Italian directors now have a specific duty of care to properly manage the company if a business crisis or insolvency is looming.

The Italian parliament recently passed a law empowering the government to adopt legislative measures to reform Italy’s current legal framework on business crisis and insolvency.

The directors’ enhanced duty of care starts long before the actual insolvency or business crisis as they now have to set up systems which effectively detect any business crisis or loss of business continuity. The aim of these systems is to prevent or mitigate potential adverse effects to the benefit of the company, the shareholders, and other stakeholders.

The duty of care to assess such preventative systems lies with the entire board while only the executive directors are charged with the responsibility to structure and implement the systems.