Liability Actions Against The Company Management Of Limited Liability Companies: Typologies Of Action Provided For By Italian Law

  • Posted By Giovanna Aucone
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  • 23 February 2021
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Liability Actions Against The Company Management Of Limited Liability Companies: Typologies Of Action Provided For By Italian Law

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It is regrettably well known that the current pandemic has resulted in a serious economic crisis which caused the collapse of numerous companies in Italy. Consequently, this is causing an increase in litigation against the management boards of companies, which are most often made responsible for the company’s bankruptcy. For these reasons, we have considered as interesting to outline an overview, which will be developed over the next few months, aimed at addressing, in a simple and understandable way, the most significant topics of liability actions in the corporate field. In order to introduce the topic, we will start with a few brief remarks over the basic elements of the various actions provided for by Italian law to protect the interests of the company, the company’s creditors, individual shareholders and third parties. Please, refer to the following articles for a more in-depth examination of the most interesting aspects of these actions.

Therefore, what are the main procedural actions concerning management liability?

A. MANAGEMENT LIABILITY ACTION:

  • Relevant legislation and purpose: this action, regulated by Articles 2393, 2393 bis and 2476 of the Civil Code only with reference to stock limited companies may also be extended, by analogy, to limited liability companies or cooperative companies. Such action is, however, brought against the auditors as well, for being held jointly and severally liable with the directors “for their acts or omissions“, where “the damage would not have occurred if they had supervised in accordance with the obligations of their office” (Article 2407 of the Civil Code).
  • Who may bring this action:
    – the company for itself;
    – the single shareholder holding a qualified share of the company;
    – the board of statutory auditors;
    – the boards of insolvency procedures (Bankruptcy Trustee, Extraordinary Administration, Liquidator) if the company is subject to insolvency proceedings.

B. THE ACTION OF THE COMPANY’S CREDITORS

  • Relevant legislation and purpose: this remedy, provided for by Article 2394 of the Civil Code, is aimed at compensating the company’s creditors for the damage suffered as a result of the negligent or intentional breach, by the company management, of the obligation to preserve the integrity of the company’s assets of Stock Limited Company (Article 2740 of the Italian Civil Code). Similarly, this action is also commonly applied to limited liability companies.
  • Who may bring this action:
    – Company’s creditors.

C. ACTION OF A SHAREHOLDER AND/OR COMPANY CREDITOR OF A SUBSIDIARY OF ANOTHER COMPANY (SO-CALLED PARENT, CONTROLLING OR HOLDING COMPANY):

  • Relevant legislation and purpose: the action, governed by Article 2497 of the Civil Code, may be brought if the parent company abuses its powers of management and coordination, and therefore it violates the rules of proper corporate management.
  • Who may bring this action:
    – the single shareholder;
    – the company’s creditor;
    – the subsidiary (according to the most recent doctrine).

D. BANKRUPTCY TRUSTEE’S ACTION PURSUANT TO ARTICLE 146 OF THE BANKRUPTCY LAW:

  • Relevant legislation and purpose: Article 146 of the Bankruptcy Law entitles the Bankruptcy Trustee to act against the corporate management of the bankrupt company, in the event that the company’s failure is attributed to its actions.
    The Bankruptcy Trustee may simultaneously bring both the company liability action and the action of the company’s creditors.
  • Who may bring this action:
    -the Bankruptcy Trustee.

E. THE ACTION OF RHE SINGLE SHAREHOLDER’S AND/OR THIRD PARTY

  • Scope of the action and purpose: the purpose of the action, governed by Article 2395 of the Civil Code, is to compensate individual shareholders or third parties who have been directly damaged by the negligent or willful acts of the management.
  • Who may bring this action:
    – individual shareholders;
    – third parties;
    – the company’s creditors.

Having briefly summarized the main liability actions, in the coming months we will try to examine in greater details the following topics:

  • The liability action, who is entitled to bring it?
  • Shareholders and company creditors: nature, prerequisites and limits of the liability actions brought by them;
  • The liability action against directors and auditors: what are the differences?
  • The Bankruptcy Trustee and liability actions: the burden of proof according to recent case law.
  • The auditor’s liability: contractual nature and burden of proof.
  • The Bankruptcy Trustee liability action: how should the claim be quantified?

For further information please contact:

Avv.Giovanna Aucone
T. +39 06 884 1535
E: aucone@pglegal.it 

Avv.Federica Colarieti
T. +39 06 884 1535
E: colarieti@pglegal.it

 

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