Company crises and sound management to be safeguarded

Imagine a limited liability company with a solid turnover, good profits, few debts and well managed (no conflicting transactions, directors paid the right amount, balance sheets in order). Now imagine that the partners are quarrelling and that one partner, who has remained in the minority, is on the warpath.

Until a few years ago, in such a situation, the company could continue its business without having much to fear from any disruptive initiatives by the minority shareholder. This is no longer the case: even for the most solid and profitable companies, a serious rupture between the partners can now have a disruptive impact on the company's operations. What happened? In 2019, with an amendment to the civil code (c.c.), the legislator required all companies to 'establish an organisational, administrative and accounting structure appropriate to the nature and size of the business, also with a view to the timely detection of the company's crisis and loss of business continuity' (Art. 2086). At the same time, it extended to all s.r.l. (limited liability companies) Article 2409 of the Civil Code, which legitimises shareholders owning at least 10% of the capital to report serious management irregularities to the court and invests the judge with the power, in the most serious cases, to revoke the directors and appoint a judicial administrator. For the past few years, courts have been taking such measures in response to complaints of serious irregularities concerning companies similar to the one mentioned at the beginning, but lacking the required structures. According to the judges, the preparation of adequate structures, as Niccolò Abriani summarised in the 26 September Norme e Tributi Focus, even constitutes "the (emphasis added n.d.r.) prerequisite of proper management and assumes relevance even in physiological contexts of economic and financial equilibrium, even before crisis situations".

One could discuss at length to what extent these 'adequate arrangements', which are costly to implement and then inevitably get in the way of dynamic management if they are not destined to remain a pure exercise in style, are really capable of preventing corporate crises: these are often the result of sudden or unforeseeable external circumstances or well concealed frauds. And one could even jokingly point out that this jurisprudential orientation evokes Ungaretti's well-known triplet: 'death/is served/by living'.

But it is on the combined provisions of Article 2086 and Article 2409 of the Civil Code that we must focus for some critical consideration.

Judicial revocation of directors can even be lethal: creditors, alerted, could react by closing the credit taps and thus cause the crisis that the rule intends to prevent. Secondly, this rule is intended to protect the company's creditors: when will the minority shareholder ever exercise the power to denounce the violation if not in a pretextual manner and, therefore, to the detriment of the shareholders as a whole? It will be objected that the rule on reporting serious irregularities protects the public interest in the proper management of corporations, not just the private interest of the shareholders. But is there not also a public interest in ensuring that healthy companies can be managed by directors trusted by the shareholders, without the risk of having them replaced by a judge who deems the appropriate arrangements lacking? Is it really in the public interest, in situations where there is a lack of other pathologies in the management of the company, to give priority to the application of Article 2086, even at the cost of handing minorities an effective weapon of blackmail?