The network contract and its use as a form of business aggregation

by Vanessa Gagliano | Apr 22, 2021 | Blog

The network contract is a juridical-economic instrument of cooperation and aggregation among enterprises, involving a reduction of costs and a greater contractual flexibility. Companies have the possibility to reach development objectives higher than those they would pursue acting individually on the market.

 

What is its purpose?

Through the signing of a network contract, two or more companies engage each other in the implementation of a common program, to collaborate in order to achieve common goals and increase their innovative capacity and competitiveness on the market. The object of the contract is what the enterprises commit themselves to do in order to achieve the objectives, being able to exchange information or services of industrial, commercial, technical or technological nature or to carry out a common activity.

The network of companies is a “transversal” phenomenon compared to the other aggregative forms: it takes shape every time some companies – formally independent – implement, for example, relations of co-production or co-performance of services through agreements centred on communication and coordination mechanisms. Through the network contract, the participating companies can confer products, services and competences for the definition of an innovative process or for the production of a new good/service that the companies individually would not be able to do, placing themselves in a complementary relationship.

 

Mandatory elements of the network contract

The network contract must contain some mandatory elements, including:

  • the indication of the strategic objectives;
  • the definition of a network program, which must contain the rights and obligations assumed by each participating company and the modalities for the realization of the common purpose;
  • the agreed modalities to measure progress against goals;
  • the duration of the network contract, which must be appropriate to the time needed to achieve the goals set out in the network program.

 

Common fund and joint body

The network contract can provide for the possibility of setting up a common patrimonial fund and the appointment of a joint body in charge of managing, in the name and on behalf of the participants, the execution of the contract or of single parts or phases of it.

 

Types of network contract

There are two types of network of companies:

  • The Network-Contract, which does not have legal subjectivity and can have a common fund on a voluntary basis;
  • The Network-Subject, which has legal subjectivity and is obligatorily provided with a common fund and a VAT number.

 

Use as a business aggregation tool

The use of the network contract as an aggregation tool between companies is a suitable and strategically winning choice for the Italian market, composed of numerous fragmented realities of small and medium size, with excellent levels of quality, professionalism and experience. Companies belonging to sectors such as chemicals, manufacturing, renewable energies, education and fashion, just to mention a few, have wide margins of development in terms of aggregations in network contracts, which would allow them to consolidate and expand their presence on the market.

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