Under Italian Law there are two different business entities providing full limited liability for their equity holders.
The first one is the “Srl” akin to a limited liability company under U.S. law, the second is the “S.p.A.” roughly corresponding to a U.S. corporation.
There exists a third / hybrid type combining the features of the partnership and the limited liability company, the “Accomandita”, where only limited liability partners are fully protected from responsibility, while managing partners are entirely liable (it being understood that if limited liability partners manage nonetheless the company, they lose the limited liability protection). This third type of company (similar to an LLP under U.S. law) will not be taken into account in the present Q&A form. Companies that resort to the risk capital markets will not be covered either.
Unless otherwise established by the charter or the bylaws, directors or a sole director (depending on the model and system adopted) are chosen among the equity holders (in an Srl, defined as “quota holders”); nonetheless the corporate documents may entrust third parties with the management of the company.
Causes of ineligibility are the same as for the S.p.A. (see art. 2382 of the Italian Civil Code).
Are not eligible for appointment:
- legally incapacitated individuals;
- individuals with restricted legal capacity;
- individuals declared bankrupt;
- individuals banned by virtue of a decision rendered by the competent court from holding a public office or from carrying on managerial duties.
The corporate documents may establish further requirements in order to be appointed such as respectability, competence and independence.
As indicated above, the management of the company is entrusted either to a sole director or to a plurality of directors. In the latter case, the directors can act as a board of directors in a collegial manner or they may manage the company directly, their powers being considered to be exercised severally and jointly.
Therefore, at least a sole director being the legal representative of the company must be appointed.
The Italian legislator has conceived three different forms of corporate governance:
- the traditional system;
- the dualistic (two tiers) system;
- the monistic (one tier) system.
The traditional system (by far the most common one, so the dualistic and monistic ones will not be covered herein) is characterized by the presence of a) a management body and b) a supervisory body, i.e., the board of statutory auditors, it being understood that the management body may consist of a sole director or several members constituting the board of directors.
The bylaws usually establish the number of directors to be appointed or simply state a minimum and a maximum (in this latter case it is up to the shareholders’ meeting to set the number of directors).
Even non-shareholders may be appointed as directors and the grounds for ineligibility are the same put forward previously for the Srl type company. Moreover, special laws may provide for grounds of incompatibility for certain categories of Individuals to be appointed as directors, e.g., public servants, members of parliament, lawyers, etc.
In companies operating in specific sectors, such as banks or insurance companies, further requirements are requested in order to be appointed, such as respectability, competence and independence are requested.
Please also note that in the S.p.A., article 2396 of the Italian civil conde mentions the figure of General Manager (Direttore Generale). Nevertheless, the legislator does not define it.
Traditionally the General Manager carries out the top management activities, being at the top of the corporate structure immediately below the directors.
To some extent the General Manager can be considered very similar to the CEO under US law, and as other top managers such as CFO and COO under US Law, is an employee of the company and can also represent it in court if this has been provided by the bylaws.
The General Manager is a corporate body different from the directors and can also assume a collective structure, as in the case of a management committee.
The General Manager, if appointed by the shareholders' meeting or by a provision of the charter, may be subject, regarding the tasks entrusted to him/her, to the liability regime provided for directors.
The liability of the General Manager under company law may be cumulated with actions, both compensatory and non-compensatory, arising from the employment relationship; this circumstance occurs when a director holds both roles.
If there are no overlapping roles, the General Manager’s appointment is solely regulated by labour law rules for top employees.