Company directors in Italy are accountable for their decisions not only to the company, but in certain circumstances also to shareholders, creditors and third parties. The framework has become more demanding in recent years, largely as a result of the Italian Code of Business Crisis and Insolvency. Understanding these duties and risks is the starting point for managing a company with confidence and for protecting personal assets in a way that is both lawful and effective.

Directors’ duties and liability claims

In an S.p.A. (joint-stock company), directors must perform their duties with the diligence required by the nature of their role and their specific expertise, and are jointly liable to the company for damage caused by any breach (Article 2392 of the Civil Code). Claims may be brought by the company, following a shareholders’ resolution or at the initiative of a qualified minority (Articles 2393 and 2393-bis); by the company’s creditors where its assets are insufficient to satisfy their claims (Article 2394); and by individual shareholders or third parties who have suffered direct harm (Article 2395).

In an S.r.l. (limited liability company), Article 2476 allows any shareholder to bring a liability claim and, since the insolvency reform, expressly provides for liability towards the company’s creditors. Italian courts consistently apply a principle similar to the business judgment rule: they do not second-guess business decisions on their merits, but review whether they were reasonable and taken with due care, considering the preparation, the information gathered and the precautions adopted. Documenting the decision-making process is therefore a practical safeguard.

Adequate organisational structures and crisis management

Article 2086(2) of the Civil Code requires businesses operating through companies to put in place organisational, administrative and accounting structures appropriate to their nature and size, including in order to detect early signs of financial distress and loss of going concern, and to act without delay by using one of the tools provided by law. The Code of Business Crisis and Insolvency (Legislative Decree 14/2019) offers a range of such tools, starting with a confidential, out-of-court negotiated settlement procedure (composizione negoziata della crisi).

Once a ground for winding up arises, for example when share capital falls below the legal minimum, directors may manage the company only to preserve the integrity and value of its assets (Article 2486). The law sets a presumptive measure of damages based on the difference between the company’s net assets when the director leaves office or insolvency proceedings begin, and its net assets when the ground for winding up arose. In practice, recognising a crisis too late is one of the main sources of personal exposure.

Tax and criminal exposure

Certain tax rules extend liability for the company’s tax debts to directors and liquidators, for instance where other creditors are paid ahead of the tax authorities during liquidation. On the criminal side, the relevant offences include those under Legislative Decree 74/2000, such as failure to pay over withholding tax or VAT and fraudulent evasion of tax collection, as well as the bankruptcy offences set out in the Insolvency Code.

Asset protection: tools and limits

Protecting personal assets is legitimate when it is planned in good time, serves genuine purposes and does not prejudice existing creditors. The most common tools are:

  • a clear separation between personal assets and the business, avoiding unnecessary personal guarantees;
  • directors’ and officers’ (D&O) liability insurance;
  • holding companies to hold shareholdings and manage generational succession;
  • the family asset fund (fondo patrimoniale), purpose-bound arrangements under Article 2645-ter of the Civil Code, and trusts, each with its own requirements and limits.

Transactions carried out on the eve of a crisis, or when significant debts already exist, are exposed to clawback actions (Article 2901), to the fast-track enforcement available against gratuitous transfers and restrictions on assets under Article 2929-bis and, in the most serious cases, to criminal liability. Credible protection is built while the business is healthy.

When to seek legal advice

Legal advice is worthwhile when accepting a directorship, to review delegated powers, reporting lines and insurance cover; when signs of financial strain appear; when claims are received from shareholders, creditors or the tax authorities; and when planning to reorganise family and business assets. Acting early widens the options available and reduces personal exposure.

This article is for general information only and does not constitute legal advice.