9 agosto, 2019

MANAGEMENT AND STATUTORY AUDIT OF AN ITALIAN COMPANY 

In Italy, companies are managed either by a Board of Directors (consiglio di amministrazione) or by a sole director (amministratore unico). The Board of Directors or the sole director can delegate certain management powers to non-directors to facilitate the day-to-day management of the company. This document discusses how companies are managed and administered under the Italian Civil Code, covering: the ordinary model under art 2380; the dual model (sistema dualistico) under art 2409 octies; and the singular model (sistema monistico).

A   GENERAL ISSUES RELATED TO MANAGEMENT AND STATUTORY AUDIT

General

Companies have a management body (`organo amministrativo‘) and a supervisory body (organo di controllo).

Companies are managed either by a Board of Directors (`consiglio di amministrazione‘) or by a sole director (`amministratore unico‘). The Board of Directors or the sole director can delegate certain management powers to non-directors (eg to a general manager) to facilitate the day-to-day management of the company.

The structure and the duties of the `supervisory body’ in the SpA will depend on the nature of the company itself. All SpAs must have an internal Panel of Statutory Auditors (`Collegio Sindicale‘) which is appointed to protect the interests of the members and the company’s creditors by ensuring that the management acts in accordance with the law, accounting principles and the articles of incorporation.

In addition to the Panel of Statutory Auditors, under certain conditions SpAs must also appoint an auditing body to audit the accounts (`revisore legale dei conti or società di revisione legale‘) ie an external auditor. Auditors control the company’s accounts, but may also be required to deliver an opinion on certain proposed transactions. In addition, the shareholders’ meeting controls to some degree the management of the company. Under certain conditions and in particular in the case of material breaches of the applicable statutes a court can appoint an interim administrator to run the company in a way to protect its assets and the rights of the members and of the creditors.

Since 1 January 2004, SpAs and SapAs have a choice of three models that they can adopt as a management structure. The three models are outlined below.

1    The ordinary model – article 2380 et seq

The ordinary model, which will apply absent a different provision in the articles of association, provides for a management body (which may consist of a sole director or of a Board of Directors), a supervisory body and, under certain conditions, a separate auditing body.

The Panel of Statutory Auditors will act as the supervisory body. Statutory Auditors are appointed by the shareholder’s meeting, and may also exercise accounting supervision functions if the company does not have recourse to the risk capital market or does not file consolidated accounts. Statutory Auditors must satisfy the requirements set forth by the applicable laws and can carry out the auditing activities as well if the satisfy the requirements set forth by the applicable statutes for the auditing body. If the Statutory Auditors do not qualify, the auditing activity must be performed by a separate auditing body.

2    The dual model (sistema dualistico) – article 2409 octies

The dual model system is similar to the one provided under the German laws and is in fact known in Italy as the ‘German model.’ In the dual model, the shareholders’ meeting appoints a `Consiglio di Sorveglianza‘ (Supervisory Board) which is responsible for ensuring that the company is managed in accordance with the law, the articles of incorporation and the standards of proper management. The Supervisory Board takes the necessary actions in the event of improper management and approves the company’s accounts or consolidated accounts. The Supervisory Board also appoints the `consiglio di gestione‘ or Management Board and supervises the activities of this board. The Management Board is responsible for the day-to-day management of the company. In addition, the shareholders must appoint an external accounting supervisory body (`organo di controllo contabile‘).

3    The singular model (sistema monistico)

The singular model system has been compared to that existing in the United Kingdom. The shareholders meeting appoints a Board of Directors, which will then appoint a management supervision committee (`comitato per il controllo della gestione‘), at least one member of which must be an auditor registered with a register held by the Ministry of Justice. It is the responsibility of this management supervision committee to ensure that the company is managed in accordance with the law, the company’s incorporation documents and the standards of proper management. An accounting supervisory body must also be appointed.

Srls will have a management body, which may consist of one or more members. A control body or an auditor can be voluntarily appointed. Unless otherwise provided in the by-laws, the Srl’s control body consists of a sole effective member. Nevertheless an Srl must appoint a control body or an auditor if certain thresholds (ie amount of the corporate capital and turnover) are met (see para [341]). The quotaholders will have a certain amount of supervisory responsibility over the company. In the absence of a control body, the quotaholders will be entitled to collect certain information about the company’s financial affairs.

This document discusses the number and qualification of directors under Italian corporate law.

B   NUMBER AND QUALIFICATION OF DIRECTORS

In the ordinary model, there is no specific number of directors fixed by law, and the articles of association provide for the minimum and maximum number of directors who can be appointed. The shareholders’ meeting appoints the directors.

Both individuals and companies may act as directors. Save as provided by special types of business (trust companies and companies owning ships and airplanes) there is no Italian citizenship requirement. Foreign directors must obtain an Italian tax code. The articles of association may provide for additional conditions on the appointment of directors.

Employees can act as directors.

In Italy, certain types of person may be disqualified by law from becoming directors and are therefore viewed by the law as being ineligible to manage and administer the company. This document discusses the appointment and removal of directors in Italy, including retiring directors.

C   APPOINTMENT AND REMOVAL OF DIRECTORS

1    General

Certain types of person may be disqualified by law from becoming directors and are therefore viewed by the law as being ineligible. These include bankrupts, whose disqualification lasts until their name is removed from the public register, and those who are disqualified by reason of a court order, for example following conviction for a criminal offence. The appointment of such persons will be void.

Further, there is a category of persons whose employment or qualifications are deemed to be incompatible with the position of company director. These include, among others:

(a)     civil servants;

(b)     notaries and lawyers (who may assume other administrative roles which do not carry any management powers);

(c)      Members of Parliament; and

(d)     the President and members of CONSOB (the regulatory body of the Stock Exchange).

Under article 2387 of the Civil Code the articles of association can subordinate the appointment of a director to the candidate possessing ‘trustworthiness, professionalism and independence’, requirements.

Additionally, In the case of companies established under the singular model, at least one-third of the directors must hold the criteria of independence required for members of the Panel of Statutory Auditors (see below).

Generally speaking directors are entitled to remuneration for their office. The actual compensation is defined either by the articles of association or by the members’ meeting.

2    Appointment

The company’s first directors are appointed in the memorandum of association.

In Srls and ordinary and dual model SpAs, the ordinary shareholders’ meeting is usually the body competent to appoint directors during the life of the company, and the appointment of new directors must be specifically stated in the agenda of the meeting. The company’s memorandum may provide particular provisions in relation to the appointment of new directors; common provisions include a preference for directors who are shareholders. Further, shareholders’ agreements may also regulate the mechanism of appointment. However, the director must be appointed in any instance by the shareholders’ meeting.

It is possible for a Board of Directors to nominate a director to replace one or more directors who resigned, died or forfeited their office. The Board can replace the missing director only if the majority of the directors appointed by the shareholders’ meeting remains in office – if this is not the case, a shareholders’ meeting must be called as soon as possible to appoint a new board. The appointment of the substitute director must be approved by the Panel of Statutory Auditors. In dual model companies the supervisory board appoints replacement directors. The substitute director will remain in office up to the next ordinary shareholders’ meeting.

If the State or a public body has shares in an SpA, the articles of association may allow for the State or a public body to nominate one or more directors.

The State or a public body may also have the right to appoint a director, regardless of a shareholding, in SpAs operating in specific sectors.

Generally speaking, substitute directors will remain in office as long as the existing directors, but the articles of association or the shareholders’ meeting may make provision for a different length of office.

To be validly appointed directors appointed during the life of the company must accept their appointment and thereafter must file their appointment with the Registry of Enterprises within 30 days from appointment date; powers granted to directors must be also filed with the Register of Enterprises as well as to the tax authorities. Failure to file the appointment or late filings will trigger the application of administrative fines to each director.

There is no legal limit to the length of the appointment of directors of an Srl, and so this will usually be for an indefinite period, unless there are provisions in the company’s articles of association that limit the length of the appointment.

The ‘accomandatari’ of an SapA who are automatically directors of the company are also appointed for an indefinite period of time, regardless of a provision to the contrary in the articles of association.

Directors of an SpA with an ordinary or singular structure can be appointed for a maximum of three financial years. This rule also applies to members of the management committee of dual model SpAs. They can, however, be reappointed an unlimited number of times. In the absence of a provision to the contrary in the articles of association, the directors’ term of office will expire on the date of the shareholders’ meeting called to approve the financial statements related to the third financial year of the directors’ office.

3    Retiring directors

Directors retire from office in the following circumstances:

(1)     Expiry of this term of the appointment; in SpAs directors can be appointed for a maximum of three fiscal years while in the Srls they could also be appointed with no term if the articles of association so provide.

(2)     Death.

(3)     Resignation. This must be in writing. A company may seek damages against a director resigning without ‘just cause’. The resignation will be immediately effective if the majority of the board remains in office.

(4)     Removal by the shareholders’ meeting. In an SpA, the removal is automatic when the shareholders’ meeting resolves to start legal action based on the breach of a director’s duties upon the vote of shareholders holding at least one-fifth of the capital in the company. Generally speaking a removal must be sustained by a ‘just cause,’ which will include: breach of the directors’ duties of good faith, loss of confidence in the director’s ability, etc. A removal without ‘just cause’ is effective, however the removed director may seek damages against the company and under certain circumstances against its members. A `just cause’ is not required to remove an Srl’s director, however if the director is remunerated for his/her office and is not given due notice he/she can seek compensation for damages.

(5)     Disqualification, should a situation occur which disqualifies the director from holding office.

(6)     Operation of a ‘simul stabunt, simul cadent’ clause. Under such a clause share/quota-holders are provided with greater control over the management of the company; in fact, under a ‘simul stabunt, simul cadent’ clause, if one of the directors retires from office, then all the other directors must also retire from office and a shareholders’ urgent meeting must be called by the directors to appoint a new board.

(7)     Liquidation of the company and, under certain circumstances, mergers and acquisitions.

In dual SpAs, members of the management board can be removed at any time by members of the supervisory board, save that removal without just cause will give rise to a cause of action.

In the case of a SapA, the ‘accomandatario’ can be removed from office in the following circumstances:

(1)     Death. Some commentators argue that the death of the ‘accomandatario’ simply terminates his or her position as a director, leaving his or her share in the company to pass to his or her heirs who will become ‘accomandanti.’ Others suggest that death will result in the immediate liquidation of the ‘accomandatario’s’ share that will pass to his or her estate.

(2)     Removal from office. This must occur through an extraordinary shareholders’ meeting. In the absence of ‘just cause’ damages may be sought. Upon removal, the ‘accomandatario’ will become an ‘accomandante’ and benefit from a limitation of liability.

(3)     Resignation. Either by disposing of his or her share in the company or by resigning from the role of ‘accomandatario’ to become an ‘accomandante’.

(4)     Liquidation of the company, mergers and acquisitions.

(5)     Age. Under current practice the articles of association can provide for the automatic removal from the office of an ‘accomandatario’ when he/she becomes older than a certain age provided in the articles of association. The enforceability of this clause is the subject of dispute among commentators.

The fact that a director has retired from office must be filed with the Registry of Enterprises within 30 days.

With reference to the Italian Civil Code, directors must act diligently and on an informed basis (using experts’ reports and advice if necessary) in order to ensure the prudent management of the company. This document discusses directors’ positive duties under Italian Civil Code, art 2381, and also their negative duties.

D   DIRECTORS’ DUTIES

1    Positive duties – article 2381

Directors must act diligently and on an informed basis (using experts’ reports and advice if necessary) in order to ensure the prudent management of the company.

The supervisory board has a ‘duty of vigilance’, i.e. a duty to monitor the management of the company in order to ensure that the organisational, administrative and accounting resources of the company are adequate to the size and nature of the business and also to notify on a regular basis – at least every 180 days – the directors and the Statutory Auditors of the on-going management and on the forecasted developments of the business.

The Board of Directors (or the management committee in dual companies) can request information and/or documentation from its delegates. It must ensure that the organisational, administrative and accounting resources of the company are adequate, examine strategic, industrial and financial plans of the company and evaluate the on-going activities of the company. Directors also undertake the operations needed for the implementation of the corporate purpose.

Additionally, directors must act diligently and consistently with the law, the articles of association and the by-laws. The standard of diligence is that defined in article 2392 of the Civil Code under which directors must use the diligence required ‘by the nature of the office and their specific areas of competence.’ Furthermore, directors are jointly and severally liable if they fail to prevent damaging acts or where they have already occurred and are known to the directors if they fail to mitigate any damage.

 The directors are also liable vis à vis the company’s creditors for breaching the obligations relating to the preservation of the integrity of company’s assets.

Furthermore, directors of public companies must disclose to CONSOB their transactions in the company’s shares or related financial instruments.

2    Negative duties

Directors are prohibited from taking certain actions, for example they cannot subscribe for the company’s own shares on behalf of the company, they cannot provide financial assistance for the purchase of the company’s shares in circumstances other than those provided for by the law or issue shares for a value less than their nominal value.

Additionally, there are general prohibitions on a director acting in conflict of interests or in competition with the business of the company. Under article 2390 of the Civil Code directors can neither act as directors or managing directors of competitors nor carry out for their account a competing business. Furthermore, directors could be held liable for damages caused to the company through the use of data, information or business opportunities they have acquired by means of their office.

The articles of association or a resolution of the shareholders’ meeting may authorize a director to undertake activities that are in competition with the company. Failing to get such an authorisation could qualify as a `just cause’ for dismissal and the company may bring an action for damages against the director. In addition, directors of public companies are banned from carrying out any transaction in respect of the company’s financial instruments taking advantage of privileged information obtained by reason of their office; the ban applies to all operations including those carried out by means of an intermediary. The breach of this ban qualifies as a crime.

In Italy, a corporation can be managed either by a sole director (amministratore unico) or a Board of Directors (consiglio di amministrazione). This document discusses the nature and characteristics of the sole director and the board of directors under the Italian Civil Code.

E    SOLE DIRECTOR AND BOARD OF DIRECTORS

A corporation can be managed either by a sole director (`amministratore unico‘) or a Board of Directors (`consiglio di amministrazione‘).

1    Sole director

The sole director has the power of management of the company and the power to legally represent it. Management powers for specific transactions could be delegated to one or more attorneys-in-fact.

Public companies cannot be managed by a sole director.

2    Board of Directors

a     General

according to article 2380bis of the Civil Code the management of the company is an exclusive duty of the directors, who perform the operations necessary for the implementation of the corporate purpose. The Board of directors is chaired by the chairman of the Board to be appointed either by the shareholders’ meeting or by the Board of directors. The articles of association may include a clause regulating the method of appointment.

The chairman has the following duties, unless the articles of association otherwise provides:

(1)     to call Board meetings;

(2)     to set the agenda of Board meetings;

(3)     to co-ordinate the work of the directors; and

(4)     to ensure that adequate information in relation to the matters on the agenda is provided to the directors.

A Board of Directors may delegate its powers either to a director or to a non-director which will be then subject to the general directors’ duties.

b     Meetings of the Board of Directors

It is the responsibility of the chairman to call meetings when appropriate or requested by another director. The call notice must be sent to all Board members and the failure to do so could cause the invalidity of the meeting if some directors are absent.

The chairman is responsible for declaring a quorum. Directors must attend the meeting in person (proxies are not permitted) and the articles of association can authorise directors to attend the meeting by any means of telecommunication ensuring proper participation in the discussion.

Directors who have a conflict of interest can vote during the Board meetings, although the conflict must be disclosed to the other directors during the relevant meeting prior to expressing the vote. Under article 2391 of the Civil Code directors who were absent from the meeting or who dissented from the resolution taken with a conflict of interest have three months to challenge a decision damaging the company. The resolution can be validly challenged only if the majority necessary to pass the resolution would not have been reached without the vote of director with the conflict of interest. The burden of proving the conflict of interest falls on the party challenging the decision.

Finally, article 2388 of the Civil Code provides that resolutions passed in violation of the law or the articles of association may onlybe challenged by dissenting or absent directors or the statutory auditors within 90 days of the resolution. Company members may challenge Board resolutions that damage their rights.

Under Italian corporate law, breach of the directors’ duties resulting in the company suffering damage could trigger the directors’ liability vis-à-vis the company and its creditors. As part of this commentary on the management and administration of companies in Italy, this document discusses directors’ civil and criminal liabilities.

F    DIRECTORS’ LIABILITY

1    Civil Liability

a     Liability to the company

Breach of the directors’ duties resulting in the company suffering damage could trigger the director’s liability vis-à-vis the company and its creditors. This applies either to a single director and to the Board of Directors. In the latter case, the Board as a whole will be jointly and severally liable for the actions of all directors, provided that they did not delegate their powers to an attorney-in-fact. In the case of a delegation of power, the attorney-in-fact will be held liable while the directors responsible for delegating the power will be held liable only if they breached the duty of vigilance (‘culpa in vigilando’) over the attorney-in-fact activity. Additionally, a dissenting director will not be held liable if their dissent has been recorded in the board’s minutes and if the Panel of Statutory Auditors has been notified of such a dissent (see para [341]).

A company may subsequently ratify a director’s decision and thus remove the director’s liability.

Examples of conduct which could trigger directors’ liabilities are:

(1)     management decisions which result in damage for the company. Liability may arise if the decision damaging the company would not have been taken by a director exercising the required diligence and the damage was foreseeable at the time the decision was taken;

(2)     irregularities in the keeping of the account books, or producing accounts which hide losses;

(3)     failure to correct irregularities in management that occurred prior to the director’s appointment. Upon taking office, by virtue of the general duty of vigilance and the duty to act in an informed manner, the director should ensure that the previous management of the company was correct and, if not, take steps to remedy any irregularities.

The statute of limitation for claims against directors is five years from the date the director left the office. The company has the burden of proof of unlawful conduct, the damages suffered by the company suffered and the causal connection between the two. Damages will be the remedy sought.

b     Liability to creditors

Joint liability will arise in relation to conduct that violates the general duty of the director to protect the company’s assets, causing a diminution in the assets and so preventing creditors from recovering their receivables. Directors who took correct management decisions with unfortunate outcomes will not be liable. There is a five-year limitation period from the date the company’s assets became insufficient to pay the company’s debts or from the date the creditor could have discovered the mismanagement by using reasonable diligence. The burden of proof is on the creditor who must prove that the director breached his/her duties and that this resulted in loss for the company. The remedy available will be damages, which will be recoverable for the sums lost as well as the loss of earnings on that sum.

c     Liability to shareholders and/or third parties

Directors will be held liable for wilful or negligent conduct (eg approval of incorrect financial statements, misrepresentation of the financial position of the company, failure to allot new shares upon a share redistribution) causing direct damage to the assets of the company, a share/quota holder or a third party.

Liability to a third party may arise, for example in the provision of documents to the third party which are misleading as to the company’s financial position for the purpose of securing a line of credit.

Liability will attach to all directors that gave consent to the decision. The burden of proof is on the plaintiff, who must prove the wilful conduct or negligence on the part of the director. There is a five years’ limitation period from the date on which the damaging act was committed and the remedy available is damages for the loss suffered.

2    Criminal liability

Italian corporate laws provide for a wide variety of crimes applicable to directors. A company itself will not be held criminally liable, but in certain circumstances it may be held administratively liable for its operation. Directors are not jointly and severally liable in relation to criminal offences, but the concept of aiding and abetting the commission of an offence could apply.

The criminal liability of a director will be defined with reference to the requirements of the individual offence, but normally there is a requirement of guilty knowledge and/or intention.

The limitation period applicable for liability if that fixed by the specific offence. Punishments available and will be also fixed by the offence and can consist in imprisonment and/or a fine. There is also provision for the confiscation of the proceeds of the crime whether this is profits or goods obtained.

This document discusses other company officers under Italian corporate law, as follows: de facto director (Amministratore di Fatto); general manager (Direttore Generale); panel of statutory auditors (Collegio Sindicale); audit by an auditing company (Società di Revisione); supervisory board; and management board and supervisory board (Consiglio di Sorveglianza) of dual model companies.

G   OTHER COMPANY OFFICERS

1    De facto director (‘Amministratore di Fatto’)

A de facto director is a person who manages a company without having been formally appointed as a director. The defining feature of this role is the taking of management decisions on behalf of the company.

Both civil and criminal liability attach to a de facto director, who is subject to the same duties as a formal director.

2    General manager (‘Direttore Generale’)

A general manager could be either an employee of the company or a non-employee and can be a member of the board of directors. A general manager implements the board’s decisions and is involved in the management of the company. No limits apply to the number of general managers which can be appointed and to the term of their office.

A general manager can be granted powers to represent the company in transactions with third parties. Powers granted to the general manager must be filed with the Registry of Enterprises.

The Board of Directors (or sole director) will be responsible for instructing the general manager; directors’ duties apply to the general manager as well.

3    Panel of statutory auditors (‘Collegio Sindacale’)

SpAs and SapAs always have a panel of Statutory Auditors or an Auditor; while pursuant to article 2477 of the Civil Code, an Srl must have such a panel only if:

(a)     the Srl files consolidated financial statements;

(b)     controls a company that is obliged to have its accounts audited ;

(c)      in two consecutive financial years, two of the following thresholds are achieved:

(i)      total assets are equal to (or greater than) €2,200,000,

(ii)     the average number of employees during the financial year was 10 or more, or

(iii)     revenue of sales and work done is equal to or greater than €2,000,00.

The mandatory appointment of the supervisory body or the auditor referred to in point (c) shall cease when, for three consecutive financial years, none of the above limits is exceeded.

The control body of an Srl, where appointed, is subject to the provisions applicable to the Panel of the Statutory Auditors of SpAs.

Generally the Statutory Auditors must review whether the management of the company complies with the applicable law as well as with the accounting and auditing principles. There are additional responsibilities for the panel of the Statutory Auditors of listed companies.

In the SpAs the Panel of the Statutory Auditors is made up by either three or five effective auditors and by two alternate auditors. At least one effective auditor and one alternate auditor have to be registered with the Register of Auditors kept by the Ministry of Justice and the remaining auditors must have the qualifications specified by the Ministry of Justice. Statutory auditors are subject to rules of ineligibility and incompatibility similar to those of directors and are remunerated for their services. Under Italian practice, statutory auditors are usually chosen from accountants.

The first auditors are appointed upon incorporation and their office will last three financial years.

Auditors can resign, but could be held liable for damages vis-à-vis the company if they do so without a ‘just cause’. The shareholders can also resolve upon the removal of statutory auditors, but this must be for ‘just cause’ and the resolution must be submitted to the court for approval. If an auditor fails to attend two consecutive meetings of the Board of Directors without justification, he or she will automatically lose office.

The panel of Statutory Auditors must meet every 90 days. The Statutory Auditors’ duties vary depending on whether the auditors supervise both the management and the accounting of the corporation or exclusively the management, while an auditing body is appointed to supervise the accounting.

If the panel of statutory auditors is required to monitor the accounting, it must verify the adequacy of the resources the company has made available for accounting and observe the rules for external auditors. It must carry out inspections on a quarterly basis to ensure that the book-keeping of the company is properly carried out and accurate.

If the panel of Statutory Auditors is required to monitor the management of the company, then it must ensure observance of the law and the provisions of the articles of association and the correct management of the company, with reference to the adequacy of the management resources available. The Statutory Auditors are required to attend meetings of the Board of Directors and of the Executive Committee (if appointed). They must also attend shareholders’ meetings.

Statutory Auditors must comply with the high standards provided by law and failure to do so may result in civil or criminal liability. They are jointly and severally liable in relation to their responsibilities to the directors of the company and each other, but personally liable in their responsibilities to the company and to creditors. They must discharge their duties with the professionalism and diligence required by the nature of their office.

Whenever the panel of Statutory Auditors discovers management or financial irregularities, it must act to stop the irregular activities. The Auditors must enter any opinion contrary to the management’s action in the minute book of the Board of Statutory Auditor meetings. They must also inform the share/quota holders and can call an extraordinary meeting of shareholders in urgent cases. If the shareholders do not take action, the Board can report the matter to the public prosecutor.

4    Audit by an auditing company (‘Società di Revisione’)

SpAs are subject to audit by an auditing company; SpAs with publicly traded shares are audited by an auditor approved by CONSOB. If the company is not required to draft consolidated financial statements, the audit can be undertaken by the statutory auditors (provided that all are licensed to do so). External auditors are appointed for three financial years; and can be re-appointed. Auditors are subject to the same rules of professional conduct and legal duties and liability as statutory auditors; external auditing companies are jointly and severally liable with the individual company members that carry out the audit.

Pursuant to Legislative Decree no 39 of January 27, 2010 as amended by Legislative Decree no 135 of July 17, 2016 the duties of the auditors are to:

(a)     carry out inspections with reference to the company’s accounts are being properly maintained and that the entries in the accounts are accurate;

(b)     check that the accounts (or consolidated accounts where applicable) conform with the accounting records and are in compliance with proper accounting procedures; and

(c)      give a report on the accounts or the consolidated accounts.

The auditors may request documents from the company and can carry out on-site inspections. Auditors could be liable vis-à-vis the company, the shareholders and third party creditors for any loss resulting from their failure to carry out their duties.

The external auditors are also obliged to deliver an opinion on any proposed increase in capital, merger, or distribution of profits.

Auditors are jointly liable with directors vis-à-vis the company, shareholders and other third parties for damages arising out of the breach of their professional duties.

5    Supervisory board

In single model SpAs, a supervisory board must be appointed by the Board of Directors, composed of directors who satisfy requirements of trustworthiness, professionalism and independence. It will remain in office for as long as the Board of Directors is in office.

The role of the supervisory board is to monitor the organisational structure, internal control systems and the accounting and management of the company as well as to carry out whatever other tasks are assigned to it by the Board of Directors.

Members of the supervisory board have the same civil liability as the Statutory Auditors; criminal liability depends on the nature of the offence.

6    Dual model companies – management board

In dual model companies, article 2409 octies and novies of the Civil Code requires and regulates the management board (‘Consiglio di Gestione’).

The management board must be made up of at least two members. Their initial appointment will be by the incorporation documents of the company and the duration of their office will be for three financial years of the company, although they will be re-electable at the end of this period. A member of the management board may be dismissed at any time by the Supervisory Board (‘consiglio di sorveglianza’), but will be entitled to claim compensation for dismissal if the dismissal is not justified by ‘good cause’. It is the supervisory board that is responsible for appointing new members of the management board during the life of the company.

The responsibilities of the management board are specified by article 2409 novies, which states that the management of the company is its exclusive responsibility and specifies that it must do all that is necessary to achieve the corporate purpose of the company.

Both the company itself and the company members may take action against members of the management board as may the supervisory board.

7    Dual model companies – the supervisory board (‘Consiglio di Sorveglianza’)

In dualistic companies, a supervisory board is required under article 2409 octies and regulated by article 2409 duodecies of the Civil Code.

The supervisory board must have at least three members, at least one of whom must be enrolled on the register of auditors held by the Ministry of Justice, and may be subject to other pre-requisites under the articles of association. Nomination to membership will be by the articles of association initially and thereafter normally by the shareholders. Members will remain in office for three financial years.

The responsibilities of the supervisory board are a mixture of responsibilities otherwise held by the Board of Statutory Auditors or the shareholders’ meeting and include, inter alia:

(a)     the approval of the annual accounts (or any consolidated accounts);

(b)     the appointment and revocation of members of the management committee and the determination of the remuneration of members;

(c)      ensuring that the company is run in accordance with the law and by-laws and with respect to the principles of correct management and that the administration, organisation and accounting of the company is adequate; and

(d)     taking action against members of the management committee.

The supervisory board must report to the shareholders in writing once a year in relation to its activities.

The standard of care required of members of the Board is diligence to the degree required by the nature of the office. Members of the supervisory board are jointly liable with the management board for acts or omissions that cause damage where such acts or omissions would not have occurred had the members of the supervisory board acted in accordance with the required standard of diligence.

Criminal liability will depend on the actual nature of the offence.

 

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