Article 2497 of the Civil Code (on the direction and coordination of companies) sets out several principles relating to the liability of entities that control a group of companies. In particular, Article 2497 provides that companies which provide direction and coordinate their subsidiaries are directly liable to the subsidiaries' minority shareholders for any damages caused to profitability and shareholding value by the violation of fair management principles.
In addition, controlling entities are liable to creditors of their subsidiaries for any damages caused to the integrity of the company's assets. However, if damages are not the result of a controlling entity's direction and coordination activities, it will be exempt from liability in that regard.
Further, under Article 2497bis of the Civil Code, subsidiaries must inform relevant third parties and the competent companies' registry of the direction and coordination activities of controlling entities, so that third parties are aware of them. Company directors who fail to comply with these provisions will be liable for damages connected to the failure to adequately notify minority shareholders and third parties.
In a recent decision (24943 of 7 October 2019) the Supreme Court of Cassation held that:
- it is possible to assess the existence of a de facto holding company which was meant to oversee the direction and coordination of other companies, even if the details of such activity have not been disclosed;
- the rules set out in Article 2497bis of the Civil Code do not constitute the establishment of a corporate group and references to direction and coordination activities in a company's correspondence do not imply that such activity has been undertaken; and
- in order to assess whether a corporate group exists, the principle of the effectiveness of a de facto situation will prevail with reference to the beginning, development and termination of a controlling entity's direction and coordination activities, regardless of compliance with the formalities set out in Article 2497bis.
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