Inapplicability of “action for recovery” to the payback of quotaholders’ loans made in breach of Article 2467 of Italian Civil Code

With judgment no. 1729 of October 15, 2024, the Court of Appeal of Florence ruled that the ordinary action for recovery cannot be pursued if quotaholders’ loans have been paid back in breach of Article 2467 of the Italian Civil Code, since Article 1185 of the Italian Civil Code provides that “the debtor cannot seek reimbursement for payments which he has made in advance”. This is without prejudice to the liability for damages of directors or liquidators who made the payment, despite the loan being temporarily uncollectible.

The case
The case derives from an action for liability pursued by the liquidator against the chairman of the board of directors of a limited liability company. The plaintiff alleged that the defendant, being aware of the company’s excessive indebtedness in relation to its corporate capital, paid back many quotaholders’ loans granted by its parent company, in contrast with the provisions of Article 2467 of the Italian Civil Code.

The plaintiff, therefore, denied the defendant’s liability, either in his capacity as chairman of the board of directors or in his capacity as liquidator, since he has assumed the office after the dissolution of the company.

The Court of First Instance, after dismissing the action for liability against the defendant in his capacity as a director due to prescription, held that the defendant was liable in his capacity as liquidator, for failing to bring an action for recovery against the parent company to obtain the pay back of the quotaholders’ loans granted in breach of Article 2467 of the Italian Civil Code.

The defendant appealed against that judgment, arguing, in particular, that the liquidator did not have the power to require the parent company to recover the sums paid to him by way of pay back of the quotaholders’ loans and that, therefore, his alleged unlawful conduct acknowledged at first instance did not exist.

The judgment
The Court of Appeal of Florence ruled that the plea alleging the liquidator’s lack of authority to demand repayment of quotaholders loans to the parent company was founded.

According to the Court of Appeal, the violation of the deferral principle set forth in Article 2467 of the Italian Civil Code can indeed established the liability (for breach of duties typically provided for by law) of directors who have paid back sums to their quotaholders in violation of the aforementioned principle. However, once the directors have made the payment, even in the case they are temporary uncollectible, “the only other protection available is the one expressly provided for (then by Article 2467 of the Italian Civil Code and now by Article 164 of the Italian Insolvency Code) of the ineffectiveness of payments made in the year before the declaration of bankruptcy (now, in the year before the petition followed by the opening of bankruptcy proceeding), which is not an action for recovery but an action for revocation in bankruptcy by law”.

The exclusion of the ordinary action for recovery in respect to the repayments of loans made in breach of Article 2467 of the Italian Civil Code derives from the general principle set forth in Article 1185 of the Italian Civil Code, according to which the debtor cannot recover what he has paid in advance. The payback in such cases constitutes “the payment of an existing but only temporarily uncollectible debt and is therefore irrecoverable in itself, unless otherwise provided by law (such as the current Article 164 of the Italian Insolvency Code - in which both Article 65 of the Italian Bankruptcy Law and Article 2467, paragraph 1, last part, of the Italian Civil Code have been incorporated - which introduces an exception to this general rule in the context of insolvency proceedings, with an exceptional ineffectiveness of payments of non-expired and subordinated debts within precise time limits)”.

Given the foregoing, the Court of Appeal of Florence, upheld the decision of the Court of First Instance, thereby rejecting the action for liability brought against the liquidator.