of saving costs, getting profit, trying to balance what are the expenses and revenues of that activities,
in order to at least break even. An entrepreneur is someone who carries out the activity not just
looking at profits, deploying assets and so on, of course you may fail and probably need to liquidate.
Prospectively in a breakeven fashion. If you fulfil these requirements, you can define yourself as art.
2082 cc. No charity attitude, if you do it you normally have profit seeking purpose.

The entrepreneur loves to have somebody else to take the risks but loves to get the profits.
ARBITRAGE of the entrepreneur. Sometimes is not so easy to define who is the entrepreneur. Is he
carrying out the activity or is it just a label? C.E.M.s CONTROL ENHANCING MECHANISMS

These mechanisms enhance the controls on the business, we can do it in two ways (its one
compounded by two aspects).

The family controlling FCA wanted to use CG in order to have multiple votes per share.

“Chartes” or “articles of association” they mean the same thing. This is because of different
jurisdictions.

“Statute” according to EU meaning, something which is not general, but the foundation of a specific
company for example. “opportunism” in legal terms means something different.

Back two CEMS: the family of FCA, Netherlands law offered multiple voting shares. If you have more
votes and you count the votes in order to take a decision and you have for every piece of share, more
than one vote, well it changes.

Counting the votes per person sitting (“headvote”) if you’re one and you bought 70%  you have 70
votes.

CEMS want to secure the votes without really standing behind them. We always have, when we
enter into the company world, a problem with identifying people who are really responsible for the
decisions taken. CEMS like for example pyramids of control, are typical example.

Multiple voting shares since 2014 are legal in Italy, are another way to enable cheaper votes.

Shares that bear 1 vote, that bears 2 votes, 3 votes and so on and so forth.

CEMS are bundles of mechanisms which are usually legal, in order to enhance the control on rights.

1- Legal personality
 2- Centralized/ delegated management
3- Investor’s ownership:
4- Free transferability of the shares
5- Limited liability of the company’s shareholders

INVESTOR’S EQUITY:

The more you invest, the more voting right you get. equity investment in business usually in a
company is subject to a higher risk of loss. I risk losing the $$$ I invested on the company. In order to
have someone investing in equity I should give something in exchange. I need to understand terms
and condition before choosing between debt and equity. In exchange I may get voice right, some
power, to address, to try to induce those in charge to do something about the business.

The more you invest in equity the more you will be able to influence those who are delegated to
control the business. So, you want, you aim, to influence, you should go with equity.

CEMS gives you the best of both worlds. Investing the least but getting the most. I may consider ROI.

From the perspective of the investor, I have the legal right to take back what I gave + interests, but
that is set at the beginning.

Investing in equity, you cannot just say goodbye, there are harder conditions. What you can get in
exchange should be really inviting. We are not investing, but to seek for profit.

THE OTHER PILLAR: I get potentially higher return that the one I could get on debt. KEY WORD is RISK.

I am participating at the risk more intensively than just what I would do by investing on debt.

Voice rights vs economic rights (you as a holder, are entitled to the proportional share of the net
profit made by the business, therefore you are risking to lose the entire amount of your investment
because there is no protection, if the company becomes insolvent, you may lose everything, the
equity is the first thing to be whipped off) If the business goes into crisis, the equity holders get
whipped off before the claim holders  the creditors may receive the payback before investors.

Some banks are strong creditors, they may have leverage/influence on company, they can have
collateral guarantees on the debt. Mandatory rules – hierarchy – privilege of creditors. If the
company is totally empty, well, there is nothing to split. This rule can be skipped by privilege
creditors, some other credits cannot be downgraded because of mandatory rules.

If you are a manager you need to have personal insurance in case you are challenged for negligence,
that money the “curatore” will try to take from you, It is almost inevitable, that bankruptcy receiver,
the coordinator of proceedings will try to challenge the director of the business because allegedly,
mismanaged the business and brought the company to insolvency status.

4. FREE TRANSFERABILITY OF THE SHARES

Companies are voluntary action, as well as financing companies. It is not mandatory of course. You might
get money, you might lose money.

Trading of million of transactions occur every second.

Free transferability is KEY in companies. Every time the partner comes out or comes in they need to ask for
permission. It is like having a VETO power in a partnership.

Freedom of contract, freedom to insert clauses in article can also limit the transfer of shares, both among
the shareholders but also with third parties. In theory I can limit the transfer of shares, by for example
dropping single articles.

In general, there is free transferability. Why is it so common to find people limiting the shares? Those
shares are needed, and nowadays do not necessarily mean more voting powers to others.

Many companies started as a closely held corporation, meaning that they start with few shareholders,
maybe friend or family members, and then after the startup phase, they go public. Now one of the things to
do is to get rid to any clauses inserted at the beginning limiting the free transferability of the shares. Why?
Because that one is one of the default rules – most commonly used worldwide -.

Limited liability companies which are normally small business companies, might have as a default rule a
limitation of free transferability, and in any event its easier to limit the transferability. Why? Because the
LLC is the prototype of small company with few members, therefore the purpose of the business is
compatible among close friends or relatives.

You can take a LLC public, by changing this rule for example, its not that rare anymore, you can trade the
equity and that security BUT GENERALLY SPEAKING might be missing number 2 and number 4. What about
number 5?

5. LIMITED LIABILITY OF THE COMPANY’S SHAREHOLDERS

Very dangerous tool to invite investors. It is not the business liability to be limited. The business person is
unlimitedly responsible for its actions. If Amazon does not deliver, Amazon assets can be used to pay my
claim.

It works for the shareholders of Amazon, because you as equity interest holder, even if you very small, you
still are bound by equity interest rule. EQUITY INTEREST RULE: if company looses everything and become
insolvent, my claim is zero. It means I lost my investments, this is the higher risk I have vis a vis in the form a
credit/debt.

My investment gets down to zero, but if the company goes insolvent, insolvency being the inability to pay
its debts as they become due, will I as shareholder will I be liable more that what I invested in the
company? Implicitly I can because my wallet is not the same of me as investor, however, this logic does not
apply, we have examples under Italian law, of legal persons companies, that notwithstanding the fact that
they were legal person, they were considering the shareholders responsibility. They – the investors - had to
make up for the insolvency of the business.

Legal personality and limited liability ARE NOT THE SAME, EVEN IF OFTEN ARE BRO AND SIS.

Limited liability is kind of the default of the rule, which is a good news for investors, you may have
proportional voice right, as a general default rule, the more you invest usually the more profit you get out
of this. One of the things we will be hearing from whoever will assist us in the investments, will tell us,
please diversify your investments, you buy then some bonds, some equity, some debts. You find a
compromise between risking too much and not risk at all.