Contribution by Antonio Vigliotti, Esq., published in N&T Plus Diritto – Il Sole 24ORE.

The Court of Cassation, with its recent order no. 9054 of 21 March 2022, has revisited the matter of the applicable rules where a director of a joint-stock company in a conflict of interest performs with a third party acts that fall within the competence of the board of directors despite the absence of a resolution by the same board.

In the specific case, the Court of Turin had annulled two consulting and advertising agency contracts pursuant to Article 1394 of the Italian Civil Code, which governs the aspects connected with the contract concluded by the representative in conflict of interest with the represented party.

The Court of Appeal of Turin had confirmed the decision, reaffirming the existence of the conflict of interest inasmuch as such agreements had been concluded by a director of one company with another company which was significantly participated in by the same director.

The Supreme Court, referring to some of its previous case law as well as to prevailing legal doctrine, has reaffirmed that it is correct to refer to Article 1394 of the Italian Civil Code rather than to Articles 2373 and 2391 of the Italian Civil Code.

In fact, in the case provided for by Article 1394 of the Italian Civil Code, the conflict of interest manifests itself at the moment of the exercise of representative power, whereas in the cases referred to in Articles 2373 and 2391 of the Italian Civil Code such conflict (respectively, in the shareholders’ meeting and in the board of directors) arises at the moment of the exercise of deliberative power.

The application of Article 2391 of the Italian Civil Code presupposes a prior resolution of the board of directors, in the presence of which the annulment of the contract is possible only if the resolution that decided its conclusion is first annulled, following proof of bad faith on the part of the third party.

Consequently, given that in the case examined by the Supreme Court there had been no resolution, the principle has been reaffirmed whereby, in the matter of joint-stock companies, when an individual director performs, in the absence of a resolution of the board of directors, an act with a third party that instead falls within the competence of such body, the impact of the conflict of interest on the validity of the transaction must be governed not by Article 2391 of the Italian Civil Code, but by the general rules of Article 1394 of the Italian Civil Code.

The circumstance that the acts falling within the competence of the board of directors were performed by a managing director rather than by a sole director cannot lead to a different solution: in such case too Article 1394 of the Italian Civil Code must be applied and not Article 2391 of the Italian Civil Code, which, referring to the conflict that emerges in the deliberative context, concerns the exercise of management power, at a moment therefore prior to that in which the act is performed, in the name of the company, with respect to the third party.