Business Judgment Rule: latest news on the liability of the director

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Cass. civ. Sec. I, Ord., (ud. 10/11/2020) 16-12-2020, n. 28718

With the decision under review, the Supreme Court returns to deal with the principle of the so-called business judgment rule, pointing out that the directors can not be held responsible for the normal business risk and, consequently, the negative outcome of the company’s activities or individual acts related to it. The merit of management choices cannot therefore be reviewed by the judge, unless, on the basis of an ex ante assessment, the operations are manifestly reckless.

The judges of legitimacy, recalling the wide-ranging jurisprudential debate, emphasize in the first place how true it is that, according to a peaceful jurisprudential orientation “the director of a company cannot be charged with responsibility under art. 2392 c.c., to have made inappropriate choices from the economic point of view” (since such an assessment relates to the entrepreneurial discretion and can therefore possibly detect as a just cause for revocation of the director, not as a source of contractual liability towards the company). Moreover, that “the judgement on the diligence of the director in the fulfillment of his mandate can never involve management choices (or the methods and circumstances of such choices), even if they present profiles of significant economic risk”. However, they confirm that it is equally undeniable that, in this type of judgment, may well syndicate “the omission of those cautions, checks and preventive information, normally required for a choice of that type, made in those circumstances and in those ways”, and therefore also “the diligence shown in appreciating in advance the risk margins associated with the operation to be undertaken.”[1]

In no case, therefore, the judge will be able to review the merit of entrepreneurial choices unless, if assessed ex ante, they are manifestly reckless and imprudent.[2]

The sentence under review, therefore, is aligned, with the recent jurisprudential pronouncement, to the principle according to which : “With regard to the liability of executive directors and the general manager of a joint-stock company for damages caused to the company administered, the unquestionability of the merit of their management choices (the so-called business judgment rule) is limited by the assessment of their reasonableness, to be carried out both ex ante and taking into account the failure to adopt the precautions, checks and prior information normally required for a choice of that type and the diligence shown in appreciating in advance the risk margins associated with the operation to be undertaken”.[3]

 

Chiara Tavoletti

[1]cf. Cass. n. 15470 del 2017.

[2]cf. Cass. n. 17441 del 2016; Cass. n. 2975 del 2020

[3]Cass. 22 Giugno 2020, n. 12108