Addressing several significant issues in corporate arbitration and dissolution law, the Italian Supreme Court, by order no. 5610 of 12 March 2026, has clarified the conditions for the legal capacity of a company in dissolution to initiate proceedings, the limits of judicial review of arbitral awards, and the formal requirements for raising the forfeiture of the arbitrators' mandate under Article 821 of the Civil Procedure Code.
Case Background
The case originated in arbitral proceedings brought by an Italian limited liability company (S.r.l.) majority shareholder of another S.r.l., against the directors of the latter for multiple unlawful management acts. The arbitral tribunal found two of the directors jointly and severally liable for damages in favour of the administered company. Following the award, one of the condemned directors challenged it before the court of appeal, which dismissed the challenge. The director then appealed to the Supreme Court on three grounds: lack of legal capacity of the company that initiated the arbitration, whose statutory duration had expired prior to the commencement of proceedings; violation of public policy due to the tribunal's failure to give effect to a contractual agreement on the transfer of management powers; and nullity of the award for being rendered out of time under the arbitration clause. The Supreme Court dismissed the appeal in its entirety.
Principles Established by the Supreme Court
The Court grounded its dismissal in the following principles.
First, the Court reaffirmed the distinction between dissolution and extinction of a company, clarifying that the expiry of the statutory term of duration constitutes a mere cause of dissolution, not extinction. Under Article 2484, paragraph 3, of the Civil Code, the effects of dissolution against third parties are deferred until the registration in the Companies Register of the instrument recording the occurrence of the dissolution event: until that moment, the company remains operative and a party to its relationships with external third parties, and its directors retain the powers under Article 2486 of the Civil Code, including the power to bring damages claims to protect the value of a shareholding in a subsidiary.
Second, the Court once again defined the limits of judicial review of judgments ruling on arbitral award challenges, reaffirming that it must be confined to verifying compliance with the law and the adequacy of the reasoning. In this framework, any ground of appeal raising issues not previously raised in the challenge proceedings before the court of appeal will be inadmissible.
Finally, with regard to the nullity of the award for the expiration of the statutory term set out in the deed of incorporation, the Court confirmed that the mere passage of time is not sufficient to render the award null and void under Article 829, paragraph 1, no. 6, of the Code of Civil Procedure. The interested party is required to give formal notice to the other parties and the arbitrators of its intention to rely on the forfeiture of mandate prior to the rendering of the award, in accordance with Article 821 of the Code of Civil Procedure, and such notice cannot be substituted by a statement made solely in the hearing minutes.
What This Means in Practice
The decision offers several practically significant takeaways.
From a corporate governance perspective, it clarifies that the expiration of the statutory duration does not strip a company of its capacity to act against third parties, nor does it divest its directors of the relevant powers, so long as the declaration recording the dissolution event has not been registered in the Companies Register. This represents a key operational consideration for those assessing the legal capacity of a counterparty in dissolution.
From an arbitration standpoint, the decision confirms the restricted scope of the judgments ruling on arbitral award challenges, discouraging appeals based on a re-examination of the merits or on issues not previously raised.
From a procedural perspective, finally, the decision calls for careful and timely management of the objection of tardiness of the award: a party wishing to rely on the forfeiture of the arbitrators' mandate must do so by way of formal notice served prior to the rendering of the award, and may not rely on the effectiveness of a mere oral objection or an application made at the hearing.
