Insolvency and directors' duties in Italy: overview

A Q&A guide to group insolvency and directors' duties in Italy.

The Q&A global guide provides an overview of insolvency from the perspective of companies that are operating within a domestic and/or international group of companies, and considers the various complexities that this can introduce into insolvency procedures. It also has a significant concentration on duties, liabilities, insurance, litigation, and subsequent restrictions imposed on directors and officers of an insolvent company.

To compare answers across multiple jurisdictions, visit the International Insolvency: Group Insolvency and Directors’ Duties Country Q&A tool.

This Q&A is part of the International Insolvency: Group Insolvency and Directors’ Duties Global Guide. For a full list of contents, please visit

Lucio Ghia and Enrica Maria Ghia, Studio Legale Ghia

Corporate insolvency proceedings

1. What are the main out-of-court and court-sanctioned insolvency proceedings involving a liquidation of the company's assets?

Italian insolvency law provides for several out-of-court and court-sanctioned insolvency proceedings, some dedicated to winding up and liquidation, others permitting restructuring and turnaround, including bankruptcy, winding up, turnaround plans, debt restructuring agreements, preventive creditor's settlement, and extraordinary administration (see Question 2).

Liquidation of a company can be achieved through the following two proceedings.

Bankruptcy proceeding. A bankruptcy proceeding can be filed either by the debtor, one or more creditors and a judge, or a prosecutor in the exercise of their duties.

The court will declare a debtor bankrupt under Article 1 of the Bankruptcy Code (see Question 3). The decision declaring the bankruptcy can be appealed.

On declaring the bankruptcy, the judge appoints a:

  • Bankruptcy administrator, with at least five years' professional experience.

  • Creditors' committee.

The liquidation is implemented, according to a liquidation proposal, which provides for the realisation of all assets and for the creditors' order of payment. The proposal is presented by the bankruptcy administrator to the creditors' committee for its approval.

The court has a specialised division dealing with bankruptcy and insolvency proceedings in general. Each bankruptcy file is assigned randomly to a judge within that division.

Composition with creditors with the effect of winding up. The debtor comes to this proceeding with a plan, which is examined and approved by the majority of all unsecured creditors. The plan must provide unsecured creditors payment of at least 20% of their credit. Law 132/2015 has introduced the possibility for creditors or third parties to present their own plan along with the one presented by the debtor. The reason for this provision was to create a competitive market within the domain of the distressed companies. The final plan is chosen by the creditors who will vote for it.

The judge appoints a commissioner who has the duty of ensuring the punctual implementation of the plan. A delegated judge is appointed to oversee the proceedings (see above).

2. Are there statutory proceedings allowing for a rescue/restructuring of the debtor company's operations and debts?

The turnaround and restructuring of a company can be achieved through four different procedures which apply to different crisis levels.

Turnaround plan (Article 67(d), Bankruptcy Code). This plan is an out-of-court private agreement promoted by the debtor to the creditors and binding on those who approve it. The plan is formed and prepared by advisors to the debtor, and then certified by an expert who must declare its "reasonableness".

All transactions, occurring within the plan timeframe, will not be voidable even if the plan turns out to be unsuccessful, and the company is later placed into liquidation or an insolvency proceeding is started.

Usually the plan has a three or four year duration. The plan will remain private and confidential, unless the plan fails and the company is put into liquidation later.

Debt restructuring agreements (Article 182-bis, Bankruptcy Code). A debt restructuring agreement must be proposed by a debtor and approved by at least 60% of the secured and unsecured creditors. The agreement is based on a plan assessed by an expert who must certify its "feasibility". The plan must provide full satisfaction to all creditors who do not take part in it.

Although it is private, the agreement must be filed with the court and then published in the company's register. The law provides a 30 day time period within which dissenting creditors can oppose the plan. However, once the plan is filed, a stay period of 60 days is imposed, and the creditors cannot bring an action or enforce their debt within this time.

As with the turnaround plan (see above), all transactions which occur during the timeframe provided by the plan, are not subject to a claw-back action in the event of a future bankruptcy procedure.

The agreement is based on the principle that it can be privately negotiated without restrictions. Therefore, the law does not provide set content for the agreement, such as a partial withdrawal of debt or an ability to repay through instalments. The debtor is free to reach its own arrangements with the creditors, including:

  • Conversion of debt to equity.

  • Granting of new liquidity.

  • Change from short-term to a medium- or long-term debt financing.

  • Transformation of guarantees into revolving credit lines.

These can all be methods that are helpful to the company and its reorganisation.

Preventive creditors' settlement or judicial composition with creditors (Article 160, Bankruptcy Code). This settlement is proposed by the debtor when the company is insolvent but unable to respect all its obligations even though it is still active and has assets. This procedure has been recently reformed and become more flexible, although it remains complex.

In this case, the settlement that the debtor presents to the creditors is based on a plan, with the following features:

  • The creditors are usually split in classes with a similar legal position and economic interests. The classes can be treated differently within the plan, which may provide different terms and conditions to satisfy their debts.

  • The settlement requires the approval of the majority of unsecured creditors and the majority of classes. Once approved, the agreement is binding and enforceable over all creditors, including creditors that do not agree, imposing on those unsecured creditors a "cramdown" (imposing reorganisation despite objections from creditors), avoiding the need to make payment in full.

  • The debtor will keep administering its own assets up to the sale.

Once the plan is executed, the debtor will no longer be liable and will be free to start a new business or continue the old one. This procedure is usually faster and with higher expectation of recovery for the creditors than liquidation.

The company can reserve the preventive creditors' settlement to a future period, filing a request with the competent court that will fix the term to start at a period when the plan and all documentation required by law is filed (Article 161(6), Bankruptcy Code). During this period, the company debtor benefits from an automatic stay and all creditors' execution proceedings are suspended.

Extraordinary administration. For more serious crises, the Bankruptcy Code provides for extraordinary administration, a reorganisation proceeding for large companies and corporations which was introduced and implemented under Legislative Decree No. 270, 8 July 1999 (Prodi Law).

For this procedure to be available, the company must fulfil minimum size requirements, including that the company has more than 200 employees. The procedure is monitored and regulated by the Ministry for Economic Development, which appoints a:

  • Special Commissioner.

  • Monitoring committee representing the creditors' interests and monitoring the Special Commissioner activities.

The Special Commissioner has a very short time to examine the situation and to take the appropriate decision whether to liquidate or turn around the company. In case of liquidation, the provisions of the Bankruptcy Code govern the entire process, in particular in relation to directors, auditors and officers' liability and related company claims for damages.

The Special Commissioner has very wide authority and, once the plan is authorised by the Ministry, he or she may take all actions to save the business.

3. What are the general requirements for commencing insolvency proceedings?

Article 1 of the Bankruptcy Code provides the criteria according to which entrepreneurs and companies can apply for bankruptcy proceedings. The thresholds are established as follows:

  • Assets valued at higher than EUR300,000.

  • Revenues higher than EUR200,000.

  • Debts higher than EUR500,000.

These are the average amounts indicated in the financial statements in the last three years, before application to the court.

Article 1 also provides requirements and thresholds for other proceedings (see Question 1).


Insolvency of corporate groups

4. Are there joint insolvency proceedings available that can apply to a whole group of companies? Do all members of a corporate group have to proceed under the same type of insolvency proceeding?

Italian law recognises the principle of economic and legal independence for members of a corporate group. The Bankruptcy Law does not provide rules for the insolvency of a group of companies. The only reference to group insolvency is made in Articles 80 to 87 of Legislative Decree No. 270, 8 July 1999 (Prodi Law), concerning extraordinary administration (see below).

Therefore, insolvency proceedings for a group of companies must be treated separately for each company. This duplication of proceedings can waste time and damage the recovery of the creditors' debts. There is no substantive consolidation of the patrimonial estate of companies related to the same group. Proceeds coming from the sale of company assets will only go to pay the creditors of that single company.

To avoid the negative impact of this lack of rules, insolvency professionals work with the courts on a case-by-case basis to see how to manage proceedings when a group of companies is involved. The courts are prepared, in certain cases of group insolvency, to authorise the filing of a single petition and single plan for a debt restructuring or composition with creditors (see Question 2).

On the other hand, there have also been cases in which the courts have requested the filing of as many different bankruptcy proceedings as the number of the companies involved, but still appointing only one judge for all proceedings. It is more difficult to appoint a single receiver for proceedings relating to a group of companies as in the case of inter-company transactions there may be a conflict of interests among companies of the same group.

Insolvency proceedings must be filed with the court of the territorial district where the company has its headquarters, official address and/or centre of main interests (COMI).

Each company can choose the type of bankruptcy or insolvency proceeding that is better suited to its own situation.

Where there has been a composition with creditors involving more than one company which is part of the same group, the plan for each company can be filed with the court that is to deal with the proceeding of the holding company, even though the different companies may have their headquarters in other judicial districts. The main aim is to grant the same treatment to all the unsecured creditors and it is for this reason that there must be a plan which keeps a net separation between the assets and the debts/liabilities of each company.

In case of an extraordinary administration proceeding, the Special Commissioner can ask for an extension of the extraordinary administration procedure to include subsidiaries, if they are also insolvent (Article 52, Prodi Law). The court located in the place where the subsidiary effectively has its headquarters provides the insolvency decree. In such a case:

  • Separate proceedings (one for each company) will determine and give priority to creditors and deal with the inventory of debtor assets.

  • Only one proceeding overseen by the Ministry through the monitoring committee for the extraordinary administration procedure will deal with all companies involved.

The Special Commissioner (or a Committee composed of three commissioners depending on the complexity of the procedure), on the authorisation of the Ministry, can ask to extend the extraordinary administration to a subsidiary that is already declared bankrupt and subject to a separate judicial proceeding. Extraordinary administration over a subsidiary being extended to the parent company is never permitted.

5. Can the same insolvency office holder(s) administer the assets and the liabilities of the entire corporate group? Is a court hearing required to determine whether administration by the same individual(s) is appropriate and, if yes, does notice have to be given to creditors?

A single administrator/trustee/receiver can administer the assets and the liabilities of an entire corporate family, under the extraordinary administration rules and Legislative Decree No. 270, 8 July 1999 (Prodi Law). In other cases, it may be possible to apply to the courts for this (see Question 4). However, the courts do not usually appoint a single administrator/trustee/receiver to protect the autonomy and distinct legal personality of each company, and to avoid a conflict of interest. If the companies agree and file a specific request to appoint a single trustee, a single trustee can be appointed for all of them. In such a case, the creditors can object when they believe there may be conflicts of interest to their detriment.

A hearing is convened before the competent court to determine if there is any opposition, raised by creditors or interested third parties (including secured and unsecured creditors), to the naming of a single trustee. The nominated trustee must notify all of the creditors and invite them to attend the hearing. This is because the different companies could involve separate bankruptcy petitions to be dealt with jointly by the one trustee and the same delegated judge. The creditors can object on the basis that bankruptcy proceedings were joined after the bankruptcy decree was issued.

6. If the law does not permit a single insolvency office holder, are there provisions allowing different office holders to co-ordinate with each other so that the value of the group's assets can be maximised?

In liquidation or restructuring proceedings the different administrators can be called together by the delegated judge, court and/or by the creditors' committee to co-ordinate with each other to maximise asset values, or co-ordinate to share particular tasks between the administrators for multiple companies. In the case of the extraordinary administration procedure, this can be done on the invitation of the monitoring committee and the Ministry (see Question 2). The creditors can ask the judge or creditors' committee to intervene to object.

7. Can professional advisers work for the entire corporate group?

Other professionals can work for the entire group of companies. However, conflicts of interest may emerge during liquidation depending on the choices made. For example, a conflict could arise when deciding whether it is more advantageous to sell a particular asset or engage in an activity that sacrifices more from one company than the others. Any interested party can ask the creditors' committee or the delegated judge to be heard and object (through the legal process) for the particular act that the receiver or trustee has, or is about to, enter into.

8. Are the rules regarding members of a corporate group transferring assets to one another different when one or more members are insolvent?

All company assets as a whole represent general security for the creditors.

If the security value decreases due to a transfer of assets from one company to another, and the transferring company is then declared bankrupt, the administrator may be liable and can be sanctioned. The bankruptcy will affect the value of the assets that serve as security for the creditor (Article 2740, Civil Code). Nevertheless, a transfer is possible if it aims to eliminate the insolvency status of the whole group, and if it is reasonably thought that it would result in an overall benefit for the group.

9. How are claims of one member of a corporate group against other members of the group treated in formal insolvency processes for those members?

These claims are not invalid or unenforceable. Italian bankruptcy law treats a creditor's claim within company members of the same group in the same way as any other claim. On liquidation, they are paid under the same conditions as other creditors of the same rank. Only shareholders' loans are subordinated to the payment of other unsecured creditors.

Substantive consolidation

10. Is pooling of assets and liabilities of some or all members of a corporate group allowed, so that a creditor of one member becomes, in essence, a creditor of all members?

The pooling of assets and liabilities of company members of the same corporate family is not allowed. Asset consolidation between separate companies of the same corporate family is not possible, and therefore the creditor of one company does not participate in, or benefit from, the bankruptcy proceedings of other members of the group.

Where a bankruptcy is extended to a natural person with unlimited liability for the bankruptcy, (in particular, a shareholder (see Question 22)), the court will appoint a single delegate judge, and a single receiver to manage the bankruptcy of the company together with the bankruptcy of the individual. The company's creditors automatically participate in the distribution of proceeds from the sale of the company's assets as well as the individual's, and therefore are in the list of creditors for both bankruptcies according to the usual order of payment on insolvency. As a result, preferred creditors for the company would be preferred creditors for the individual as well, and unsecured creditors for the individual or company rank equally. The shareholder's creditors will be paid exclusively from the proceeds of the sale of the individual's personal assets. If the company's assets are not sufficient to satisfy the company's unsecured creditors, the latter may be listed within the creditors of the shareholder's insolvency proceeding and will be paid accordingly.

11. What proceedings are required for the court to order the pooling of assets and liabilities?

The pooling of assets and liabilities of members of the same corporate family is not allowed. Where the bankruptcy is consolidated with that of an individual with unlimited liability, the procedure is simple: the request for consolidation is placed before the court by the receiver or the creditors. It is dealt with summarily by the court.

12. Is the partial pooling of assets and liabilities allowed? What conditions apply?

There are no legislative provisions dealing with partial pooling. Full pooling between a company and its unlimited liability member specifically concerns companies that operate in a collective sense (partnerships, joint stock companies or closely held corporations run by an individual) for a determined period. The pooling is only full for the creditors of the bankrupt company, and not the creditors of the individual (see Question 11).

13. If the pooling of assets and liabilities is permitted, are there any protections for certain types of creditors?

Extending creditors' rights to the assets of an unlimited liability member does not affect the rights of creditors that have a lien or other guarantee on particular assets, who will be satisfied with the proceeds coming from the sale of that specific asset with priority over unsecured creditors (Article 2741, Civil Code). The secured creditor will participate, like any other unsecured creditor, in the balance of the estate if the value of the secured good(s) is insufficient to satisfy the whole debt.

Secured creditors

14. How are secured creditors treated in relation to a group of companies?

Companies are legally and financially independent, and there is no automatic consolidation of assets. Therefore, each creditor must act based on the type of credit that they possess in relation to each company, and therefore a secured creditor for one company will retain its assets only in relation to that company. Where a bankruptcy is extended to an unlimited liability member, a secured creditor of the bankrupt company is admitted to the bankruptcy creditors of the natural person, but does not lose his rights to payment from the proceeds of the asset over which the creditor has security (see Questions22  and13).


Insolvency proceedings for international corporate groups

15. What extra considerations are necessary if one or more members of the corporate group is incorporated under or governed by the laws of another jurisdiction?

Different rules apply depending on whether those companies are incorporated or hold assets within the EU or not. Cross-border procedures within the EU are governed by Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) and Regulation (EU) 2015/848 on insolvency proceedings (recast) (Recast Insolvency Regulation), which will come into effect on 26 June 2017. The Regulations provide for the automatic recognition of insolvency proceedings in all the member states (with the exception of Denmark that has not signed the regulation) (see Question 16). When the assets are outside Europe, and if the Italian bankruptcy proceedings are not recognised by the laws of the foreign state where the assets are located, Italian law will not apply and the Italian courts will not have jurisdiction over the assets. A company with headquarters in a foreign country may be declared bankrupt in Italy if it has a branch or an "organised business unit" or its centre of main interest in Italy.

16. If insolvency/restructuring proceedings are started for corporate group members in different countries, do international treaties or EU legislation apply?

Italy has not yet adopted the UNCITRAL Model Law on Cross-Border Insolvency 1997 but, as part of the EU, complies with Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) (see Question 15). The Insolvency Regulation covers situations where a company has different branches in different EU member states. It does not apply to the insolvency of companies that are part of the same corporate family, where every company will have its own insolvency procedure which will be opened within, and governed by, the law of the member state where that entity has its centre of main interests.

The Insolvency Regulation provides that the procedure for the main insolvency which is opened first in a European country will automatically be recognised in the other states, meaning that:

  • The liquidator can exercise all the powers conferred by law in all the other member states to ensure the best management of the bankrupt company's assets, included in relation to assets located in other European states.

  • Where there are operational branches in other countries, these companies can be liquidated with the input of the trustee from the main insolvency proceedings who can ask to open secondary proceedings in states where these branches are located.

Note that the purpose of the secondary procedure is to liquidate the branches and not to reorganise or reconstruct them (Chapter III, Article 27, Insolvency Regulation). Because of this, there have been recent requests to modify and expand this provision.

Outside of the EU, if there are no relevant international conventions concerning the company's assets in those countries, the creditor will have to act individually as an external creditor of the debtor company.

17. Do domestic courts typically attempt to exercise jurisdiction over all the assets of a company filing locally (regardless of where the assets are located) or do they limit their jurisdiction to local assets?

Italian courts typically attempt to exercise jurisdiction over assets located outside Italy if a secondary proceeding has not been started in the jurisdiction where the assets are located.

18. Do local courts enforce court orders from foreign jurisdictions that attempt to exercise jurisdiction over assets located in your jurisdiction that are owned by a company subject to foreign insolvency proceedings?

Insolvency proceedings opened in another EU member state are automatically recognised in Italy and the foreign trustee has the same authority given to him or her by the state that opened the proceedings. If a foreign court makes an order over a particular asset, the court will enforce the order of the court of a member state, but all interested parties can oppose the enforcement of that order. To make an order concerning the debtor's assets as a whole, it is necessary under Regulation (EC) 1346/2000 (Insolvency Regulation) to open a secondary proceeding under Italian law in the interest of all creditors.

An order of the court of a non-member state will be considered by the court of the district where the assets are located (lex sitae rei). Interested parties can oppose the enforcement of that order. In that case, the court must verify the legitimacy of the foreign decision in order to recognise it, including that the:

  • Foreign proceeding provided for a fair hearing.

  • Decision is final.

  • Decision does not go against public order.

In the case of a company already declared bankrupt in a foreign country, the company assets located in Italy are subject to Italian law (lex loci).

19. Can the courts co-operate with foreign courts to co-ordinate the administration of group assets?

The Ministry of Justice is responsible for answering requests and co-ordinating responses between Italian and foreign non-European courts. Any judge or Italian court can send a request for assistance to the Ministry of Justice, which will forward it to its counterpart in the foreign country, depending on the bilateral or multilateral conventions in place between Italy and other states.

Criminal assistance

In relation to mutual assistance on criminal matters between the courts of the member states, this is governed by the European Convention on Mutual Assistance in Criminal Matters 1959 (Convention on Mutual Assistance in Criminal Matters) and Article 727 and following of the Criminal Procedure Code.

Co-ordination between the EU member states

Liquidators in the main insolvency proceedings and liquidators in secondary insolvency proceedings must communicate with each other and reciprocally share information (Article 31, Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation)). It is currently proposed that the Insolvency Regulation be modified and applied to all national judges involved in insolvency proceedings, as well as liquidators.

Regulation (EU) 2015/848 on insolvency proceedings (recast) (Recast Insolvency Regulation) provides for a higher level of co-operation among the member states in a cross-border insolvency when the:

  • Insolvent company has assets in different member states.

  • Insolvent companies have their centre of main interests (COMI) in more than one member state, but all companies are part of the same corporate families.

Guidelines Applicable to Court-To-Court Communications in Cross-Border Cases

Italy has not adopted the Guidelines, but many bankruptcy judges are familiar with the Guidelines from the Italian edition.


Directors' duties

20. Does your jurisdiction encourage or discourage overlapping boards or management teams for separate members of a corporate group?

Italian law does not encourage, but does allow, the same individual to be an administrator or sit on the board of more than one company belonging to the same or different corporate families. The director is bound by the rules that govern conflicts of interest in the exercise of his management duties (Articles 2368, 2373, 2391, 2475 ter, 2479 ter, 2629 bis and 2634, Italian Civil Code).

21. What legal consequences are there for the directors of a parent company where they are not directors of the subsidiary but do manage the subsidiary's affairs?

The corporation law has introduced rules to govern the corporate family structure (Legislative Decree No 6 of 2003). Articles 2497 and so on of the Italian Civil Code set out the rules for corporate governance (direction and co-ordination of companies) and impose disclosure and informational requirements.

Responsibility of directors of holding companies

It is lawful for a holding company to direct and administer a subsidiary company. Where this is done in practice, the administrators and officers of the holding company are held to be responsible for the subsidiary including liability for breach of duties, and so on, as with directors of the subsidiary itself. They are not regarded as having a conflict of interest with a controlled subsidiary because they run the holding company. Moreover, case law has created the concept of "compensative criteria" which applies when the directors' and officers' decision may be potentially harmful for the subsidiary but generates a global beneficial effect for the whole group.

Concerning who runs a company, there is a rebuttable presumption that a company is run by a party for whom either, or both, of the following apply (Article 2497-sexies, Civil Code):

  • Responsibility for putting together the budget.

  • Control over the other companies (that is, the party is the holding or parent company).

Therefore, it is for the parent company to prove that a subsidiary is run independently.

Disclosure requirements

Consolidated financial statements. Consolidated financial statements must be prepared in relation to a group of companies (which can be a corporation in which the state is a shareholder, limited liability company, or partnership limited by shares) that controls other companies (regardless of their legal form) (Article 25, Legislative Decree No. 127 of 1991).

Disclosure requirements for subsidiaries. Subsidiary companies can be defined as a company in which another entity (Article 2359, Italian Civil Code):

  • Owns the majority of votes to be cast at a shareholders' meeting.

  • Exercises a dominant influence on the shareholders through, for example, contractual obligations.

In those cases, the subsidiary's administrators must:

  • Indicate that feature in their documents and correspondence.

  • Include a summary in the budget prospectus of essential information relating to the last budget of the holding company.

  • Include with their financial statements a separate document describing relations with the holding company and other companies in the corporate family.

  • Declare in any communication and document its membership to the group of companies (for example, the head paper of the subsidiary must state that it is part of a group).

The corporate administrator of the subsidiary is liable for harm caused to the company, creditors, single shareholders or third parties where this duty is breached.

22. What are the main duties and responsibilities of directors and officers to the company, shareholders and third parties? Do they change when the company becomes insolvent?

Corporate administrators of companies must fulfil their duties as set out in law and the corporate charter with the diligence required by "the nature of the position" and "their specific role" (Article 2392, Civil Code).

It is prohibited for corporate administrators to (Civil Code):

  • Act in a conflict of interest (Articles 2390 to 2391).

  • Exceed their legal or delegated authority (Article 2384).

  • Compete with the company (Article 2390).

Administrators must also (Civil Code):

  • Draw up annual financial statements observing the principles set out in Articles 2423 and 2423 bis concerning clearness, veracity and correctness.

  • Immediately call a shareholders' meeting when it is necessary to reduce capital due to loss or where the capital is eroded under the legal minimum.

  • Comply with decisions made by shareholders (Article 2364(5)).

  • Challenge the decisions of invalid shareholders' meetings (Article 2377).

In general, administrators will also be liable if they are aware of prejudicial facts and they do not do what they can to prevent, eliminate or mitigate damages.

Directors or officers of a company owe fiduciary duties and contractual obligations.

Where administrators are in breach of their duties, a shareholders' judicial claim may be brought (Article 2393, Civil Code). Where the judicial claim is approved by the shareholders' meeting, the company can file the action. Where the action is taken by shareholders representing at least 20% of the total shares, the administrator is automatically removed from his or her role. The action can also be brought, where not approved by a general meeting, by shareholders representing at least 20% of the total shares or another amount established by law (but not more than one-third) (Article 2393 bis, Civil Code). In that case, the shareholders act on behalf of the company, rather than the company acting directly. The director is not automatically removed from office, but the general meeting may approve the director's removal.

In the case of a limited liability company (società a responsabilità limitata) (Srl), every shareholder can bring an action against the directors. Further, he or she may apply for an injunction aiming to remove the administrator from his or her role (Article 2476, Civil Code).

In relation to directors' conflict of interests, the resolution adopted with the determining vote of the interested directors may be challenged by the board of directors or, alternatively, by the board of auditors (Article 2491, Civil Code).

The administrators have a duty to the creditors to maintain sufficient corporate assets to satisfy outstanding debts. In that case, a creditors' action can be brought against the administrators when the corporate assets fall below the level necessary to satisfy outstanding debts (Article 2394, Civil Code). If the creditors' action is successful, the creditors are entitled to attach all the directors' assets (Article 2740, Civil Code).

The duties to government authorities are mainly duties related to compliance with rules such as safety, privacy, and so on, and maintaining a correct governance organisation according to the provisions of Law No. 231/2001. Further, directors and officers are subject to specific controls carried out by dedicated public authorities, such as, for example, the Court of Accounts and the Anti-Corruption Authority.

Directors and officers do not owe specific duties to employees, except a general duty of good faith. From a civil law standpoint, directors are not qualified as employers and do not have any employment relation with the employees. Nonetheless, according to criminal law, if they carry out conduct consisting of an abuse of their power and role resulting in a diminishment of the responsibilities of the employee or appointing an employee to detrimental duties, the directors may be liable to an offence (Article 572, Criminal Code).

The following civil actions are also possible against administrators for injury caused by a:

  • Negligent or intentional act of an administrator or the misrepresentation of the company's economic and financial situation. In that case, a single shareholder or third party (such as an employee) who has been harmed by a negligent or intentional act can bring a civil action against the administrator (Article 2395, Civil Code). This type of action is not dependant on the existence or success of any derivative suit (Court of Cassation, Civil Section I, 30/5/2008, n. 14558).

  • Devaluation of corporate assets caused by the actions of an administrator. In that case, creditors, individual shareholders or third parties can bring a civil action for harm resulting from the devaluation of corporate assets which was caused by an administrator's actions (Article 2497, Civil Code). This action can only be brought if the claimants have not already been compensated by the company.

From a criminal perspective, liability is governed by Articles 2621 and so on of the Civil Code. The most important articles are:

  • False corporate communications (Article 2621). This provides for a two-year imprisonment for administrators and officers who include false information in financial statements or other corporate communications.

  • False corporate communications which harm the company, shareholders or creditors (Article 2622). This provides for a three-year imprisonment for administrators and officers who include false information in financial statements or other corporate communications which damage the company, shareholders or creditors.

Italian law does not change the responsibilities of administrators and officers when the company becomes insolvent. That is, they must not aggravate the insolvency status of the company. The only thing that changes is who is capable of bringing actions in the name of the company under Articles 2393 and 2394 of the Civil Code. In the case of insolvency, standing to bring an action belongs to the bankruptcy trustee, the liquidator or the special commissioner (Articles 2394 bis, Civil Code and Article 146, Bankruptcy Law).

A company's bankruptcy decree also declares the bankruptcy of "unlimited liability members" (Article 147, Bankruptcy Law (modified by Legislative Decree No 5 of 2006)). This can happen when, for example:

  • There is only one person responsible for the debts taken on in a given period.

  • The company is a partnership (Article 2291, Civil Code).

  • The individual is a managing partner in a limited partnership (Article 2313 and 2452, Civil Code).

See Question 10.

The bankruptcy of a subsidiary formed as a corporation or a limited liability corporation does not extend to the holding company or to other companies part of the same group.

23. How are competing duties addressed where directors and officers of different group company members overlap and there are conflicts of interest between the group members?

Administrators and officers of a company must comply with the rules concerning conflicts of interest to avoid being held responsible by the company, shareholders, creditors and third parties (including employees) (see Question 22). In the case of conflicts within the corporate family, a parent company operating in breach of the rules relating to proper governance is liable to the shareholders of the subsidiary for harm caused to the value of the company and to creditors for devaluation of corporate assets (Article 2497, Civil Code). This is in addition to the personal liability of the administrators and officers under Articles 2393, 2393 bis, 2394, 2394 bis e 2395 of the Civil Code.

24. What specific types of conduct are in breach of the duties and responsibilities of directors and officers?

Failure to take reasonable steps to minimise losses

The company, third parties or creditors can hold administrators and officers responsible for an increase of debts that is not supported by sufficient corporate assets, and that results from their administration. This also applies when administrators and officers are continuing to trade when there is little prospect of being able to pay liabilities as they fall due (see below, Failure to inform creditors of insolvency).

Misappropriation of corporate assets

Administrators are liable for bad choices or bad management which occur in violation of their duties. Liability derives from a failure to act (Court of Cassation, Civil Section I, No 18231 of 12 August 2009). Administrators and officers have the authority to take all decisions they believe are in the company's best interests and are not considered personally liable if those particular choices (that are diligently undertaken in good faith to meet the company's interests) produce negative effects ("business judgment rule").

Undervaluation of corporate assets in a preference or other transaction

The business judgement rule is applied (see above, Misappropriation of corporate assets). It will only be possible to hold an administrator or officer liable when company assets are sold at a price which is well below the market value.

Failure to inform creditors of insolvency

Administrators and officers can be held liable for continuing to conduct business when the company is insolvent, if that results in increasing company debt. This rule applies to an even greater extent when administrators have not taken the initiative to start insolvency proceedings.

Preferential payments

Preferring payment to one creditor when insufficient monies are available to pay others may constitute the criminal offence of "preferential bankruptcy" (Article 216(3), Bankruptcy Law) (see Question 25, Criminal framework).

25. What civil and criminal liability exists for directors and officers if they breach their duties and responsibilities?

Civil liability

See Question 22.

Criminal framework

The insolvency administrator, or the trustee of an insolvency procedure (such as a liquidation or extraordinary administration), must send the public prosecutor a report concerning the situation of the company and the events causing the insolvency, including the responsibilities of the company's management.

If the public prosecutor finds grounds for charges against the directors, CEO and supervisor, a criminal action is filed with the competent court.

The crimes that are relevant in the case of insolvency are:

  • Fraudulent bankruptcy (Articles 216 and 223, Bankruptcy Law). A director, CEO or supervisor can be imprisoned from three to ten years, if they have:

    • hidden, distracted (taken away from the company), destroyed or concealed the assets of the company, in order to damage the creditors' declared and recognised non-existent debts;

    • distracted, destroyed and forced balance sheets of the company to obtain an unfair profit for themselves or others, or to otherwise damage the creditors.

  • Preferential bankruptcy (Articles 216(3) and 223, Bankruptcy Law). Directors, who, prior to or during the bankruptcy procedure, make payments or simulate any pre-emption to provide privileges to some creditors and cause damage to others, can be imprisoned from one to five years.

  • Simple bankruptcy (Articles 217 and 224, Bankruptcy Law). A director, CEO or supervisor can be imprisoned from six months to two years, if he has:

    • bought items for personal necessity or for family necessity, spending excessively when considering the company economic conditions;

    • wasted a substantial part of the company assets in imprudent operations;

    • maintained imprudent behaviour in order to delay the bankruptcy;

    • increased company difficulties, while not filing the bankruptcy petition or with any other guilty behaviour;

    • not satisfied the obligations assumed in a previous judiciary composition with creditors or in a previous bankruptcy agreement with creditors.

  • Illegal recurrence to credit (Articles 218 and 225, Bankruptcy Law). A director, CEO or supervisor can be punished with imprisonment of up to two years if he has managed the company to ask for new credit, concealing the financial difficulties of the company.

  • Declaration of non-existent creditors and other infractions (Articles 220 and 226, Bankruptcy Law). A director, CEO or supervisor can be punished with imprisonment from six to 18 months if he has indicated in the company's documents and in its declarations regarding its creditors, the existence of non-existent entities or persons as creditors.

Rules on restructuring

In the case of a reorganisation plan (Article 67(3), Bankruptcy Law) and a restructuring plan (Article 182 bis, Bankruptcy Law), no civil or criminal liabilities apply to administrators or officers for all payments made in accordance with the plan's execution.

In the case of a judicial composition with creditors, the criminal liabilities for directors and officers are limited to the crimes provided in Articles 223 and 224 of the Bankruptcy Law and therefore do not include illegal recurrence to credit or the declaration of non-existent creditors, which are only considered as crimes in connection with bankruptcy.

See Question 2.

26. Is potential personal civil or criminal liability a factor in officers and directors deciding if and when to put the company into a formal insolvency/reorganisation procedure?

All administrators and officers who have run the company properly will file for bankruptcy on time to avoid any liability arising from a failure to do so. However, administrators or officers who have breached their duties to the company's detriment cannot file for bankruptcy or reorganisation to avoid control over their bad management in an attempt to avoid civil and/or criminal sanctions. A decision not to file for bankruptcy or reorganisation may be made in an attempt to repair the damage done to the company and to save the administrators or officers from liability.

27. Is insurance available to protect directors and officers from claims arising while operating a financially distressed company?

It is possible to stipulate, with the largest insurance companies operating in the market, policies that protect administrators and officers from the risk of eventual civil liability for negligence, excluding gross negligence, intentional harm or the violation of statutorily imposed duties. Administrators and officers are only responsible for the damage caused by their own actions and not that caused by other officers and/or directors.

Directors' and officers' (D&O) insurance is widely used, especially in medium and large companies. Premiums are expensive but most of the time the burden is covered by the companies on behalf of the single director or administrator. The availability of insurance is not a factor in whether to put the company in a formal insolvency/reorganisation procedure.

28. Can directors and officers resign from their positions if the company becomes financially distressed and what difference will this make to their potential liability?

Administrators and officers must observe their duties to avoid criminal and civil liabilities although they are not prevented from resigning. Resignation can limit the liability of the administrator or officer to the date on which he or she left their post.

29. How common is litigation against directors and officers for violation of their duties after commencement of insolvency/reorganisation proceedings? Is the litigation typically successful?

During the last few years, derivative actions against administrators and officers have been very common after the start of insolvency proceedings. Claims started by shareholders against administrators and/or officers are less frequent before the opening of insolvency proceedings or after reorganisation.

According to an estimate based on data directly obtained by the authors' firm:

  • Actions filed after the start of insolvency proceedings have a 20 to 25% success rate and the majority of them are settled.

  • Actions filed before the start of insolvency proceedings, or before the start of the reorganisation plans, have a 10 to 15% success rate and the majority of them are closed through a settlement.

30. What defences against civil and/or criminal sanctions are available to directors and officers?

Certain facts must be determined before a conviction or civil award can be made against an administrator or officer of a company:

  • The administrator's or officer's illicit act.

  • Damages.

  • Direct causation between the act and the harm.

The claimant (trustee or insolvency administrator) bears the burden of the proof in these actions (Court of Cassation, Civil Section I, April 4, 2011, No 7606). Therefore, it is possible to base the administrator's or officer's defence on lack of proof.

The defence can be built on the argument that no act that was harmful to the company interest, to the creditors or to the third parties was actually accomplished by the directors or the officers. The following can be useful to demonstrate that there was no illicit act:

  • Good faith in carrying out due diligence in evaluating assets.

  • Consulting professionals (accountants, lawyers, and financial advisors).

  • Taking rational action with the intent of preserving the market value of the company in accordance with the principles of on going concern.

  • Appointing independent administrators.

  • Appointing experts specialised in the evaluation of intangible assets.

  • Detailed recordings of meetings and fully setting out dissenting opinions.

  • Carrying out efforts to recover the company.

  • Continuously providing information to shareholders, creditors and stakeholders.

  • An assessment on the industrial and managing decision taken by the directors and officers in good faith.

It is also possible to argue that the eventual illicit act and failure to observe the rules governing management does not place the liability on the directors and officers because there is no evidence that the harm was actually caused by the directors' and officers' behaviour.

31. If it appears that "going concern values" will result in a higher return to creditors than a liquidation of the assets, can directors and officers be protected if they decide to continue operations to protect the values for the benefit of all creditors?

If carrying on operations constitutes a rational course of action on the part of the directors, then this may form part of a defence (see Question 30).

32. If a company becomes insolvent, is a director or officer of the insolvent company legally restricted from acting as a director or officer in another company, or from obtaining credit as a promoter of another company?

An officer or director is only legally restricted from acting as an officer if, as a result of the company's insolvency, the administrator or officer is found guilty of the following crimes:

  • False corporate communications or false corporate communications that harm the company, shareholders or creditors (Articles 2621 to 2622, Civil Code).

  • Fraudulent, preferential and single bankruptcy (Articles 216 to 217, Bankruptcy Law).

33. If a director or officer becomes personally insolvent, is he legally restricted from continuing to act as a director or officer of his current company or another company?

Current company

Administrators and officers are prevented from holding leadership positions in corporate entities by virtue of their personal insolvency (Article 2382, Civil Code) until the end of the insolvency proceedings and the debtor discharge (Article 120 and 142, Bankruptcy Law). All eventual revenues should be used to satisfy prior debts with higher precedence (Court of Cassation, United Sections, 10 December 1993, No 12159).

Another company

See above, Current company.


Online resources

Bankruptcy Code

W (the website of the authoring firm)

Description. An unofficial translation of the Italian Bankruptcy Law is available on the authors' website by simply filing a request form.

Contributor profiles

Lucio Ghia, Partner

Studio Legale Ghia

T +39 06 42012618
F +39 06 42012522

Professional qualifications. Lawyer, 1968; Law professor in business law and bankruptcy law, 2005; UNCITRAL Italian Delegate, Group V - Insolvency, Group VI - Secured Interests

Areas of practice. Business law; corporate law; banking law; bankruptcy law.

Languages. Italian, English

Professional associations/memberships. International Insolvency Institute; American College of Bankruptcy; Turnaround Management Association; Member of the Board of Directors of International Insolvency Institute


  • Treaty on Italian Bankruptcy law in six volumes.

  • The Italian Bankruptcy Law in English (see above, Online resources).

  • International Business Law.

Enrica Maria Ghia, Partner

Studio Legale Ghia

T +39 02 76390887
F +39 02 76025932

Professional qualifications. Lawyer, 1998

Areas of practice. Business law; corporate law; banking law; bankruptcy law.

Recent transactions.

  • Turnaround cases.

  • Claim for damages against D&O.

  • Composition with creditors for a group of companies before the Court of Milan.

Languages. Italian, English, French

Professional associations/memberships. International Insolvency Institute; Turnaround Management Association; American Bankruptcy Institute; IWIRC.

Publications. The Italian Bankruptcy Law in English (see above, Online resources).

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