Italian corporate law, as amended by Legislative Decree 6/2003, establishes the liability of members of the board of directors of joint stock companies depending on whether they are:
- directors with specific management powers (eg, chief executive officers or executive directors) that legally represent a company; or
- board members without specific management powers (eg, independent and non-executive directors).
With regard to non-executive directors, Article 2381 of the Civil Code states that all directors must be duly informed and ensure that they are up to date with relevant company information. As a result, non-executive directors should ask executive directors to keep them up to date with any information that may be relevant to company management.
Further, Article 2392 of the Civil Code states that executive and non-executive directors are jointly and severally liable for damages that arise from a failure to perform their duties unless it relates to specific powers granted to one or more directors (ie, executive directors).
In a number of recent decisions, the Supreme Court of Cassation held that under the business judgement rule, decisions made by boards of directors cannot be challenged, save those which are manifestly reckless or imprudent according to an ex-ante evaluation.(1)
However, even if the responsibility of non-executive directors is less stringent than that of executive directors, non-executive directors must act in a proactive way, particularly where there is evidence of insolvency or a lack of information regarding a company as an ongoing business concern. In such cases, in order not to be held liable towards a company, non-executive directors should request additional information from executive directors to keep up to date with all relevant matters.
The Milan Court of Appeal recently stated that non-executive directors are liable when they:
- act negligently by not recognising signs that a company is being managed unlawfully;
- fail to remind executive directors of their duty to undertake any required actions to avoid or mitigate damage to a company; or
- fail to act with specific care to protect company assets when a company is dissolved (ie, its net assets are less than the minimum amount required by law).(2)
In light of the above, the Supreme Court of Cassation and Milan Court of Appeal decisions focused on the liability of non-executive directors by affirming that they must be proactive and fulfil their duty to be as informed as possible to ensure a suitable standard of corporate governance.
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