Business Management and Articles of Incorporation: the “Economic Arbitration” Clauses Can Be an Effective Exit Strategy from Management Deadlocks in Close Companies?

The 2003 Italian Company Law reform permitted companies governed by Italian Laws to include management deadlock clauses in their articles of incorporation/bylaws. Such clauses provide the appointment of an “expert” empowered to decide on the management of the business. Thanks to these clauses, the so-called “economic” arbitration clauses (EACs), an external expert – even non-legal – can be instructed to decide how to best conduct the business in place of the company directors if the latter fail to reach agreement on some specific board resolutions. This essay will focus on the pros and cons of the inclusion of an EAC in the articles of incorporation/bylaws, comparing their effects to those of mediation or arbitration when disputes arise concerning the management of a company The Author will then investigate the degrees of efficiency that can be achieved through the intervention of legal/non-legal experts. The last part of the essay will seek to understand if and how much EACs may be useful in breaking management deadlocks and fostering the continuation of corporate joint-ventures, especially in the case where two people own equal shareholdings.