The Companies and the Legal Routes

The responsibility of the directors in the company, the Civil Code identifies two cases of directors' derivative, one generic and one referring to specific conduct. The cases are respectively the following:

• The directors are jointly and severally liable for damages deriving from the non-observance of their duties (which, as mentioned above, must be carried out with the diligence necessary for the office held). Derivative is limited to damages and does not extend to negative management results;

With reference to the obligations of the directors to act informed as well as the obligation to intervene if they are aware of prejudicial facts to prevent or eliminate harmful consequences of these. Pursuant to the Civil Code, the directors are jointly liable if they do not comply with these obligations. In such cases the companies would need a lawyer to defend against derivative action as well.

The rule also indicates a case in which the director remains excluded from derivative towards the company despite the commission or omission of acts or facts. This is the case envisaged by the last paragraph of the law which excludes from responsibility the director who being free from fault, has made his dissent noted without delay in the book of meetings and resolutions of the board, immediately informing the chairman of the board of statutory auditors.

The company that moves the derivative action against the directors is required to demonstrate the existence of the damage and the causal link (i.e. that the damage is attributable to the directors) but not their fault. It is up to the latter to prove that they are free from fault.

The exercise of the derivative action against the directors of the company

The civil code provides the steps for the exercise of the derivative action. In particular, it distinguishes how closed companies (those that do not make use of the risk capital market) and open companies (those that make use of the risk capital market) must behave. It also determines the resulting consequences for the administrators responsible.

It begins with a discussion about the filing of the derivative action. This can take place at a specially convened ordinary meeting or at the meeting to discuss the financial statements or at the meeting of the board of statutory auditors.

At the end of the discussion, the collegial body deliberates in a positive or negative sense. If the outcome was positive, following the resolution of these bodies (in the case of the board of statutory auditors, the resolution must be passed with a majority of 2/3 of its members), the derivative action can be initiated. The Civil Code specifies that this can happen even if the company is in liquidation and in any case within 5 years from when the director has left office.

What are the consequences for the directors who suffer this action?

The shareholders' meeting revokes the office if the resolution is passed with the favorable vote of at least 1/5 of the share capital and provides for its replacement. Alternatively the directors' derivative, to a waiver, the company may propose the resolution of the dispute with a transaction. However, the Civil Code requires two conditions:

• That the shareholders' meeting decides on the approval of the waiver and the transaction;
• That shareholders representing at least 1/5 of the share capital do not vote against. In listed companies, the share of capital representation is 1/20 or the percentage provided for in the bylaws.
• The shareholders and derivative action against the directors of the Spa in listed and unlisted companies

Derivative action can also be exercised by shareholders representing a certain share of capital. However, a distinction must be made according to whether they participate in an open or closed society.