The “Compensation” of Damages with Advantages Deriving from Management and Co-ordination Activity (Direzione e Coordinamento) of the Parent Company (article 2497, paragraph 1, Italian Civil Code) – Italian Supreme Court 24 August 2004, no. 16707 –

The reform of Italian joint stock company law (legislative decree no. 6 of 17 January 2003) introduced regulation of the activity of management and co-ordination (articles 2497–2497 septies Italian Civil Code (ICC)), applicable to groups of companies and businesses. The Report which accompanies legislative decree no. 6/2003 maintains that the responsibility of the parent company towards subsidiary companies' shareholders and creditors is “the main issue facing corporate groups”. One of the most important and interesting provisions made by article 2497 ICC is that in the first paragraph concerning the so-called “compensatory advantages”, by which the parent company, and those entities which may be jointly answerable with the parent company, may be held not liable for damaging activity of management and co-ordination. A recemt ruling by the Italian Supreme Court refers to this exemption from liability, and its inclusion in new regulatory references is likely to further the jurisprudential debate on this topic. However, the Supreme Court ruling appears to be only partially usable if considered in light of a possible interpretation of the new art. 2497, paragraph 1, of the Italian Civil Code.