The family pact

With Law no. 55/2006 the institution of the family pact has been introduced in the Italian Civil Code (articles 768-bis to 768-octies).

This instrument allows entrepreneurs, with the express consent of all the legitimate subjects, to derogate from the prohibition of inheritance agreements and to implement a kind of “anticipated succession” in favour of only some of his descendants (beneficiaries).

As the family pact is not subject to an action for reduction and annulment, it allows the entrepreneur to guarantee the continuity of the management of the business, avoiding that its value and growth prospects could be jeopardise by inheritance issues.

From a formal point of view, the size of the family business is irrelevant. However, banking or insurance businesses are excluded from the family pact.

For the family pact to be valid, it must be drawn up by a notary, under penalty of nullity, and it must be signed by all the persons who, in addition to the settlor, would be entitled under the law of succession (pursuant to Article 768-quater of the Civil Code).

In addition, in the event of the death of the entrepreneur, the opening of his succession may also involve new subjects assuming the status of legitimates.

This is the case when there are surviving heirs, i.e. pre-existing heirs who were not party to the agreement at the time of its conclusion (for example an illegitimate child recognized by the entrepreneur without the knowledge of the other members of his family), or when the entrepreneur, whether unmarried or widowed, marries after the conclusion of the family pact, leaving behind an surviving spouse or children (including adopted children).

In this case, the new heirs can require the beneficiaries of the pact to pay a sum of money equal to the value of the legitimate inheritance share to which they are entitled by law (ex art. 768-quater, paragraph 2, Civil Code).

The family pact thus constitutes a plurilateral contract, inter vivos and with real effects, under which the beneficiaries are obliged to compensate the other participants of the agreement, to whom no shares of the business have been assigned, by paying a sum of money equal to the value of the shares of the business object of the family pact reserved to them, unless the latter waive their rights, partially or in full.