Irregular bookkeeping and due diligence – Liability of directors – Shareholders

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The Court of Milan (see judgment of April 30, 2021, no. 3644) affirmed the principle that, in order for a shareholder to successfully bring an action for damages under article 2395 of the Italian Civil Code against the manager of company that has provided false information that does not reflect reality in the company’s accounting documents – such as, for example, the financial statements, in connection with the purchase of shares in the company by this shareholder – it is crucial to assess the real influence of such a false declaration on the economic and financial situation on the choice of investment.

The plaintiff must prove that the decision to invest in the company was determined by such a distorted situation, resulting from the illegal conduct of the director. In any case, any form of liability of the administrator must be excluded if, as in the present case, the party seeking damages has expressly made the investment conditional on the success of the due diligence activities, from which the risk profiles of this operation had emerged and the actual financial situation of the target company had been sketched out, thus excluding the causal link between the director’s conduct and the economic damage that had occurred.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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