directors liability - corp

Directors’ liability (comparative law)

Area of corporate law comparing duties, standards of review, and remedies across jurisdictions (Italy, UK, Delaware)

Why directors’ liability matters

Same decision can be lawful or unlawful depending on judicial review standard and governance context

Conduct rules

Duties such as care, loyalty, good faith, proper purpose, conflict disclosure, asset protection

Review standards

Legal tests like negligence review, fairness review, business judgment rule, creditor-oriented review

Remedies

Legal consequences including corporate actions, derivative suits, creditor actions, insolvency remedies

Executive directors

Manage day-to-day operations, implement strategy, control reporting and operations

Non-executive directors

Provide oversight, challenge executives, monitor controls and conflicts

Non-executive liability relevance

Assessed by access to information, warning signs, dissent, and engagement in oversight

Italian baseline approach

Statutory system distributing duties across multiple articles rather than a single doctrine

Art. 2392 c.c.

Duty of diligence; directors liable jointly unless individually exonerated

Art. 2381 c.c.

Board must act informed; includes delegation and reporting structure rules

Art. 2391 c.c.

Regulates conflicts of interest and disclosure duties

Art. 2393 / 2394 c.c.

Corporate and creditor actions for damages and asset protection

Art. 2086(2) c.c.

Duty to adopt adequate organisational systems to detect crisis early

Duty of care (general)

Process-based duty requiring attention, inquiry, monitoring, and informed decision-making

UK duty of care (s.174 CA 2006)

Objective + subjective standard of reasonable care, skill, and diligence

Minimum care standard

Attention, inquiry, informed deliberation, supervision, internal control review

Care principle

Requires proper process, not successful outcomes; failure must stem from business risk not neglect

Delaware duty of care

Process-focused expectation enforced through judicial review and BJR doctrine

Business Judgment Rule (BJR)

Presumption that directors acted in good faith, informed, and in company’s best interests

Aronson v Lewis

BJR test requiring good faith, informed basis, honest belief in company interest

Smith v Van Gorkom

Board liable for gross negligence due to uninformed approval of merger

DGCL §141(a)

Board has authority to manage corporate affairs; foundation of board-centric governance

DGCL §141(e)

Protects directors relying in good faith on experts and reports

DGCL §102(b)(7)

Allows exclusion of monetary liability for duty of care breaches (not loyalty/bad faith)

Delaware review logic

Deference is earned through informed and proper decision-making process

BJR policy rationale

Encourages risk-taking and prevents courts punishing failed business decisions ex post

Italian functional BJR equivalent

Conditional deference based on informed, rational, and disinterested decisions

Duty of loyalty

Protects against conflicts, self-interest, bad faith, and improper purposes

Italian loyalty framework

Art. 2391 + 2391-bis regulate conflicts and related-party transactions

UK loyalty provisions

SS.171–177 CA 2006 regulate proper purpose, conflicts, and disclosure

Delaware loyalty doctrine

Strict review (often entire fairness) when disloyalty or conflict exists

Stone v Ritter

Good faith breaches treated as part of duty of loyalty, not separate duty

Why loyalty differs

Cannot tolerate conflicted decision-making unlike duty of care

Review consequence of loyalty

Triggers stricter judicial scrutiny and burden shifts

UK s.172 ESV

Directors must promote company success while considering long-term and stakeholder factors

ESV factors

Employees, suppliers, environment, reputation, long-term consequences, fairness

ESV interpretation

Shareholder primacy remains, but modified by stakeholder considerations

French Code civil art.1833

Company must consider social and environmental issues in corporate interest

Raison d’être

Statutory optional purpose defining corporate mission and principles

French corporate purpose model

More explicit social purpose than Italy; less shareholder-centric than UK

Creditor-oriented turn

Duties adjust in insolvency risk situations toward creditor protection

BTI v Sequana

Creditors considered when insolvency is imminent or probable

Gheewalla (Delaware)

Creditors cannot bring direct fiduciary claims in zone of insolvency

EU Directive 2019/1023 art.19

Directors must consider creditors, stakeholders, and insolvency prevention

Corporate governance spectrum

Ranges from shareholder primacy to stakeholder-sensitive governance models

CSRD

Reporting regime using double materiality; increases transparency of impacts

CSDDD

Due diligence obligations to identify and mitigate human-rights/environmental harms

CSRD vs CSDDD

CSRD = disclosure; CSDDD = conduct regulation

Overall EU approach

Company remains central, but stakeholder effects become legally relevant

Key comparative takeaway

Corporate governance is a spectrum, not a binary shareholder vs stakeholder system