Italian Constitutional Court rules on statute of limitation for liability against audit firms

The Italian Constitutional Court recently ruled on the statute of limitation applicable for liability action against audit firms by decision no. 11 published on the Official Gazette no. 27 of 3 July 2024.

The law provision under scrutiny by the Constitutional Court is Article 15(3) of the Legislative Decree no. 39/2010. It provides a five-year limitation period for bringing liability actions against audit firms, running from the date of the release of the relevant audit report.

The case

In 2018 a bankruptcy receiver brought a liability action before the Milan Court against several defendants, including an audit firm.

The audit firm raised the preliminary issue that the action was time-barred on the basis that the action against them was brought in October 2018. But the audit report challenged by the receiver dated back to 14 June 2013 (ie more than five years from the date of the issue of the audit report).

The Court of Milan resolved to submit to the Constitutional Court the issue of whether Article 15(3) of Legislative Decree no. 39/2010 complies with Articles 3 and 24 of the Constitution. The article provides rules on the statute of limitation that are different from (and more favorable to) those applicable to statutory auditors (sindaci). And particularly considering that the time limitation period for the action against audit firms starts running from the issue of the audit report, ie when the damaged party could be unaware of their liability.

The Italian Constitutional Court's decision

According to the Italian Constitutional Court, Article 15(3) of Legislative Decree no. 39/2010 is compliant with the Constitutional Court. In particular, according to the court, the different rules on statute of limitations applicable to audit firms is reasonable, considering that (i) they are external to an audited company; (ii) in case of fraud, the statute of limitations is stayed by operation of the law; (iii) the limitation period cannot start running before the audit report is issued.

The law proposal no. A.C. 1276 in the matter of statutory auditors’ liability

As reported in our latest DeRisk edition, on 29 May 2024 Camera dei Deputati of the Italian Parliament unanimously approved the law proposal no. A.C. 1276 which should be aimed at bringing the rules in the matter of statute of limitations applicable to statutory auditors aligned with those applicable to audit firms.

Final approval of the legislative proposal by the Senate is expected in the next few months.

We will keep you posted.