The Supreme Court of Cassation recently ruled on the revocation of the board chair of a listed company controlled by a public entity shareholder (10 September 2020, 21495).
The court clarified the concept of just cause with regard to directors' revocation under Article 2383 of the Civil Code, particularly with respect to a situation that takes place after a director's appointment which jeopardises their ability to carry out their tasks fairly and prejudices their fiduciary duties – even if such event is not brought about by the director.
However, the court underlined that conflict with other directors, which may arise during normal board discussions, does not constitute just cause for a director's revocation.
The court also stated that a director's revocation must be specifically provided for in the shareholders' meeting resolution. Further, if the company cannot prove the revocation's just cause, the director must be compensated for damages borne, which usually correspond to the compensation due up to the expiration of their mandate.
The court also stated that directors appointed by public entities, whose revocation is politically motivated, and directors appointed by private shareholders, are in an equal position. Therefore, if their revocation is not motivated by just cause, a director revoked by a public entity:
- must be compensated only for monetary damages; and
- cannot be reintegrated as a board member according to Articles 2383 and 2449 of the Civil Code (see also Supreme Court of Cassation decision 29078/2019).
