Cash Pooling in Business Groups: Opportunities, Regulations, and Critical Issues

Cash pooling, also known as a ” centralized treasury contract ,” is a centralized liquidity management tool that is increasingly widespread among medium- to large-sized corporate groups.

Through cash pooling, individual group companies transfer their liquid assets (or their needs) to a centralized account managed by the parent company or a designated treasury company (the so-called “pool leader”), thus optimizing the use of financial resources and minimizing the need for external financing sources.

The instrument, which is not organically regulated in the Civil Code, is part of the management and coordination activity (pursuant to Articles 2497 et seq. of the Civil Code) and requires careful evaluation from a civil, fiscal, accounting, and, last but not least, criminal perspective.

This circular, in light of the Research Document of the National Foundation of Accountants published on February 25, 2026, illustrates the main aspects of the instrument, with the aim of providing an updated operational framework that allows for the evaluation of the adoption or revision of a cash pooling agreement within the group.

Types of Cash Pooling

Cash pooling is divided into two main configurations, which differ in the way the funds are moved:

1. Physical Cash Pooling

Participants’ bank account balances are physically transferred to (or from) the master account held by the pool leader. The main options are:

• Zero Balance Cash Pooling (ZBCP): This is the most common form among European groups. At the end of the business day, all peripheral accounts are zeroed and the balances are transferred to the centralized account. It requires a high degree of automation and ensures maximum efficiency in the use of liquidity, but requires complex contracts and a careful assessment of the accounting and tax impacts.
• Target Balance Account: accounts are not zeroed but maintained at a predetermined balance. More flexible, but less efficient for minimizing interest expenses.
• Fork Balance: A hybrid model in which part of the liquidity is centralized and part remains under local management. Typical of complex groups or multinationals with diversified needs.

1. Notional Cash Pooling

The funds are not physically transferred but remain in the individual company accounts. The bank calculates interest as if all the accounts were a single virtual balance, with no actual movement of funds. It has less impact on accounting and legal matters, but requires cross-guarantees between participants and is not permitted in the US. The Italian Revenue Agency (Circular No. 11/E/2005) has clarified that notional pooling is a form of indirect financing.

There is also a third configuration, Nordic Cash Pooling , which represents a hybrid system: actual transfers are recorded to the master account, but the participating company retains ownership of the transferred funds. This reduces the risk of asset confusion between entities.

The advantages of Cash Pooling for the Group’s companies

The FNC document identifies the following main benefits:

• Optimization of internal liquidity

Centralization allows the excess liquidity of companies with surpluses to be used to cover the needs of those with deficits, avoiding the need for external bank credit. In practice, the liquidity that one company within the group would have deposited at low interest rates is instead made available to another subsidiary that would otherwise have had to borrow at higher rates.

• Reduction of financial costs

The savings estimated by the National Foundation of Accountants are between 20 and 60 basis points (bps) on the volume managed.[1]

• Improvement of the group’s credit rating

The “parental support” approach valued by rating agencies tends to favor the presence of centralized treasury structures, which signal coordination and financial solidity of the group as a whole.

• Greater efficiency in financial forecasting (cash forecasting)

Centralized visibility into the cash flows of all group entities enables more accurate financial planning and improved liquidity risk management, even in volatile market environments.

• Economies of scale in banking management

Centralized management allows you to negotiate better conditions (spreads, commissions, credit limits) with banks thanks to the aggregation of volumes.

• Reducing exposure to liquidity risk

Cash pooling functions as an internal buffer: companies in temporary difficulty can draw on the group’s resources without having to resort to the external market, reducing their vulnerability to credit cycles.

The Civil and Contractual Framework

Cash pooling is classified by legal theory and case law as an atypical contract that combines causal elements of the mandate, the current account, and the financing agreement. Its civil legitimacy is conditional upon compliance with the rules on management and coordination activities (Articles 2497 et seq. of the Italian Civil Code) as well as the principles of proper corporate and business management.

Civil legitimacy requirements

The FNC identifies the following requirements for the correct implementation of the tool:

• adequate contractual formalization of the relationships between the parties (so-called “treasury agreement”);
• traceability of flows and correct regulation of intra-group interests;
• mutual solvency guarantees between the participating companies;
• Transparency in governance: participation in cash pooling must be indicated in company financial statements and in the Company Register.

Liability of the parent company (Article 2497 of the Civil Code)

Article 2497 of the Italian Civil Code establishes the direct liability of the parent company towards the shareholders and creditors of its externally controlled subsidiaries when management and coordination activities occur “in violation of the principles of sound corporate and entrepreneurial management.” In relation to cash pooling, this means that:

• the pool leader cannot systematically drain the liquidity of a subsidiary without providing it with adequate compensation;
• the cash flows towards the parent company must find an economic justification in the overall interest of the group (so-called “compensatory advantages”);
• the absence of documented compensatory benefits may expose the parent company and its directors to civil liability pursuant to art. 2497 of the Civil Code.

More specifically, the theory of compensatory advantages developed by jurisprudence in application of art. 2497 of the civil code provides that the damage caused to a single subsidiary must be compensated by the benefits it derives from belonging to the group .

To document these benefits it is necessary:

• that they are concretely identifiable and not merely hypothetical;
• that they are reasonably proportionate to the sacrifice suffered;
• that are documented in written documents (resolutions, reports from corporate bodies, bank statements).

Issues and the risk of bankruptcy

The most sensitive aspect of cash pooling occurs when one of the participating companies experiences financial difficulty or insolvency. In such situations, the companies involved are exposed to the following risks:

• Risk of bankruptcy revocation

In the event of bankruptcy (or judicial liquidation) of a participating company, transfers made under the cash pooling may be subject to:

• ordinary revocation (art. 2901 of the civil code) if carried out in fraud of creditors;
• bankruptcy revocation (art. 166 CCII), if carried out during the suspect period and classified as gratuitous acts or payments of unexpired debts.

• Fraudulent bankruptcy due to distraction

The most serious risk is that of being charged with the crime of fraudulent bankruptcy due to distraction (art. 322 CCII, formerly art. 216 LF) against directors who have transferred liquidity to the parent company when the company is in a state of insolvency or crisis.

The Criminal Cassation Court (ruling no. 37062/2022, in accordance with numerous subsequent rulings) has clarified that:

• payments to the parent company under cash pooling do not necessarily constitute diversion, provided that the overall management and coordination activity of the group has produced compensatory benefits for the externally controlled company;
• the verification of compensatory benefits must be conducted ex ante (at the time of the transfer) and not ex post (when the crisis is already established);
• The presence of a formally valid cash pooling contract is not in itself sufficient: the flows must have been settled under market conditions and the participating company must have actually benefited from the advantages of the instrument.

Tax Aspects and Transfer Pricing

Cash pooling generates financial flows between group companies that require careful tax assessment, structured on multiple levels:

• Deductibility of passive interests (art. 96 TUIR)

Interest expense accrued by participating companies is deductible according to the accrual principle, pursuant to Article 89, paragraph 7, of the TUIR. However, Article 96 of the TUIR limits the deductibility of interest expense to 30% of the company’s gross operating profit (GOP), with the possibility of carrying forward the excess to subsequent financial years.

With regard to interest expense arising from cash pooling, the classification of the mechanism adopted is particularly important. Specifically, it is important to determine whether cash pooling can be classified as an ordinary intragroup loan (with the consequent application of the limits of Article 96) or as a treasury optimization tool (excluding this classification).

In the case of zero-balance cash pooling, the Revenue Agency’s practice [2]has clarified that this system, if properly structured, represents a centralized treasury management tool and not a true intragroup financing. In such cases, the account balances of individual companies are zeroed daily through transfers to the centralizing company, without establishing independent credit and debit relationships between the parties.

Conversely, in “notional” cash pooling systems, based on a purely accounting offsetting of balances, actual intra-group financial relationships may emerge, with the consequent tax relevance of interest and the application of the limits on its deductibility set forth in Article 96 of the TUIR.

• Transfer Pricing (Article 110, paragraph 7, TUIR and OECD Guidelines)

All intragroup transactions, including cash flows under cash pooling, must comply with the arm’s length principle , as established by Article 110, paragraph 7, of the TUIR and the OECD Transfer Pricing Guidelines.

This requires that:

• the interest rates applied to cash pooling flows must be consistent with market rates for comparable transactions;
• interest rates are determined on the basis of specific methods identified by the OECD Guidelines, and preferably using the Comparison Price method (CUP) with reference to interbank rates;
• Transfer pricing documentation (Master File and Country File) must include a specific analysis of the cash pooling agreement and the rates applied.

Operational considerations and conclusions

Given the complexity of the regulatory and case law framework outlined above, the following points are worth noting for the correct implementation of a cash pooling agreement:

• Contractual adequacy: The treasury contract must be formalized in writing and contain all essential elements; it must also be updated in the event of changes in market conditions or the group’s structure;
• Monitoring the financial health of participants: it is advisable to adopt procedures for periodically monitoring the financial situation of participating companies and to evaluate the possibility of including clauses in the contract for automatic exit from the pool in the event that financial alert thresholds are exceeded;
• Transfer Pricing Documentation: must be prepared and updated annually with particular reference to the comparative analysis of the rates applied with respect to market rates ;
• Correct presentation in the financial statements: Cash pooling items must be correctly classified in the financial statements as financial receivables/payables to group companies, in accordance with applicable Italian Accounting Standards (OIC) or IFRS. Adequate disclosure of the cash pooling agreement, including amounts, rates, and terms, must also be included in the notes to the financial statements.
• Support of corporate bodies: the adoption of a cash pooling contract must be approved by the Board of Directors of each participating company, after evaluating the interests of all stakeholders (including minority shareholders and creditors).

Cash pooling represents a strategically valuable tool for business groups seeking to optimize their liquidity management, reduce financial costs, and improve cash flow planning. The benefits of this tool, in terms of interest savings, better use of internal resources, and strengthening the group’s credit rating, are well-documented and significant.

However, the correct implementation of cash pooling requires a multidisciplinary approach that simultaneously takes into account the civil, tax, accounting, and criminal aspects of the instrument.

The firm remains available to assist companies in structuring, reviewing, or verifying cash pooling agreements, as well as preparing the necessary tax and accounting documentation.

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Do not hesitate to contact us for any further information.

Best regards,

Beatrice Pallante

This newsletter is the result of a collaboration between artificial intelligence and human expertise, with revision and editorial care by Beatrice Pallante.

[1] For a group with €50 million in managed liquidity, this translates into a potential annual saving of €100,000-300,000 in terms of lower net financial expense.

[2]Revenue Agency Resolution No. 47e of 2006.