Conflict of Interest in Compensation Resolutions: Commentary on Order No. 10889 of 2024

Recently, the Court of Cassation issued Order No. 10889 of April 23, 2024, offering significant insights into the validity of shareholder resolutions in the presence of conflicts of interest. In particular, the ruling clarifies that a resolution to determine an administrator's compensation is not invalid, even if adopted with the decisive vote of the administrator themselves, provided that there is no prejudice to the corporate interest.

Regulatory Context and the Ruling

The Order under review falls within the context of capital companies, where the Civil Code, in Articles 2479 ter, 2373, and 2389, governs the methods for determining administrators' compensation and the conditions for the validity of shareholder resolutions. In the specific case, the shareholder-administrator had participated in the meeting in their capacity as a shareholder, and their vote was decisive for the approval of a resolution that provided for a reduction in their compensation, due to the company's economic difficulties.

Capital Companies - Administrator's Compensation - Shareholder Resolution for Determination - Challenge - Conflict of Interest - Prerequisites - Admissibility - Exclusion - Factual Circumstance. Regarding capital companies, a resolution to determine an administrator's compensation is not invalid due to a conflict of interest, even if adopted with the decisive vote of the administrator themselves, who participated in the meeting as a shareholder, because, while allowing them to pursue a personal interest, it does not, in itself, cause prejudice to the corporate interest. (In this instance, the Supreme Court confirmed the lower court's decision which, despite the decisive vote of the shareholder-administrator, had not found any incompatibility between the personal interest and that of the company, as it was a resolution that had reduced their compensation due to the company's economic difficulties).

Implications of the Ruling

The decision of the Court of Cassation is of crucial importance for capital companies, as it clarifies that an administrator can participate and vote on a resolution concerning their own compensation without this automatically constituting a conflict of interest. However, it is essential that the resolution does not harm the corporate interest.

• The reduction of compensation, in a context of economic difficulty, can be seen as an act of responsibility on the part of the administrator.
• The ruling emphasizes the distinction between a personal interest and a corporate interest, highlighting that not every vote by an administrator on their own compensation is to be considered a conflict.
• The necessity of a contextual and not abstract analysis of shareholder resolutions.

Conclusions

In conclusion, Order No. 10889 of 2024 represents an important step in regulating the internal dynamics of capital companies. It invites reflection on the balance between the personal interests of administrators and the collective interests of the company, promoting a more pragmatic and responsible approach in managing shareholder resolutions. The Court has therefore drawn a clear line: it is possible for an administrator to vote on matters that directly concern them, provided that this does not compromise the company's general interest.