Limits of the liquidator’s liability to unsatisfied corporate creditors
When should the liquidator of a limited liability company be liable to unsatisfied creditors of the company after the striking off the company from the Commercial Register?
At the beginning of 2020, the Judges of the Court of Cassation gave a comprehensive answer to this question. By means of the order no. 521 of 15 January 2020 of the 3th Civil Section of the Court of Cassation, the Judges of Piazza Cavour circumscribed the extension of the liability of the liquidator provided for by Article 2495, paragraph 2 of the Italian Civil Code[1].
The case dealt with by the Court of Cassation is as follows:
Beta was cancelled, at the request of the liquidator, from the Register of Companies following the closure of the liquidation phase. As a consequence, Alfa, Beta’s privileged creditor, took legal proceedings against Beta’s liquidator. The latter, in fact, prior to the extinction of the company, had proceeded to pay some of the company’s debts without considering the fact that Alfa’s credit was assisted by general privilege and not even noted in the final liquidation balance sheet.
After ascertaining the liquidator’s liability, the Court of First Instance ordered him to pay compensation for financial damage quantified in the amount of the pre-determined claim. This was due to the fact that Beta was already in serious default at the moment the opening of the state of liquidation, therefore Beta had to be subject to bankruptcy proceedings. Consequently, the liquidator had to be held liable for the failure to satisfy the Alfa creditor.
The Court of Appeal, called upon to decide on the burden, had limited the liquidator’s liability to the cases referred to in Article 2495 of the Civil Code, i.e. to the presence of “culpable” conduct, in relation to the nature of the assignment of the liquidator. This culpable conduct violate the “duty of the liquidator to act in a conservative manner, useful for the liquidation, to avoid the dispersion of social assets, now intended for liquidation and therefore for the payment of social debts and the distribution of assets in favour of shareholders“. In this case, the Judges of the encumbrance ascertained that the creditor didn’t prove the damage attributable to the liquidator and they led the non-payment to the evident lack of economic resources of the company.
Following an appeal filed by the creditor Alfa, the Court of Cassation, called to assess the case, erased the sentence and referred it to the Court of Appeal.
The hermeneutical process carried out by the Judges of Piazza Cavour gave a possible definition of “liquidator’s fault”, which would arise if the liquidator violated the obligation to liquidate the assets without taking into consideration the legal order of priority of the company’s claims and the prohibition to distribute them to shareholders before having satisfied creditors.
The principles aimed at guaranteeing maximum protection of creditors are well known and they are set out in articles 2487, 2489 and 2491, paragraph 2, of the Italian Civil Code. For example: article 2491, paragraph 2, states that “liquidators may not distribute advances on the result of the liquidation among shareholders, unless the financial statements show that the distribution does not affect the availability of sums suitable for the full satisfaction of the company’s creditors“.
As noted in the ordinance illustrated above, therefore it has to be taken into consideration the orientation of the Court of merits according to which the liquidator is obliged to comply with the precept of the par condicio creditorum. Actually, the liquidator has the role of guarantor of creditors in this delicate phase in which the creditors can no longer rely on the productivity of the company.
This has allowed the Judges of the Court of Cassation to identify in the principle of the par condicio creditorum, the correct parameter for the configurability of culpable conduct, pursuant to Article 2495, paragraph 2 of the Italian Civil Code, integrating the liability of the liquidator, including the respect of the legitimate causes of priority among creditors pursuant to Article 2741 of the Italian Civil Code.
At the point of the onus probandi, the creditor has to prove the wilful or negligent conduct of the liquidator and the damage and causal link between this and the damage suffered by the himself. Consequently, as stated in the order illustrated above, in order to assert the liquidator’s non-contractual liability, the creditor, who is dissatisfied with the liquidation activity, “must prove the failure to satisfy a claim existing, liquid and payable at the time of the opening of the liquidation phase and the consequent damage caused by the liquidator’s failure to fulfil his obligations, which is abstractly appropriate“.
On the other hand, the liquidator called upon to answer for his own conduct, “will have to prove the fulfilment of the obligation to proceed with a correct and faithful recognition of the social debts and the fulfilment of the obligation to pay the social debts in compliance with the par condicio creditorum, according to their order of preference, without any pretermission of credits existing at the time”
[1] The second paragraph of Article 2495 of the Italian Civil Code states as follows: “without prejudice to the extinction of the company, after the cancellation, unsatisfied company creditors may assert their claims against shareholders, up to the amount of the sums collected by them on the basis of the final liquidation balance sheet and against the liquidators, if the non-payment was the fault of the latter.“