Thanks to Rossella De Sio for collaborating on this article
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Legislative framework and systemic reform
On 12 April 2025, Italy brought into force law no. 35 of 14 March 2025, introducing comprehensive amendments to article 2407 of the Italian Civil Code that fundamentally redefine the liability framework governing statutory auditors. This landmark reform represents a pivotal evolution in Italian corporate governance, establishing both proportionate liability caps tied to remuneration and express limitation periods for liability actions, thereby addressing longstanding systemic imbalances in the supervisory accountability framework. Prior to the reform, statutory auditors were subject to joint and several liability with directors for damages arising from directorial acts or omissions, where such damages could have been prevented through proper supervisory activity, without any monetary limitation. This expansive liability regime, compounded by rigorously expansive judicial interpretations, frequently resulted in excessive exposure for statutory auditors despite their lack of direct managerial authority. The resulting chilling effect proved particularly pronounced within small and medium-sized enterprises and companies subject to heightened insolvency risk, where qualified professionals increasingly declined audit mandates. Recognizing these systemic deficiencies, the legislature crafted this reform to recalibrate the system by introducing greater legal certainty, proportional accountability, and a more predictable liability regime.
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Quantitative liability limitations and temporal restrictions
The reform’s cornerstone innovation lies in the introduction of quantitative monetary limitations under the newly enacted paragraph 2 of article 2407 of the Italian Civil Code, establishing a sophisticated tiered structure that calibrates liability exposure to annual remuneration levels received in the relevant financial year. Where remuneration does not exceed €10,000, liability is capped at fifteen times the annual remuneration. For remuneration falling between €10,000 and €50,000, the liability ceiling is established at twelve times the remuneration. Where remuneration exceeds €50,000, maximum liability is limited to ten times the remuneration received. Critically, this liability limitation regime is rendered inapplicable in circumstances involving wilful misconduct. Complementing these monetary caps, the reform introduces express temporal limitations to enhance legal predictability, requiring liability actions against statutory auditors to be initiated within five years of filing the financial statements for the financial year in which the damaging event occurred, as provided under article 2429 of the Italian Civil Code. This provision resolves longstanding uncertainty regarding applicable prescription rules, where the absence of specific statutory terms often generated considerable interpretive confusion.
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Interpretive challenges and jurisprudential implications
While the reform represents commendable advancement toward clarity and proportionality, several aspects may generate interpretive challenges requiring judicial clarification. The removal of previous provisions governing joint and several liability with directors raises fundamental questions regarding whether, and under what circumstances, auditors may continue to be held accountable for damages linked to directorial misconduct, particularly where supervisory failures may have contributed to harm. This legislative omission creates potential uncertainty concerning the scope of auditors’ residual liability for directorial misconduct. Furthermore, the reformed text fails to explicitly address the treatment of gross negligence, potentially creating inconsistencies with article 1229 of the Italian Civil Code, which prohibits advance exclusions or limitations of liability in cases involving gross negligence or wilful misconduct.
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Conclusion
Law no. 35/2025 marks a watershed moment in corporate governance, fundamentally transforming statutory auditor liability through the introduction of proportionate monetary caps and definitive temporal restrictions. The reform’s sophisticated three-tier structure successfully calibrates liability exposure to remuneration levels while establishing clear five-year limitation periods, providing the legal certainty that has long eluded Italian corporate governance.
Despite interpretive challenges surrounding the removal of joint and several liability provisions and potential inconsistencies with article 1229 of the Civil Code, this transformative legislation achieves its core objective of mitigating disproportionate liability risks that previously deterred qualified professionals from accepting audit mandates.
In any case, the reform’s ultimate success will depend on consistent judicial application that honours both its protective intent and accountability requirements. By creating a more sustainable framework for statutory auditor liability, law no. 35/2025 addresses a critical gap in Italian corporate law while encouraging qualified professional participation in corporate supervision.
