Corporate governance is the set of rules according to which companies are managed and controlled under a specific legal system.
Under Italian Law, the most common type of companies are the joint stock companies (Società per Azioni – S.p.A.) and the limited liability companies (Società a responsabilità limitata – S.r.l.).

Legal Framework

Corporate governance regulatory framework is mainly set out in the Italian Civil Code (ICC), in the Legislative Decree 58/1998 (Testo Unico della Finanza – TUF) and in the rulings of the National Commission for Companies (CONSOB), i.e. the public authority for the market security.
Listed companies can adopt the non-mandatory Code of Conduct by the Italian Corporate Governance Committee Borsa Italiana, issued in July 2018. 

Corporate Governance body and management models

According to Art. 2380 of ICC, the joint stock company’s governance (S.p.A.) can be structured as follows:

1. Traditional model: this system will apply by default if no choice is made. It is characterized by:
   • Shareholders’ general meeting: it has the power to appoint:
   • Management body: board of directors or sole director;
   • Panel of statutory auditors: it ensures the company financial compliance with the law;
2. Dualistic model: this system is characterized by a two-tier structure, where the shareholders appoint:
   • Supervisory Board: responsible for ensuring the company complies with the law;
   • Management Board: the sole responsible for the management of the company;
3. Monistic model: this system is characterized by a one-tier structure, where the shareholders appoint only:
   • Board of directors: responsible for management of the company and composed by a controlling body, appointed within its own members.

According to Art. 2475 of ICC, limited liability company’s governance (S.r.l.) can be structured as follows:

1. Sole director;
2. Two or more directors without forming a board of directors;
3. Board of directors.

Management and board members

Directors of both S.r.l. and S.p.A. have the duty of managing the company and they are responsible for it, hence they must be independent. Moreover, managing powers can be also granted to not-directors individuals, called general directors.  
In both the companies, the board of directors can be composed of individuals or legal entities and shareholders can also be directors.
In the S.p.A., the by-laws of the company can provide that the shareholders’ meeting must authorize specific management decisions. In the S.r.l., the directors can request the quotaholders to resolve specific issues usually reserved to the management body.
For both S.r.l. and S.p.A., the removal of directors can be approved by a resolution of the shareholders’ meeting. The removal must provide a just cause, otherwise the director is entitled to claim damages. 

Beware that listed companies must be managed by a board of directors and must maintain a gender balance within it.     

Shareholders’ agreements

Shareholders’ agreements are a fundamental tool especially at the highest level of the control chains, and they are used to regulate obligations between shareholders. The agreed obligations are enforceable only between the parties and not also against third parties.
Pursuant to Art. 2341-bis of ICC, shareholder’s agreement concerning voting rights, limitations to the transfer of shares and the exercise of a dominating influence cannot exceed five years, although they are renewable. If the duration is undetermined, however, any party can withdraw from the agreements.

In conclusion, corporate governance involves the relationship between different relevant figures: the executive officer, the board of directors, the management body and the shareholders. All parties involved have an interest and it is often difficult to find the right balance for the proper functioning of a company.           

A professional and experienced legal assistance is thus always suggested. VGS Corporate Lawyers provide expertise and experience to our clients through all the steps of a company formation and for the setting up of the most appropriate corporate governance.