By decision no. 25085 of 7 December 2016, the Supreme Court established the legitimacy of a general delegation of management, by the board of directors to individual managing directors with the power to act separately, to the extent that it is not aimed at excluding the exercise of a concurrent managing power by the managing body.

1. Foreword

The delegation of management has become increasingly common in corporate practice in order to assure a more efficient organisation of the company given the scope of the activities and functions of the board of directors. Exactly with a view to rationalise and optimise the company’s organisational models, directors are often forced to make recourse to attorneys entrusted with the completion of a series of tasks in the name and on behalf of the company. The delegation of management may be used provided that the various organisational models are consistent with the imperative rules of corporate legislation reserving the exercise of the administrative function to the persons appointed for such purpose. By decision no. 25085 of 7 December 2016, the Supreme Court ruled, taking on an innovative position that breaks with the past, on the admissibility of a general delegation of management operated by the board of directors of a limited liability company (s.r.l.) in favour of individual directors with managing powers that each of them was entitled to exercise separately.

2. The fact

The event giving rise to the decision at issue concerns a case brought to the Supreme Court by a limited liability company against the decision of the Lombardy Region Tax Commission (“CTR Lombardy”) that rejected the appeal of the company and confirmed the decision whereby the introductory appeal against an assessment of the Italian Revenue Agency was declared inadmissible for being signed by a person deemed not legally entitled to externally represent the company. CTR Lombardy pointed out that the corporate by-laws vested also managing directors, if appointed, with the powers to represent the company within the limits of the powers granted to them and that the board of directors had appointed three directors as managing directors, vesting them, in derogation of the principle of collegiality, with the power to carry out all acts of ordinary and extraordinary administration falling within the duties of the Board, without limitations or exclusions, as well as with the representation of the company for the performance of acts falling within their respective delegations with free and single signature. CTR Lombardy declared the aforesaid delegation invalid by for being issued in breach of the law, hence the company appealed to the Supreme Court

3. Decision no. 25085 of 7 December 2016 of the Supreme Court in the framework of the case law and academic debate on the possible scope and extent of a delegation of management

The Supreme Court established the legitimacy of a general delegation of management to the extent that it is not aimed at excluding the exercise of a concurrent managing power by the managing body. According to the Supreme Court, the general delegation of all powers attributed to the board of directors, except where otherwise required by law, is not prevented by the law or by the principle of collegiality and, on the contrary, is grounded on Articles 2475 and 2381 of the Italian Civil Code, which provide for the possibility to delegate the duties of the Board of Directors and even to concentrate them in only one of its members. Therefore, the by-laws of a limited liability company (s.r.l.), incorporated before 1 January 2004, that provide for the board of directors’ power to delegate its own duties – with the exception of those exclusively reserved by law to the advisory board – to individual managing directors, with the power to act separately, is not in contrast with the mandatory rules and mainly with Article 2475, third paragraph, of the Italian Civil Code (in the text amended by legislative decree no. 6 of 2003), since such rule does not impose – subject to the provisions of the last paragraph – the compulsory application of the principle of collegiality, because of the supplementary nature of the provisions at issue compared to possible different provisions governing such matters contained in the deed of incorporation (paragraphs 1, 3 and 4). Moreover, according to the Court, the by-laws provision authorising the delegation does not constitute an impediment to the concurrent right of the board of directors to exercise the powers to manage the company, in consideration of the powers of information, of direct intervention and evaluation, as well as of evocation and withdrawal – similar to those indicated in Article 2381 of the Italian Civil Code – however owed to the same prior to, concomitantly with and subsequently to the delegated duties. Finally, the right to appear in court cannot depart from granting a delegation of managing powers, but the opposite is not always true since the deed of incorporation or the by-laws may give the capacity to sue and be sued, in the name of the company, to only one of the persons vested with business-related representation powers and entitled to exercise them separately. In particular, the judges of the Supreme Court established that in order for a general delegation of management to be compatible and admissible with respect to the principles of the legal system, it must take into consideration two interpretive criteria: i) the subject-matter of the delegation and ii) behaviours implementing the delegation provisions. With regard to the subject-matter of the power of attorney, the main criticalities occur when the nature of the delegated functions is not merely executive for the company but contemplates a high degree of decisional autonomy. Indeed, such events mainly hide the risk that the delegation results in an unlawful withdrawal of powers of the board of directors. So, in order to avoid objections, it is necessary that the business-related delimitation of the powers granted does not go beyond the decisions concerning business policy and the definition of global targets in individual sectors. Therefore, the power of strategic management must remain with the board because it cannot be subject to delegation without divesting the board of directors of its own duties. With regard to behaviours implementing the delegation provisions, in case of powers of attorney of ambiguous interpretation it is necessary to make recourse to the interpretive criteria under Article 1362 of the Italian Civil Code and, hence, to investigate what was the common intention of the parties in order to establish whether the purpose of the board of directors was the withdrawal of its powers. By way of example, the delegator’s prior approval of the ratification of all acts of the representative may constitute a conduct that raises the presumption of a reduction of the authority of the board of directors.

4. Final considerations

The Supreme Court’s decision at issue is definitely innovative compared to the prior case law and academic position that tended to consider a delegation of management invalid only because of its general nature. Therefore a step forward has been made that should allow to consider admissible also general delegations of management provided that such instruments are not used with the purpose to deprive the administrative body of the functions attributed to the same by the law. Although the decision of the judges of the Supreme Court represents an opening compared to previous positions, it should be kept in mind that the widening of the boundaries of the subject-matter of the delegation of management shall have anyway to respect certain limits such as the retention of the power of strategic management of the company’s business by the directors and the maintenance of a constant flow of information between delegating bodies and delegated bodies pursuant to Article 2381 of the Italian Civil Code.