Italy Update: Administrator in conflict of interest and investigative power of the judge

Court of Cassation, order no. 7279 of 13 March 2023

Tizio, minority shareholder of Alfa S.r.l., sued the shareholders and the director of Alfa for having been stipulated, with the director judicially revoked (who would have continued to manage the company), a transaction in a state of conflict of interest. The claim for damages was rejected in the first two levels of judgment on the assumption that: (i) the decision to compromise had been adopted by the shareholders’ meeting; and that (ii) the economic conditions underlying the transaction were the result of a discretionary choice of the corporate bodies, not reviewable by the judge if assumed in the absence of elements of recklessness, irrationality or arbitrariness.

It recalls, first of all, the Supreme Court that there is a relevant conflict of interest, with reference to the individual act, when there is, in fact, a conflict between a non-social interest and any of the interests that are attributable to the partnership contract.

To this end, the magistrate is called upon to assess, ex ante, the reasonableness of the administrator’s conduct, taking into account any failure to adopt the precautions, checks and prior information normally required for a choice of that type, as well as the diligence shown in assessing in advance the risk margins associated with the operation. This situation must be revealed by indices and elements of anomaly of the concrete context in which the choice was made, which is the responsibility of those who act to prove.

In the present case, the Supreme Court highlighted the lack of elements symptomatic of the pursuit of an extrasocial interest, considering the debt to exist and the compensation not unreasonable.

By Quorum, Italy, a Transatlantic Law International Affiliated Firm.

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