Corporate Governance 2019 Comparisons

Last Updated June 21, 2019

Law and Practice

Authors



CMS Adonnino Ascoli & Cavasola Scamoni is unique in its composition, which combines extensive local and international expertise in order to assist clients with all types of cross-border issues. The Italian corporate team (with offices in Milan and Rome) comprises over 30 professionals and is best known for its knowledge leadership, especially in the energy, life sciences, automotive and media sectors. It has strength in mid-market deals, with a number of long-term clients in this area. Recent highlight deals include international transactions concerning Total, including assisting Total Marketing Services SA and ERG Spa with the sale of TotalERG Spa to API Spa (Anonima Petroli Italiana S.p.A) and providing assistance to Moneygram with respect to restructuring after Brexit. The firm also concluded several high-value deals in 2018, with clients including NMS Group, Telit, and Cuki. It covers all corporate-related practice areas.

Business organisations in Italy may be categorised into two main categories, namely:

  • partnerships, including collective partnerships (società in nome collettivo), limited partnerships (società in accomandita semplice) and simple partnerships (società semplici); and
  • corporations, including limited joint-stock partnerships (società in accomandita per azioni), limited liability companies (società a responsabilità limitata) (SRLs) and joint-stock companies (società per azioni) (SPAs).

The main difference between the abovementioned types of business organisations is that only the shareholders of SPAs and the quotaholders of SRLs enjoy limited liability to the extent of the paid-up capital, while participants in partnerships can be held liable (without limits) for the activity of the organisations in which they take part. Moreover, partnerships have a simplified organisational structure.

SRLs and SPAs are the most common types of limited liability corporations and this chapter will therefore be limited to describing these forms of organisation.

While their governance is similar and, in many cases, rules governing SPAs are applicable to SRLs, there are some differences concerning their management and control, related to the fact that SRLs allow for a greater degree of flexibility from the perspective of corporate governance and control.

Only SPAs can be listed and traded on the Italian Stock Exchange.

The main source of corporate governance requirements is the Italian Civil Code (ICC), which includes the most relevant provisions concerning the corporate governance of companies incorporated in Italy.

In addition to the ICC, mandatory requirements for publicly listed companies are also laid down in Legislative Decree no 58/1998, called the Consolidated Financial Act (TUF), which provides, inter alia, additional integrity and independence requirements that must be fulfilled by the individuals performing management and control roles in companies with publicly traded shares.

The 2006 Corporate Governance Code issued by the Italian Stock Exchange (Codice di Autodisciplina) lays down further rules on the corporate governance of companies with publicly traded shares. Even though these rules are not binding, such companies must keep the market and their shareholders informed of their governance structure and degree of compliance with the code.

As a general rule, the Italian legal framework concerning corporate governance is based on the principle that the management body is responsible for setting up a proper system of governance and controls, which must be tailored to the type and size of the company and to the activities carried out.

The directors are liable vis-à-vis the company, shareholders and third parties for any damage that may be caused as a consequence of an improper design of the corporate governance of the company.

The main recent development concerning corporate governance in Italy was carried out with Legislative Decree no 14/2019, the 'Code of Crisis and Insolvency', published in the Official Gazette no 38 of 14 February 2019.

Within a wide-reaching reform of the legal framework governing financial crises and insolvency procedures, the Italian legislator amended a number of provisions of the ICC to ensure a more responsible approach to corporate crises.

In general, the reform strengthened the duties and responsibilities of directors related to obligations to:

  • set up a proper organisational, administrative and accounting governance structure;
  • take action without delay for the adoption and implementation of the tools for overcoming the crisis and the recovery of business continuity; and
  • in the event of a crisis, limit the management activity to the preservation of the company’s assets.

The majority of the provisions of the Code of Crisis and Insolvency will enter into force 18 months after its publication date, ie, on 14 August 2020. However, few provisions amending the ICC became effective on 16 March 2019, including, for example, those setting forth new and lower thresholds for the appointment of the controlling/auditing body in SRLs, in accordance with Article 2477(3) ICC.

The governance and management of the company is a responsibility of the management body.

SPAs

The main bodies involved in the governance and management of the companies vary based on the model that the shareholders choose to adopt at the time of the incorporation of the company, or subsequently.

The most common model of corporate governance is the traditional model (modello tradizionale), which entails that the company is managed either by:

  • a sole director (amministratore unico), or
  • a board of directors composed of two or more directors (consiglio di amministrazione).

Alternatively, the company may adopt one of the following models:

  • in the one-tier or monistic model (modello monistico), the company is managed by a board of directors appointed by the shareholders, which elects the management control committee (comitato per il controllo sulla gestione) from among its members;
  • in the two-tier or dualistic model (modello dualistico), the company is managed by a management board (consiglio di gestione) which is appointed by the supervisory board (consiglio di sorveglianza). The supervisory board is appointed by the shareholders.

In the case of companies with publicly traded shares, the 2006 Corporate Governance Code establishes the rule that the company must provide prior information on the reasons why and manner(s) in which it intends to adopt a non-traditional model.

SRLs

In the case of SRLs, the management body might be either:

  • a sole director;
  • two or more directors, with joint or separate powers, or
  • a board of directors composed of two or more directors.

As a general rule and unless the bylaws provide otherwise, the management body has the power to manage the company and to carry out any act of ordinary and extraordinary management of the company, save for those powers and matters expressly reserved to the shareholders/quotaholders by the law or the bylaws, eg:

  • approval of the financial statements and distribution of dividends, which shall be resolved within 120 days (or, in the case of postponement for justified reasons, 180 days) after the end of the fiscal year;
  • appointment and compensation of the members of the management body;
  • appointment of statutory auditors and external auditors;
  • responsibility of directors and statutory auditors;
  • amendments to the bylaws;
  • reduction of the corporate capital for loss; and
  • appointment and revocation of liquidators.

In the case of a sole director or directors with separate powers, unless the bylaws provide otherwise, directors have joint and several power to manage the company and to carry out any act of ordinary and/or extraordinary administration; the decisional process concerning which is not subject to specific formalities.

In the case of collective bodies, different rules apply based on the nature of the company, as described below (since the traditional model is the most common model of corporate governance in SPAs, the rules below are applicable to the decision-making process of the board of directors).

SPAs

Decisions are adopted following a regular meeting, according to the rules which are usually set forth in the bylaws.

In brief, as a general rule and unless the bylaws provide otherwise:

  • the meeting is convened with a notice of call to be sent to all the directors and statutory auditors (if appointed);
  • even without a notice of call, a plenary meeting can be validly assembled if all the directors and statutory auditors are in attendance;
  • as far as quorums are concerned, meetings are duly assembled with the attendance of the majority of the directors and resolutions pass with the favourable vote of the majority of the attendees;
  • the meeting is chaired by a chairman, identified by the bylaws or appointed by the attendees, who verifies the regularity of the meeting and ascertains the results of the vote.

SRLs

The following matters:

  • approval of draft financial statements;
  • merger/de-merger plans; and
  • decisions or proposals for capital increase delegated to the board by the quotaholders,

must be adopted by the directors following a regular meeting. As a matter of practice, the applicable rules and formalities are set forth in the company’s bylaws; otherwise, the rules applicable to SPAs apply.

The bylaws of SRLs might provide that all the other decisions can be adopted by the directors through the procedure of written consultation or written consent, according to the specific formalities provided for therein. As a general rule, it is necessary that all members are able to participate in the decision and is adequately informed and that the executed documents clearly indicate items on the agenda and the consent granted to them.

The board of directors must be composed at least of two directors.

The board of directors must elect a chairman among its members, if the same has not been appointed by the shareholders/quotaholders upon the appointment of the board, and may also appoint a deputy chairman authorised to act in place of the chairman.

The bylaws contain specific rules on the power of legal representation of the company, establishing the individuals who may represent the company to third parties and the extent to which they may do so.

Usually, unless otherwise provided in the bylaws, the chairman of the board of directors (and the deputy chairman, if appointed) is the legal representative pro tempore of the company, while the other directors have the power to represent the company in respect of powers specifically delegated to them.

Under Italian law, there are no specific statutory requirements for the composition of the board of directors. For example, the directors may or may not be quotaholders/shareholders and there is no residency requirement.

That said, it is worth noting that the following individuals cannot be appointed as directors:

  • minors;
  • persons not having legal capacity;
  • persons banned from offices;
  • persons who have been disqualified;
  • bankrupts; or
  • persons in a position of incompatibility.

Under Italian law, in the case of SRLs, entities can also be appointed as directors provided that their legal representative(s) complies with all the requirements mentioned above. If so, the legal representatives are jointly liable with the entities for the violation of directors’ duties and obligations.

Specific requirements for the appointment of the directors may be set forth in the bylaws.

In the case of companies with publicly traded shares, there are a number of further requirements/rules that the company must take into account in the appointment of the directors, (including, for instance, gender quotas).

As a general rule, directors are appointed by the shareholders/quotaholders while the attorneys-in-fact (who are usually employees of the company) are appointed by directors.

In the case of SPAs (and also in the case of SRLs, if so provided in their bylaws), if one or more directors cease to hold office, then the other directors shall appoint a new director by way of co-optation (cooptazione), provided that the majority of the members of the board of directors is composed by members appointed by the shareholders/quotaholders. The directors so appointed shall stay in office until the next shareholders'/quotaholders' meeting.

In SPAs, the maximum term of the mandate for directors is three years. In SRLs directors can also appointed for either a fixed term or an indefinite term. In both cases (SPAs and SRLs), directors can be re-appointed at the expiry of their mandate.

The mandate to the directors might cease upon one of the following events:

  • expiry of the mandate;
  • resignation;
  • if appointed for a fixed term, revocation for cause (if the revocation is without cause the director might claim damages);
  • if appointed for an indefinite term, revocation without cause upon reasonable notice; and/or
  • if the director subsequently becomes ineligible (see the requirements outlined in 4.3 Board Composition Requirements/Recommendations, above).

With reference to resignation, directors may resign at any time with immediate effect upon informing the board (and the statutory auditors), as long as the majority of the members of the board of directors remain in office. Otherwise, such resignation shall be effective upon the reconstitution of the majority of the board.

Specific requirements for the independence of the directors may be set forth in the bylaws. In the case of companies with publicly traded shares, there are statutory requirements concerning the independence of directors.

As a general rule, the directors are responsible for damages arising from their breach of conflict of interest rules. In such a case, statutory auditors, external auditors and abstaining and absent directors can challenge any resolution taken by the board with a vote of directors in conflict, to the extent that the vote in conflict was essential to reach the needed quorum, and the company suffered damage as a result of the decision.

SPAs

Pursuant to Article 2391 ICC, the directors are under the duty to disclose any interest they may have, personally or on behalf of third parties, in a specific transaction, specifying the nature, terms, origin and relevance thereof to the board of directors and to the board of statutory auditors and abstaining from taking any action in conflict (or, in case of a sole director, referring the decision to the board of statutory auditors).

If such action is taken, the board of directors must expressly state the reason and the benefit to the company of the transaction.

Directors of listed companies who fail to disclose conflict of interests may incur criminal liability in accordance with Article 2629-bis ICC.

SRLs

In the case of SRLs, a court can be asked to declare contracts entered into by a director invalid to the extent that, in respect of such contracts:

  • the director acted in his or her own interest or in the interest of a third party; and
  • the third party with which the director contracted was aware (or should have been aware) of the conflict.

In order to ensure that directors undertake their role appropriately, there are a number of duties that they must comply with. A failure to comply with these duties could demonstrate a breach of their responsibility for the management of the company.

General Duties

Duty of care

Directors must perform their activities with a high standard of care and diligence, which depends on the nature of the office, their competence and the unique circumstances of each case, such as the kind of company, its size, the field of activity, the importance and conditions of the discussed operation and the timeframe available to make a decision.

Duty to pursue the company’s purpose

Directors must act in a way which they think is most likely to pursue the company’s purpose and promote the success of the company. This aim is deemed as pursued once the company has accomplished the corporate purpose as laid down in the bylaws.

Duty to inform and be informed

All directors are required to be informed about the day-to-day activities of the company and each director has the duty and the power to receive all relevant information of the company.

If appointed, managing directors must periodically inform the other directors and statutory auditors of the general development of the management, of its foreseeable evolution and of the most relevant operations (in terms of value or quality) including the company subsidiaries.

Duty to monitor

Even when some of these duties have been delegated to individual directors (or to an executive committee or to third parties), directors are jointly liable if they fail to supervise the general conduct of company affairs provided that, being aware of acts which could prejudice the company, they did not do what they could have to prevent their performance or to prevent or mitigate their harmful consequences.

Duty of confidentiality

Directors may be held responsible to the shareholders/quotaholders for damages arising from using and/or sharing business information learned during their time in office.

Specific Duties

A very broad list of the duties of the directors specifically mentioned in the ICC would include compliance with:

  • rules concerning the preservation of the equity and assets of the company (eg, prohibition of distributing fictitious dividends or dividends not resulting from duly approved financials);
  • calling of shareholders’/quotaholders' meetings when required by the law or the bylaws;
  • consenting to the inspections of the statutory auditors, if appointed, and giving them true and complete information;
  • maintaining true and complete accounting books and records;
  • payment of taxes, social security contributions, tax withholdings from employees’ salaries;
  • drafting of true and complete yearly accounts;
  • disclosing to the Chambers of Commerce details of parent companies or ultimate controlling shareholders, both resident and non-resident, which carry out direction and co-ordination activity concerning the Italian entities.

Directors may incur in civil liability if they breach their own duties and obligations.

In particular, from a civil law perspective, each director is jointly and severally liable towards the company, the shareholders/quotaholders and third parties in general for damages resulting from directors’ breach of their statutory duties and obligations, unless such duties have been validly delegated to either a managing director, an executive committee or an attorney-in-fact.

In such circumstances (ie, valid delegation of authority), the directors might in any case be held jointly liable with the delegate if they have failed to supervise the general conduct of company affairs or if, being aware of acts which could prejudice the company, they did not do what they could have done to prevent their performance or to eliminate or reduce their harmful consequences.

As mentioned in 4.7 Responsibility/Accountability of Directors, above, the company, the shareholders/quotaholders and third parties can enforce a breach of directors’ duties and obligations and claim damages arising out of such breaches.

Directors may also incur criminal and administrative liability.

Specifically, administrative fines may be imposed on directors for several omissions, including, for instance:

  • failure or hindrance of the exercise of control pursuant to Article 2625(1) ICC;
  • failure to file of documents with the Chamber of Commerce within the statutory deadlines;
  • failure to call the quotaholders' meeting when it is requested by the law or the bylaws; and/or
  • lack of communication of particular information (including for example registered seat, competent Chamber of Commerce, number of enrolments at the Chamber of Commerce, etc) in the company’s correspondence.

In addition, directors may also be considered personally criminally liable for specific offences, eg, false company communications, corruption, unlawful transactions on quotas, unlawful distribution of profits and reserves, fraudulent bankruptcy, death or personal injury in lack of adoption of measures to protect safety at workplace, unlawful treatment of data or environmental pollution.

Criminal liability is assessed on a case-by-case basis by the Public Prosecutor, who relies on the company’s excerpts, organisational chart, board of directors’ minutes, legal documents and actual conduct of the parties involved.

As a general rule, the directors must be compensated for their office as directors. They can expressly or tacitly waive such right.

The remuneration payable to the directors can be fixed or variable (depending for example on the profit of the company) or mixed (partially fixed and partially variable). In addition, the directors must be reimbursed of the costs borne during the performance of their office.

The rules applicable to the remuneration, fees and benefits payable to officers are subject to HR regulation.

Specific rules are envisaged by the TUF concerning for instance stock option plans as well as the obligation for the company to disclose a report on the remuneration of the directors, pursuant to Article 123-ter TUF.

In this regard, the Corporate Governance Code issued by the Italian Stock Exchange states that the board of directors shall appoint a remuneration committee composed of (at least a majority of) independent directors, which shall periodically assess the adequacy of the policies for the remuneration of directors and statutory auditors and submit proposals and opinions to the board of directors.

There is no obligation to make any public disclosure of the remuneration payable to directors for their office.

As mentioned, the rules applicable to the remuneration, fees and benefits payable to officers are subject to HR regulation.

The relationship between the shareholders and the company has two main sources: the law and the bylaws.

In fact, within the boundaries laid down in the ICC and other applicable regulations, the shareholders, when setting up a company by entering a deed of incorporation, are allowed to regulate several crucial aspects of their relationship with the company in the bylaws.

Indeed, the bylaws, which can be amended only by way of resolution of the extraordinary quotaholders’/shareholders’ meeting before a public notary, establish among other things the rules applicable to the relationship of the shareholders to each other and covers issues such as the transfer of participations, granting of specific rights to certain shareholders/quotaholders, withdrawal and exclusion from the company, etc.

SPAs

According to Article 2380-bis ICC, the ordinary and extraordinary management of the company is an exclusive and autonomous prerogative of the board of directors (or the sole director), as appointed by the shareholders’ meeting, with the exception of those matters that must be entrusted to the shareholders (see 3.2 Decisions Made by Particular Bodies, above).

Therefore, as a general principle, the shareholders cannot intervene directly into the management strategies. Nonetheless, a number of tools are granted to the shareholders with the purpose of monitoring and, in certain cases, intervening in the management of the company, such as the right to remove the directors at a shareholders’ meeting or to choose not to re-elect them when their mandate expires.

Moreover, Article 2367 ICC provides that shareholders representing a tenth of the share capital (or less, if provided by the bylaws), have the right to ask the directors to call a shareholders’ meeting with a specific agenda. In the event of the directors’ inertia, the controlling body shall call the meeting. Should the controlling body fail to call the meeting, the shareholders may ask a court to do it.

SRLs

Pursuant to Article 2475 ICC, the management of SRL companies is usually entrusted to the quotaholders, unless otherwise provided in the company’s bylaws.

The stronger involvement of the quotaholders in the management of the company is embodied by other provisions, such as the possibility to entrust quotaholders, with specific provision of the bylaws, with special rights relating to the administration of the company in accordance with Article 2468(3) ICC.

Furthermore, Article 2476 ICC provides that even the quotaholders who do not take part in the management of the company have the right to be informed by the directors of the trends of the business and to consult, including through trusted professionals, the company’s books and the documents relating to the management (such as of journals, minutes of the meetings of the corporate bodies, accounting reports, bank account statements, contracts and tax returns).

The Italian courts (both local and Supreme Court) have also held that, in relation the matters falling within their competence pursuant to Article 2479 ICC, quotaholders have the direct power to call the quotaholders’ meeting, notwithstanding different provisions of the bylaws and, in any case, without the need to resort to a court’s decision as it is for SPAs (see, ex multis, Italian Supreme Court, case no 10821 of 25 May 2016).

SPAs

In SPAs, shareholders adopt their decisions by means of shareholders’ meetings only.

As a general rule and unless the bylaws provide otherwise:

  • the shareholders’ meeting is convened by the board of directors, with a notice of call that must include:
    1. the location of the meeting;
    2. the date of the meeting, which shall be at least 15 days later; and
    3. the items on the agenda to be discussed and resolved by the shareholders;
  • usually the notice of call will also include the detail of a shareholders’ meeting on second call, which can be assembled and pass resolutions with a lower quorum, if provided by the bylaws, in the event that the first one cannot be properly held;
  • even without a notice of call, a plenary shareholders’ meeting can be validly assembled if the entire corporate capital of the company is represented and the majority of the directors and the statutory auditors are in attendance;
  • shareholders can be represented within the shareholders’ meeting by means of proxies granted to other shareholders as well as to third parties, with the exception of members of management and control bodies of the company;
  • as far as quorum is concerned, shareholders’ meetings are duly assembled with the attendance of at least half of the shareholders, excluding shares without voting rights. The ordinary meeting passes resolutions with the favourable vote of the absolute majority of the attendees, unless a higher majority is required by the bylaws. The extraordinary meeting passes resolutions with the favourable vote of shareholders representing more than half of the share capital, unless a higher majority is required by the bylaws; and
  • the shareholders’ meeting is chaired by a chairman, identified by the bylaws or appointed by the attendees. The chairman verifies the regularity of the meeting and ascertains the results of the vote. The chairman must be assisted by a secretary (likewise identified by the bylaws or appointed by the participants), who is entrusted, inter alia, with the task of preparing the minutes of the meeting.

SRLs

The quotaholders can pass resolutions during a quotaholders’ meeting but also by means of written resolutions, except for some items that must be necessary addressed by the quotaholders’ meeting (eg, modifications of the bylaws or the corporate scope of the company, compulsory reduction of the corporate capital and winding up of the company).

There are other differences from the SPA, such as:

  • the shorter term for the notice of call, which is set to eight days prior to the meeting but can be further reduced by the bylaws;
  • the possibility, unless differently provided by the bylaws, of not appointing a secretary to the meeting; and
  • the fact that, even without notice of call, the quotaholders’ meeting is properly convened if the quotaholders are present and management and supervisory bodies are not in attendance and declare that they have been informed as to the agenda, even if they are not physically in attendance.

Each director is jointly and severally liable towards the shareholders/quotaholders for damages resulting from directors’ breach of their statutory duties and obligations, unless such duties have been validly delegated to either a managing director, an executive committee or an attorney-in-fact.

Thus, each shareholder is entitled to bring forward an ordinary action for damages, which is subject to a five-year time bar, starting from the day on which the act was committed.

Specific disclosure obligations concerning the shareholders are provided in relation to companies with publicly traded shares in order to ensure that all stakeholders (eg, investors, regulators and financial operators) are informed of the allocation of shareholdings granting control powers.

In particular, Article 120 TUF provides that all persons holding significant shareholdings, ie, above the threshold of 3% of the share capital (5% if the issuer is an SME), must notify the company and the public authority responsible for regulating the Italian financial markets (Commissione Nazionale per le Società e la Borsa) (CONSOB).

Failure to notify significant shareholdings may result in:

  • an administrative sanction against the issuer and the shareholder;
  • suspension of certain voting rights; and
  • the possibility (including for CONSOB) to challenge the resolution passed with the decisive vote of the shares for which the right to vote was not allowed.

In general, companies must – within 30 days of approval by the quotaholders’/shareholders’ meeting – file the annual financial statements, along with (if required by law) the reports of the directors, the auditors and the external auditing firm, with the companies’ registry kept at the competent Chamber of Commerce.

In accordance with Article 154-ter TUF, companies with publicly traded shares shall make available to the public (at the company's headquarters, website and by the other means established by CONSOB), in addition to the annual financial statements, a six-month financial report containing a simplified half-year statement, interim management report and, where applicable, six-month statements from the statutory auditor or external auditor.

Most of the corporate governance arrangements are included in the bylaws of the company, which must be communicated to the Chamber of Commerce and are therefore publicly available.

However, pursuant to Article 2341-bis ICC some arrangements may be included in separate agreements between shareholders in order to regularise the ownership structure or the management of the company (so-called 'patti parasociali'). These agreements may relate to the exercise of voting rights, the limitation of the transfer of shares/quotas and the exercise, jointly or otherwise, of a dominant influence on the company.

In general, there is no statutory requirement obliging the companies to disclose these arrangements. 

An exception is provided with regard to companies with publicly-traded shares (and their parent companies), where shareholders agreements must be:

  • communicated to CONSOB within five days;
  • published in extract form in the national daily newspapers within ten days;
  • filed with the companies registry of the place where the company has its registered office within 15 days; and
  • communicated to the listed companies.

All companies are obliged to communicate to the companies’ registry the appointment of directors (with specification of the chairman of the board, if any), statutory auditors, external auditing firms and attorneys-in-fact (procuratori) within certain deadlines, as well as the powers granted to directors, officers and attorneys-in-fact.

In addition to information concerning the corporate governance of the company, mandatory disclosures to the Chamber of Commerce shall be made in relation to other sets of information, such as the name and registered office of the company, the corporate capital (with details of the quota held by each shareholder), the name of the company exercising direction and coordination and the indication of insolvency proceedings affecting the company, if any.

All such information is displayed in the excerpt of the company (visura), which can be obtained from the Chamber of Commerce.

Article 16 of Legislative Decree no 39/2010 provides that, for companies with publicly traded shares, asset management companies, banks, insurance and re-insurance companies and other so-called Public Interest Entities (PIEs) cannot entrust internal auditors with the auditing of the company’s accounts and must therefore appoint an external auditing firm.

The mandate of the external auditing firm must have a three-year term and can be revoked by the shareholders with just cause at any time after consulting the controlling body (if any).

SPAs

While SPAs are always obliged to appoint statutory auditors, they must appoint an independent auditor (either a registered accountant or an external auditing firm) if the company is obliged to prepare consolidated financial statements or is a listed company.

Otherwise (and provided that it is not a PIE), the company has the possibility to entrust the auditing of the company’s accounts to the statutory auditors.

SRLs

With regard to SRLs, Article 2477 ICC provides that a controlling body, eg, board of statutory auditors, or an external auditing firm must be appointed if the company:

  • is obliged to draft consolidated financial statements;
  • controls another company which is subject to the accounting audit; or
  • has exceeded at least one of the following limits for two consecutive financial years:
    1. total assets: EUR2,000,000;
    2. revenues from sales and services: EUR2,000,000;
    3. average number of employees during the financial year: ten.

The duty to appoint a controlling/auditing body ceases if none of these conditions is exceeded for three consecutive financial years.

Therefore, if the above conditions are met, the SRL will generally have the possibility to choose between an external auditing firm and the appointment of a controlling body (whose members need however to be enrolled at the Registry of Auditors) entrusted also with the auditing of the company’s accounts.

The obligation to appoint an external auditor can be included in the bylaws of the company.

As a general rule, the directors have the exclusive responsibility over the management of the company. Pursuant to Article 2086(2) ICC, this entails the creation of an organisational, administrative and accounting structure that is appropriate to the nature and size of the business, also in relation to the timely detection of the crisis of the business and the loss of business continuity.

CMS Adonnino Ascoli & Cavasola Scamoni

Galleria Passarella 1
20122 Milan
Italy

+39 02 89 28 38 00

+39 02 48 01 29 14

daniela.murer@cms-aacs.com www.cms.law
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CMS Adonnino Ascoli & Cavasola Scamoni is unique in its composition, which combines extensive local and international expertise in order to assist clients with all types of cross-border issues. The Italian corporate team (with offices in Milan and Rome) comprises over 30 professionals and is best known for its knowledge leadership, especially in the energy, life sciences, automotive and media sectors. It has strength in mid-market deals, with a number of long-term clients in this area. Recent highlight deals include international transactions concerning Total, including assisting Total Marketing Services SA and ERG Spa with the sale of TotalERG Spa to API Spa (Anonima Petroli Italiana S.p.A) and providing assistance to Moneygram with respect to restructuring after Brexit. The firm also concluded several high-value deals in 2018, with clients including NMS Group, Telit, and Cuki. It covers all corporate-related practice areas.

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