On March 12, 2025, the Italian Parliament unanimously approved Bill No. 1155, which amends Article 2407 of the Civil Code concerning the liability of the members of the board of auditors. The law introduces a cap on damages and redefines the terms statute of limitations, marking a significant shift in the regulation of auditors' liability.
WHAT CHANGES?
A. Limitation of liability: Except in cases of fraud, in the event of joint liability with the directors, the maximum compensation will be proportional to the auditor's fee, with three reference ranges: · Up to EUR 10,000 → maximum 15 times the fee · Between EUR 10,000 and €50,000 → maximum 12 times the fee · Above EUR50,000 → maximum 10 times the fee The intention is to align liability with the importance, complexity, and nature of the tasks actually performed within the company.
B. New statute of limitations rules: The five-year limitation period begins from the filing of auditor’s report on the financial statement, ensuring greater certainty regarding the timing of potential liability actions. This rule brings the regulation in line with that set out for external auditors in Article 15, paragraph 3, of Legislative Decree No. 39/2010. However, this provision will need to be reconciled with Judgment No. 115/2024 of the Constitutional Court, which clarified that the limitation period, starting from the audit report date, applies only to liability actions brought by the company that appointed the auditor. For actions brought by third parties or shareholders, the general rules of limitation apply, meaning the period starts when the damage becomes externally perceivable.
Comparative summary below:
Article 2407
Liability | | Current Legislation | New wording | | Statutory auditors must fulfill their duties with the professionalism and diligence required by the nature of the appointment; they are responsible for the truth of their statements and must maintain confidentiality on facts and documents they are aware of due to their office. | Statutory auditors must fulfill their duties with the professionalism and diligence required by the nature of the appointment; they are responsible for the truth of their statements and must maintain confidentiality on facts and documents they are aware of due to their office. | | They are jointly liable with the directors for their actions or omissions when the damage would not have occurred had they exercised due diligence in accordance with their obligations. | Except in cases of fraud, even when the audit is carried out by the board of auditors under Article 2409-bis, second paragraph, auditors who breach their duties are liable for damages caused to the company, its shareholders, creditors, and third parties within limits based on a multiple of their annual fee, as follows: for fees up to €10,000, 15 times the fee; for fees between €10,000 and €50,000, 12 times the fee; for fees over €50,000, 10 times the fee. | | The liability action against auditors is subject to, as applicable, the provisions of Articles 2393, 2393-bis, 2394, 2394-bis, and 2395. | The liability action against auditors is subject to, as applicable, the provisions of Articles 2393, 2393-bis, 2394, 2394-bis, and 2395. | | | The liability action against auditors is time barred five years from the filing of the report referred to in Article 2429, relating to the fiscal year in which the damage occurred. |
IMPACT ON THE INSURANCE SECTOR
The reform represents an important change, as it overcomes the rule, which was particularly burdensome for auditors, of joint liability with directors.
The limits introduced could significantly reduce the exposure of the board of auditors, especially in liability actions initiated within insolvency procedures, where the damage claimed is often of particularly high value.
The reduction in auditors' liability will have positive repercussions for professional indemnity policies for accountants and lawyers, where the extension to include auditor activities used to significantly increase the insured risk.
Therefore, a revision of the relevant limits and a reduction in premiums can be expected, along with increased appetite for the placement of these products.
The reform will have less favourable effects on D&O policies, which, in liability actions, may rely on the contribution of the mandatory professional policies of auditors, whose coverage partly overlaps. In fact, the measure shifts the centre of liability to the directors, who can rely solely on the coverage offered by D&O.
The law will come into effect 15 days after its publication in the Official Gazette. We await further developments.
Please feel free to contact us for questions or further insights. |
