The Italian Supreme Court has ruled that a company director who uses corporate assets for personal or family expenses can be convicted of fraudulent bankruptcy through asset diversion. The decision, issued by the Fifth Criminal Section on February 4, 2026, addresses a question that has generated significant legal debate: whether such conduct constitutes a criminal offense under Italian bankruptcy law.
The case originated in Naples, where a court of appeals confirmed a first-instance conviction against the sole director of a limited liability company that had been declared bankrupt. The director faced charges of fraudulent bankruptcy, both patrimonial and preferential documentary. His defense appealed to the Supreme Court, arguing violations of law and insufficient reasoning in the finding of guilt for the patrimonial bankruptcy charge.
Personal Spending as Criminal Diversion
The Supreme Court rejected the appeal, finding the director’s arguments groundless. The court drew on established case law holding that administrators of capital companies cannot allocate corporate assets to their own expenses or those of their families. Doing so, the court confirmed, constitutes the crime of fraudulent bankruptcy by diversion.
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The ruling cites two previous decisions that established this principle: one from June 2017 and another from October 2014. Both cases involved directors who had used company funds for personal purposes, and both resulted in convictions that the Supreme Court upheld.
The reasoning centers on the fiduciary duty directors owe to the company and its creditors. When a director spends corporate money on personal matters, they violate the legal purpose for which those assets are held. This creates a direct harm to creditors, who lose resources that should have been available to satisfy the company’s debts.
What the Ruling Means for Directors
For directors of Italian companies, the practical implications are straightforward but worth spelling out. The line between corporate and personal finances must be maintained rigorously. Even in closely held companies where the director is also the majority shareholder, corporate assets are not personal property. The legal personality of the company stands between the director and those assets, and crossing that boundary carries criminal consequences.
The court’s answer to the legal question is clearly affirmative: yes, using company funds for personal or family expenses can trigger fraudulent bankruptcy liability, provided the company later enters insolvency proceedings. This applies regardless of whether the director intended to repay the money or believed the company could absorb the loss.
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Directors should also note that the ruling applies to expenses incurred for family members, not just personal outlays. The court treated both categories identically, viewing any such spending as an unauthorized diversion of resources that belong to the corporate entity and, ultimately, to its creditors.
Established Legal Principle Confirmed
The decision does not break new ground but rather consolidates an existing interpretive line. The court explicitly referenced prior rulings to support its conclusion that such conduct violates the designated use of corporate assets and, when the company undergoes insolvency proceedings, constitutes fraudulent bankruptcy by diversion.
This behavior amounts to an unjustified removal of resources from the company to the detriment of creditors. The court’s analysis emphasizes that the protection of creditors is a fundamental purpose of bankruptcy law, and conduct that undermines that protection cannot be tolerated. For legal practitioners who advise company directors on their obligations, the ruling provides useful clarity—it confirms that the criminal justice system treats personal use of corporate funds as a serious offense, not a mere corporate governance issue or a civil matter between a director and the company.
