Business networks and business groups: the use of consolidated financial statements

Abstract

Business networks are a network of companies, working together to achieve certain objectives. These objectives can be both strategical and operational and are used by business networks based on their role in the market. These form of business helps small and medium-sized enterprises (SME) to become more competitive and innovative. In Italy, due to the financial crisis, many business networks were formed to help small and medium-sized firms to be able to compete in the European and, more broadly, in the International market. In Italy, the business network contract is the instrument with which companies regulate forms of collaboration and cooperation. The legislator, with the Law n. 134/2012 introduced the possibility that, with the business network contract, the contracting parties could create an autonomous legal entity, endowed with legal subjectivity, envisaging that if the establishment of the common fund is intended, the network may register in the ordinary section of the Register of Companies in whose district its headquarters is established; with this registration, the network acquires legal subjectivity. Therefore, the network contract can give life, based on the will of the contracting parties, to a new legal entity, the so-called “subject network”. The subject network has the obligation to have a common asset fund and a common body that carries out activities with third parties. As it is, it must, within two months of the end of the year, draw up a balance sheet, observing the rules relating to the financial statements of a joint-stock company and deposit them at the office of the Register of Companies of the place where the business network is located. The work presented here has the goal to contextualize the scope of the rules related to the presentation of the financial statement in business networks and to propose their substitution with a consolidated financial statement, as it applies to groups of businesses. A consolidated financial statement would allow to know the network’s financial structure, the degree of financial independence and the level of debt, the governance and ownership of the group, the overall cost of the that, the composition of network costs, especially those that are the most significant items. The consolidated information provides the opportunity, also, to have the knowledge about the different composition of income as well as the analysis of a possible forecast of the business networks’ components as well as to formulate programs for a better future optimization.