In a recent decision, the Court of Milan examined the simul stabunt simul cadent clause in a joint stock company's articles of association (Company Section Decision 57633 of 14 January 2020).
Pursuant to a simul stabunt simul cadent clause, if a director resigns from the board of directors, the entire board is no longer in charge of the company. As a result, under Article 2386 of the Civil Code, a shareholders' meeting must be called to appoint a new board of directors.
In several cases, directors have used this clause to dismiss an undesirable board member and have the shareholders' meeting appoint a replacement who is more aligned with the shareholders' policies.
If an ousted director who has not been reappointed to the new board can prove that this clause has been used illicitly and that such use amounts to an abuse of power by the company, the ousted director can be compensated for damages suffered under Article 2383 of the Civil Code as a result of a de facto revocation without cause (Court of Milan, 28 July 2010).
In the present case, the Court of Milan rejected the request for damages from the company's managing director, who was ousted through a simul stabunt simul cadent clause, for the following reasons:
- The managing director did not prove the company's alleged abuse of power and, at the time of his appointment, had implicitly accepted the company's articles of association, including the clauses relating to directors' appointment and dismissal (eg, the simul stabunt simul cadent clause) (Court of Milan, 13 March 2015).
- Further, the court stated that the simul stabunt simul cadent clause had been lawfully exercised in connection with the company's reorganisation due to a merger and change of control, leading to the board of directors' new composition.
