Directors' revocation and change of company control

Directors' appointment and revocation
Supreme Court of Cassation decisions
Decision 18182


Directors' appointment and revocation

According to Article 2383 of the Civil Code, the directors of joint stock companies are appointed or revoked by a shareholders' meeting decision. If the revocation is not motivated by just cause, the directors are entitled to request damages from the company, which usually correspond to compensation due to the directors up to the expiration of their mandate.

Under Italian law, the appointment of directors must not exceed three years and the expiry date must correspond to the date on which the shareholders' meeting is called for the approval of financial statements.

Supreme Court of Cassation decisions

In a recent decision, the Supreme Court of Cassation (2037/2018) held that companies must provide evidence of just cause of a director's revocation.

Further, in a number of recent decisions (7475/2017 and 7587/2016), the Supreme Court of Cassation held that just cause is connected to a situation which takes place after a director's appointment, even if it is not caused by them, which damages trust between the director and the company.

Decision 18182

In a recent decision, the Supreme Court of Cassation stated that the revocation of members of a controlled company's board of directors due to the transfer of the majority shareholdings to a third party does not constitute just cause for a director's revocation.(1)

Consequently, a change in control of a holding company does not breach the duty of trust between the company and its board members.

For further information on this topic please contact Eugenio Vaccari at Grieco e Associati by telephone (+39 06 420 3881) or email (e.vaccari@griecoassociati.com). The Grieco e Associati website can be accessed at www.griecoassociati.com.

Endnotes

(1) Decision 18182 of 5 July 2019.