Role and Duties of Companies’ Directors in Italy

In every company, there exists an executive body, which can be either the sole director or the Board of Directors (B.o.D.).

A sole director is more prevalent in partnerships or small to medium-sized companies where there is either a single shareholder or a shareholder with a strong majority, while a board of directors is more common in companies with multiple shareholders, who have an interest in appointing their own directors.

In this article, we will focus on the role and duties of the Board of Directors, which is tasked with executing decisions made by shareholders through shareholder resolutions and overseeing company operations.

In terms of corporate governance, the primary role played by the Board of Directors is undeniable. Indeed, the primary responsibilities of the executive body encompass defining organizational strategies, formulating management policies, and ensuring the company’s legal compliance with regulatory authorities.

In addition to this, the Board of Directors is responsible for convening the shareholders’ meeting, maintaining the accounting records and drawing up the financial statements to be submitted to the shareholders for approval.

The Board of Directors consists of directors and a chairman, whose number, appointment and remuneration are decided by the Shareholders’ Meeting.

Directors remain in office for a period of three years, at the end of which they may be re-elected. They have the power to represent the company and to perform all acts falling within the company’s object, subject to any legal or statutory restrictions.

The Board of Directors then has the choice to appoint one or more managing directors, granting them the authority to act on behalf of the company. Additionally, the Board may opt to impose limitations on the delegated powers, such as – for instance – specifying a maximum monetary threshold for actions or prohibiting certain predefined categories of activities.

Moreover, to prevent actual or potential conflicts of interest, directors are prohibited from assuming similar roles in competing companies without prior authorization from the Shareholders’ Meeting. Directors also have an obligation to disclose any personal interests they hold in company transactions to the other members of the Board of Directors and the Board of Auditors; in which case they must abstain from participating in the transaction.

The directors are, then, jointly and severally liable to the company for any damage the latter suffers as a result of their breach; however, individual directors may avoid the liability action by having their dissent recorded with respect to the act and/or transaction carried out by the Board of Directors. The liability action against the directors may be resolved by the Shareholders’ Meeting or also by the Board of Statutory Auditors.

It should be specified that the liability action applies also to so-called de facto directors.

A de facto director is a person who performs management activities within a company, i.e. takes decisions and performs administrative actions in the name of and on behalf of the company, even without having received a formal mandate through a legally recognized resolution, as provided for by law or the articles of association.

The de facto director may face legal action from the injured company for various corporate and bankruptcy offenses, even without a prior resolution from the shareholders’ meeting to initiate liability proceedings. Additionally, individual shareholders or third parties who have incurred damages due to the director’s negligent or intentional acts may also sue them.

In conclusion, the Board of Directors stands as a fundamental pillar for the operation of companies, undertaking crucial responsibilities in corporate management and upholding transparency and legality. Its composition, functions, and powers are regulated by laws and bylaws, aiming to ensure effective and accountable governance.

D’Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (a DP Group company) offer assistance and consultancy services in the legal and tax fields. For any enquiries, please contact us: info@dpgroup.biz.

The above contents are provided for information purposes only. The publication of this article does not create an attorney-client relationship between DP Group and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case.