The ad nutum withdrawal of a LLC shareholder: unlawful if the company is established for a fixed term, even if the term is particularly long

Supreme Court of Cassation, September 5, 2022 – order No. 26060. A LLC shareholder may withdraw ad nutum and, therefore, at any time and with no reason, solely when the company is established for an unlimited term.

The appealed verdict

A limited liability company, incorporated until 2050, appealed to the Court of Cassation against the Genoa Court of Appeal’s verdict which, in reform of the first-degree ruling, condemned the company to pay the value of the shareholder’s quota on the assumption that the life term of the company was long enough to legitimate the withdrawal ad nutum.

The Genoa Court of Appeal followed the argument, as previously stated by the Court of Cassation, that a limited liability company shareholder is entitled to withdraw arbitrarily not only when a company is established sine die, under Article 2473(2) of the Italian Civil Code, but also when the bylaws establish a very long term.

The Court argued that a life term so long is de facto equivalent to an open-ended term, considering both the remaining life expectancy of the shareholder and the connection between the term of the company and the aim pursued.

In the end, the Court observed that the Italian Company Law reform also intended to ‘simplify’ the withdrawal of the minority shareholders in order to balance the extended powers granted to the majority shareholders.

The Supreme Court decision

On the contrary, the Court of Cassation, in line with its most recent decisions, has privileged a restrictive interpretation of Article 2473(2) of the Italian Civil Code, thus strictly limiting the right of a limited liability company shareholder to withdraw at any time and with no reason, and however outside the cases specifically allowed by the Legislator and by the company’s deed of incorporation, merely if the company is established with no term limit.

The Supreme Court also, and above all based its decision on the interest of the company’s creditors, in terms of assets, in the preservation and non-alteration of the generic credit security represented by the share capital, and in terms of organization, in being aware of the withdrawal cases, as instrumental and essential in order to be able to plan their relationships with the company using accessible, clear and unquestionable data.