Thanks to Giorgio Nardone for collaborating on this article
On February 23, 2022, the Court of Naples (the “Court”) issued an interim decision on director liability waiver clauses contained in sale and purchase agreements (“SPA”).
Specifically, the Court stated that a covenant that is part of an SPA under which a purchaser (as a new company shareholder) undertakes not to bring company liability actions against a resigning director and, therefore, not to vote in favor of pursuing such actions (the “Clause”) is invalid.
The decision issued by the Court was based on two main sets of grounds:
- Firstly, the Court labeled the Clause a shareholder agreement, even though it was provided as part of an SPA. It went on to argue that shareholder agreements cannot favor the interests of one or more shareholders to the detriment of the company’s interests. An agreement that does so must be deemed null and void.
In the case at hand—the Court argued—the Clause was in the interest of the purchaser, as it allowed the purchaser to purchase shares at a discounted price. Simultaneously, the Clause ran counter to the interests of the company (and its stakeholders) to seek damages in response to bad management. Therefore, the Court stated that the Clause was not designed to target interests worthy of protection according to the legal system.
- Secondly, according to the Court, the Clause was in breach of the rules dictating that a waiver of company liability actions taken against directors can only be approved by a shareholders’ meeting. Indeed, by agreeing to the waiver in the shareholder agreement, the buyer sidestepped those rules, and therefore the Clause is to be deemed null and void.
This ruling is in line with the previous case law on the matter[1]. Italian courts have consistently deemed invalid contractual provisions that compel shareholders not to take company liability actions against directors.
[1] Court of Cassation, April 28, 2010, no. 10215; Court of Cassation, June 9, 1994, no. 7030; Court of Milan, June 16, 2014.
