As corporate responsibility and business integrity become increasingly important to global commercial businesses, Italy has responded domestically with a review of two key laws which may significantly impact Italian companies.

Italian Legislative No. 231 dated June 8, 2001 (“Decree 231”)

Decree 231 has been in force for seventeen years and is likely to be significantly amended during the course of 2017.

On November 4, 2016 a draft proposal (No. 4138 – the “231 Draft Law Proposal”) was filed with the Chamber of Deputies of the Italian Parliament. An appointed commission is currently evaluating such draft, in consultation with a number of different economic operators (e.g. trade associations, banks, insurances, etc).

Key points from the 231 Draft Law Proposal are:

  • the 231 Draft Law Proposal is intended to prevent the occurrence of criminal offences and simplify the implementation of the legislation;
  • exclusion of administrative liability for entities with 15 or less employees (with the exception of entities subject to direction and coordination activity);
  • small size legal entities will no longer be able to entrust the function of Supervisory Board (“Organismo di Vigilanza” – provided under Decree 231 with the purpose to supervise, among other things, the legal entity’s compliance with the applicable Decree 231 procedures) to their directing body (organo dirigente) or to the Board of Statutory Auditors (Collegio Sindacale); and
  • increase of interdictory sanctions (including prohibitions, confiscation of the price or profits deriving from the crime and publication of the judgment, provided in case of violation of Decree 231), applicable to banking institutions, the Sicav, Sicaf and for the insurance and reinsurance companies.

Decree 231 imposes an administrative (and criminal) liability upon a legal entity for certain acts (“reati presupposto[1]) committed by its directors, executives, etc., in the interest of, or for the benefit of, the entity itself.

A Decree 231 defence exists when the legal entity can prove that:

  • (i) its managing body adopted and actually implemented an effective management model (“231 Model”) which is considered adequate to have the capacity to prevent the occurrence of such an offence; and
  • (ii) a Supervisory Board (“Organismo di Vigilanza”) was appointed and provided with an adequate budget.

A competent Court is currently responsible for assessing the adequacy of the 231 Model and its implementation and, in doing so, ascertain the administrative liability of the entity.

Bribery between Private Individuals

On December 14, 2016, the Council of Ministers preliminarily approved a draft law proposal aimed at amending the offence of “bribery between private individuals” (corruzione tra privati).

Under such proposal, it is an offence for a manager, general director, director in charge of the drafting of balance sheets, statutory auditor, liquidator and individual under the direction or supervision of any of these individuals, to receive or accept the promise of money or other advantages, for themselves or a third party, in order to act or omit to act in breach of their duties, which results in damage to the legal entity.

The purpose of the proposed amendment to Article 2635 of the Italian Civil Code is to give effect to the principles set out in the European Framework Decision 2003/568/GAI. These principles are aimed at combating corruption in the private sector by extending the scope of application of Article 2635 of the Italian Civil Code.

Conclusion

In summary, the most important factors to understand about these two proposals is the clear intention to:

  • (i) its managing body adopted and actually implemented an effective management model (“231 Model”) which is considered adequate to have the capacity to prevent the occurrence of such an offence; and
  • (ii) extend the scope of application of the offence of “bribery between private individuals” (corruzione tra privati), in line with the principles laid down in the legal framework of the main central European countries.

At this stage, the future of these two proposals are unclear, but the political will of the Italian Parliament and the impact it could have on companies incorporated or working in Italy should start to become more clear by the end of January.

This post was prepared with the assistance of Bianca De Vivo in the Milan office of Latham & Watkins.