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Italian Corporate law: Control of the shareholder of an Italian Limited (S.r.l.) in competition with the company

Company law

Italian Corporate law: Control of the shareholder of an Italian Limited (S.r.l.) in competition with the company

In an interesting judgement of 31 August 2024 (no. 2482/2024), the Court of Venice ruled on the scope of the right of control of the shareholder of a limited liability company.

The right of control to which the shareholder is entitled includes both the right to information, which is exercised by requesting information on the company's business performance, and the right of access to the company's documents, which is to be understood in a broad sense and refers to all contractual, administrative, accounting and tax documents of the company, with the right to make copies. It is then up to the shareholder to decide on the specific modalities of exercising his right of control, i.e. whether he limits himself to requesting information or whether he demands to inspect the company's documents.

However, as has been repeatedly affirmed, a shareholder's right to control is not linked to any condition other than membership, as there is no obstacle below a minimum shareholding threshold. The only restriction concerns the principle of good faith and fair dealing. This means that the shareholder may not exercise his rights to information and inspection in such a way that he unnecessarily hinders the administration of the company or impairs or harms the activities of the company.

In addition, the shareholder's right of inspection must be weighed against the company's need for confidentiality if the requesting shareholder is in a competitive relationship with the company itself and the right of inspection is exercised for purposes other than control, whereby the shareholder's particular situation must be taken into account. For these reasons, it is concluded that a shareholder who carries out an activity in competition with the holding company must not have access to information that enables him to operate on the market with a competitive advantage and that can be used by him for purposes other than control, to the advantage of third parties and with potential damage to the company.