Italy scrutinises directors' liability
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Italy scrutinises directors' liability

Euro Italien

A recent judgment has outlined the differences between public and in-house companies when identifying competent courts in relation to directors' liability

A recent judgment issued by the united sections of the Italian Supreme Court (Corte di Cassazione) – judgment 26283 of November 25 2013 (the 2013 Judgment) – has outlined the differences between public companies (companies owned, in whole or in part, by public entities) and in-house companies (companies wholly owned by public entities and meeting the requirements set out below) for the purpose of identifying competent courts to rule in the event of legal actions regarding directors' liability.

As regards public companies (not classified by law as public entities), the 2013 Judgment states that such companies are, if not otherwise provided by law, subject to the provisions of the civil code. Public companies are, in fact, private legal persons that are autonomous from the relevant public shareholders, and their assets are privately owned by them.

Therefore, according to the 2013 Judgment, when the damage caused by directors' misconduct affects only public companies' assets and no public assets are directly involved, the applicable provisions are those of the civil code and civil courts are competent to hear any proceedings relating to the liability of such directors.

Under such circumstances, the jurisdiction of the Italian Court of Accounts (Corte dei Conti) may be excluded since no direct damage to public assets (danno erariale) has occured.

As set out in the 2013 Judgment, the above conclusion may not be extended to in-house companies.

In-house companies are entities entrusted with the management or provision of public services, and they need to fulfil all the following requirements: (i) the shareholders are exclusively public entities (in-house companies' by-laws have to prohibit the transfer of the relevant shares to non-public entities); (ii) the most relevant part of their activity is directed in favour of the relevant public shareholders; (iii) public shareholders own rights that are wider than those attributed to ordinary shareholders under the civil code and place in-house companies under a control similar to that existing over public shareholders' offices (referred to as analogous control).

Due to such analogous control, in-house companies are subordinated to the relevant public shareholders which have the power to manage and direct all the company's activities.

As a consequence, in-house companies, unlike public companies tout court, do not operate as autonomous and independent legal persons, since they are considered internal offices of the relevant public shareholders to which they are subject.

The assets of in-house companies are only from a formal point of view separate from those belonging to the relevant public shareholders. On such a basis, the 2013 Judgment states that any damage caused to in-house companies' assets as a consequence of the misconduct of their directors, represents damage to the public assets of the relevant public shareholders and, therefore, the Court of Accounts has jurisdiction over the legal proceedings.

Susanna Beltramo and Bruno Zerbini

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