Resignation of the statutory auditors of a company and the prorogatio regime
- The case
By Court decision no. 9416 of 12 April 2017, the Court of Cassation ruled on the issue of prorogatio of a resigning statutory auditor in the performance of his/her duties, joining in the wake of a debate on the issue.
The case at issue concerns a liability action brought, pursuant to Article 2394 of the Italian Civil Code, by the bankruptcy manager of a limited liability company against directors and statutory auditors, for the alleged failure to comply with the obligations inherent to the preservation of the integrity of the corporate assets.
With reference to the board of statutory auditors, both the Court and the Court of Appeal found that the resignations submitted by the two effective members of the board of statutory auditors had not immediate effect, due to the non-acceptance of the appointment by the alternate auditors and the consequent failure to reconstitute the controlling body in the minimum number of three components. So, the claim for compensation of damages brought against the statutory auditors, with effect from the bankruptcy and comprising the period following their resignation, that the latter deemed ineffective, was upheld.
The two statutory auditors turned to the Court of Cassation challenging the decision on the merits for having mistakenly considered that the prorogatio regime was effective, after the resignation and until the subsequent replacement.
- The debate regarding the prorogatio of the resigning statutory auditors
With reference to joint-stock companies, Italian law does not contain a specific provision regulating the effect of the resignation of the members of the controlling body in a case such as the one in question.
The matter is expressly regulated with regard to the managing body. Article 2385, paragraph 1, of the Italian Civil Code, provides that “the waiver has immediate effect, if the majority of the board of directors remains in office, or, otherwise, from the moment in which the majority of the board has been reconstituted“.
In the absence of a specific regulation on the matter, a debate has therefore developed, in the context of case law and the merits and doctrinal jurisprudence, regarding the analogical applicability of this rule in the event the resignation involves a statutory auditor rather than a director.
- Arguments against the applicability of the prorogatio regime to the resigning auditor
According to certain case law, the prorogatio regime would not be applicable in case of resignation of statutory auditors since, with the corporate law reform of 2003, the legislator envisaged this possibility only in the event of termination of the appointment of statutory auditors due to the expiry of their office. Indeed, Article 2400, paragraph 1 of the Italian Civil Code provides that “the termination of statutory auditors due to expiry of the term takes effect from the moment in which the body is re-established“.
On the basis of the principle “ubi lex voluit dixit, ubi nolui tacuit“, the failure to mention the hypothesis of resignation of the statutory auditor would result in a precise choice of the legislator and the exceptionality of the relative discipline. As a result, in the event of resignation, the effect of termination of office would be immediate.
It was also considered that the different position of the directors (to whom the prorogatio regime referred to in Article 2385, paragraph 1, of the Italian Civil Code above applies) can be considered justified on the basis of the different functions and continuity requirements provided for the managing body and for the controlling body.
According to this view, it was also stated that the managing body is required to undertake a daily and continuous commitment, so that a standstill of the assets held by it is not conceivable; this need for continuity does not exist with reference to the board of statutory auditors, whose functions can also be carried out periodically, at almost predefined deadlines and in relation to specific corporate events.
- Arguments supporting the applicability of the prorogatio regime to the resigning auditor
On the other hand, another part of case law has supported the applicability by analogy to the statutory auditors of the directors’ regime of prorogatio referred to in Article 2385, paragraph 1, Italian Civil Code.
This case law stated, among other things, that the same requirements of continuity and stability apply to all corporate bodies, including the controlling body, which is also given powers of inspection and control to be exercised constantly, as well as functions to be carried out urgently.
Moreover, said case law goes along with the previous case law according to which, if it is not possible to automatically replace the resigning auditor with an alternate auditor, said resignation cannot be considered as immediately effective, and the regime of prorogation must be applied.
- The decision of the Court of Cassation
The Court decision in question is not limited to confirming the previous orientation of the Court of Cassation but also offers, unlike in the past, a clear reasoning of the thesis favorable to the application of the instrument of the prorogatio in the case in question.
In particular, the Court – after having taken note of the above-mentioned debate on the subject, and having highlighted how in this case the substitution of the alternate auditors had not been completed following the resignation of the statutory auditors – stated the need to guarantee continuity for both the managing body and the controlling body.
With particular reference to the board of statutory auditors, the confirmation of this requirement can be found in Article 2397 of the Italian Civil Code which, having established that the body is composed of three or five effective members, states that “two alternate auditors must also be appointed“.
Therefore, according to the Court, the mandatory appointment of the alternate auditors expresses the need to maintain stability and consistency in the functioning of the controlling body in a way similar to that established by Article 2385 of the Italian Civil Code for the board of directors, with the consequent analogical applicability of the prorogatio regime envisaged by this rule also to the board of statutory auditors.
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 Even though the ruling concerns a case previous to the 2003 company law reform, the Court of Cassation sets out a current and relevant principle of law, clearly taking a position in favor of the analogical application of the instrument of prorogatio, envisaged with reference to the managing body, also in case of resignation of the statutory auditors, on the basis of the same need for continuity of the two bodies.
 Court of Florence, 8 June 2015; Court of Bari, 2 February 2013.
 Court of Milan, 2 August 2010.
 Court of Rome, 4 July 2016; Court of Rome, 14 November 2012; Court of Rome, 8 October 2012.
 Court of Cassation, Section I, 4 May 2012, n. 6788; Court of Cassation, Section I, 18 January 2005, n. 941; Court of Cassation, Section I, 9 October 1986, n. 5928.