GmbH and S.r.l.: Differences and similarities of directors' liability in Italy and Germany

The Italian Civil Code governs the liability of the director of an Italian limited liability company.

Directors of an S.r.l. have sole responsibility for the management of the company and have the general representation of the company.

As a rule, the management actions of directors or members of the board of directors are not subject to subsequent review (so-called Business Judgment Rule applies). A company director cannot be held liable for business decisions that later prove to be economically inadequate. This is because a prior assessment of the appropriateness of the decision is the result of a business judgement and, although it may lead to the dismissal of the director, it cannot, in principle, give rise to contractual liability towards the company.

However, the incontestability principle of management decisions is not absolute and its effectiveness is subject to limits. 

The breach of statutory or contractual obligations provided for the exercise of management functions, as well as proven mismanagement of the company by the directors, may trigger various types of civil liability of the management body. The directors of an S.r.l. may be held liable to the company (Article 2392 of the Italian Civil Code), to the company's creditors (Articles 2394 and 2394-bis of the Italian Civil Code), to the shareholders or to third parties (Art. 2395 of the Italian Civil Code).

The function, requirements, and legal nature of these different types of liability vary on the basis of the different interests they protect.

The following section of this article will focus on the topic of the limitation period for the company's claim for damages against the managing director, as this is where the differences between Italian and German law regarding the limitation period of the claim are most apparent. 

Pursuant to Art. 2941 no. 7) in conjunction with Art. 2949 para. 1 of the Italian Civil Code, company actions against directors for breach of directors’ duties are subject to a five-year limitation period, which is suspended until the director ceases to hold office.

In the case of a company action against a director, however, the start of the limitation period depends not only on the date of the director's resignation from office, but also on the moment when the damage caused by the director's conduct becomes perceptible "externally" (i.e. in the company's assets) (see Court of Cassation, Civil Section I, judgment of December 4, 2015, no. 24715). If the damage only becomes recognisable to the company after the managing director has left office, the time of occurrence of the damage shall be decisive for the start of the limitation period. 

In addition, there are special limitation rules, e.g. if the director has deliberately concealed the damage (in which case the limitation period is deemed to be suspended pursuant to Art. 2941, no. 8) of the Italian Civil Code, until the concealment is discovered - one of the most common cases occurs when the directors have deliberately altered the company’s accounting records in order to conceal an embezzlement) or if the director's conduct is of criminal relevance (in which case, pursuant to Art. 2947 para. 3 sentence 1 of the Italian Civil Code, the possibly longer limitation period provided for the offence in question applies).

With the filing of a lawsuit against the director, the limitation period for the action is interrupted and remains suspended until the final judgement that settles the dispute is reached (see Art. 2943, para.1-2 in conjunction with Art. 2945, para. 2 of the Italian Civil Code).

Unlike Italian law, the general liability of the director of a German GmbH toward the company is not governed by the Bürgerliches Gesetzbuch or BGB (the German equivalent of the Italian Civil Code), rather by a regulation contained in the “Gesetz betreffend die Gesellschaften mit beschränkter Haftung or GmbHG” (German law on limited liability companies).

German law also grants the directors a wide margin of discretion, provided they reasonably assumed, at the time of the decision, that they were acting on the basis of adequate information and in the best interests of the company (so-called Business Judgment Rule). However, if a director exceeds this limit by, for example, making negligent decisions based on insufficient information or by violating mandatory legal requirements (principle of legality), he or she may be held personally liable through his/her assets for any claims brought against him/her by the company.

The central basis for a claim by the company against a managing director who breaches his obligations through negligent management (so-called internal liability) is Section 43 (2) GmbHG. Accordingly, ‘managing directors who breach their obligations’ are jointly and severally liable to the company for the damage incurred. § Section 43 (2) GmbHG refers to the general standard of care for managing directors defined in Section 43 (1) GmbHG.In addition to the general rule for claims for damages under Section 43(2) GmbHG, the director's liability towards the company may also arise in specific cases from other provisions of the GmbHG (e.g. in the case of violation of the capital preservation regulations) and from claims for compensation of a non-contractual nature, in which case intentional damage contrary to public policy provided for in Section 826 BGB and, in cases of criminal liability for breach of fiduciary duty, civil liability pursuant to Section 823(2) BGB in conjunction with Section 266 StGB (the German criminal law) are particularly relevant.

Section 43(4) GmbHG provides for a five-year limitation period for claims for compensation under Section 43(2), which begins with the 'arising of the claim' (see Section 200(1) BGB) (and not, as in the case of the standard limitation period under Section 199(1) BGB, at the end of the year in which the claim arose and the claimant became aware of the relevant circumstances giving rise to the claim and of the identity of the obligor, or should have become aware of them without gross negligence). 

According to the prevailing opinion, in this sense, the company's right to compensation from the director arises when the damage occurs. This means that the amount of the specific damage does not have to be quantifiable yet, but it could hypothetically be claimed through an action for a declaratory judgment. Pursuant to the German Civil Code, the limitation period referred to in the first sentence of Section 200, first sentence, also applies if the director deliberately fails to disclose a breach of duties to the shareholders' meeting.  

However, it should be noted that Section 43(4) GmbHG does not apply to any non-contractual/tortious claims (see above). If, for example, the director is also criminally liable for a breach of fiduciary duty, any claim for compensation brought against him/her by the company - pursuant to Section 823(2) BGB in conjunction with Section 266 StGB - is subject to the ordinary limitation period of three years provided for in Sections 195 and 199(1) BGB. However, this period begins to run only from the time when knowledge is acquired or should have been acquired in the absence of gross negligence (see above), and in practice this often occurs later.

In a cross-country comparison, it is also worth mentioning the German peculiarity of the GmbH & Co. KG – a type of limited partnership that is particularly popular in Germany for tax reasons.

However, despite its tax advantages, the GmbH & Co. KG is not suitable for avoiding the liability risk for the management, which in the case of a GmbH & Co. KG is generally assumed by the general partner (Komplementärin), i.e. the GmbH, in accordance with Section 164 of the German Commercial Code (HGB). According to the Federal Court of Justice (BGH), in addition to the general partner itself, the director of the GmbH is also liable for damages incurred by the GmbH & Co. KG arising from a breach of management duties in accordance with the same principles as otherwise applicable to the GmbH under Section 43 (2) GmbHG.

In an interesting recent decision, the BGH also ruled that the bylaws of a limited partnership may stipulate that, contrary to the statutory provision in Section 164 HGB, the management of the limited partnership may be transferred in its entirety to the limited partner (Kommanditistin). In such cases, the director of the limited partner is liable for breaches of management duties towards the GmbH & Co. KG in addition to the limited partner itself, in accordance with section 43 (2) GmbHG in conjunction with the contract for the benefit of a third party (cf. the ruling of the Federal Court of Justice of 14 March 2023 (II ZR 162/21)).

By way of comparison, it should be noted that Italian limited partnerships may only be managed by general partners (Art. 2318 para. 2 CC). These may also be legal entities (such as a limited liability company), in which case they must appoint a natural person who is jointly and severally liable with the general partner for all obligations arising from the relationship between the general partner and the limited partnership.

The above provision of Art. 2941 No. 7) CC applies to liability claims of the limited partnership against the general partner director, according to which the limitation period is suspended until the director leaves office (see Italian Constitutional Court, judgment of 24 July 1998, No. 322).

Although in many areas, Italian and German company law are based on identical or comparable principles and overlap, there are still meaningful differences, that also affect sensitive areas such as the limitation period for company claims against directors for breach of directors’ duties. Directors operating in cross-border areas are encouraged to seek timely and comprehensive information on the respective differences between the legal systems from legal advisors who specialize in cross-border issues.