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The new provisions brought by Law Decree No. 118/2021

02 September 2021

Italian bankruptcy law: the new provisions brought by Law Decree No. 118/2021 and the so called "negotiated settlement procedure" aimed at solving business crises.

In order to support businesses to face with the economic and financial crisis caused by SARS-Cov-2 emergency, the Law Decree No. 118 of 24 August 2021 has introduced "urgent measures concerning company crises and business reorganisation, as well as further urgent measures on justice" (the "Law Decree No. 118/2021").

On one hand, such decree anticipates some provisions provided by the Legislative Decree No. 14 of 12 January 2019 (the "new Bankruptcy Law", also known as "CCII") and, on the other hand, it provides a postponement of the entry into force of the CCII to 16 May 2022 (and to 31 December 2023 as regard to the regulation of the so called "Early Warning System").

The highlight of the Law Decree No. 118/2021 concerns the introduction of a new procedure, the so called "negotiated settlement procedure" which allows any failing individual and collective companies to ask for an appointment of an independent expert who could facilitate negotiations between the debtor and the stakeholders, in order to lead the company to its recovery (hereinafter also referred to as the "Procedure").

HOW TO ACCESS THE PROCEDURE

From 15th November 2021, the business owner could ask to access the Procedure, sending a formal instance accessible though the website of the Chamber of Commerce: the competence of the single request is up to the Chamber of Commerce where the company's registered office is located.

APPOINTMENT OF THE COMMISSION

The Secretary-General of the Chamber of Commerce is responsible for forwarding the aforementioned request to a special commission appointed on the Chamber of Commerce itself: this commission is composed by three professionals (one Judge, one member designated by the President of the Chamber of Commerce and another member designated by the Prefect).

APPOINTMENT OF THE INDEPENDENT EXPERT

Within five days after the commission's designation, the commission shall appoint an independent expert aimed at assisting the company in crisis.

The expert must meet the requirements set out in Articles 3 et seq. of the Law Decree No. 118/2021 (i.e. the requirements of independence, third party status and professionalism) and, in particular, he has the task of facilitating negotiations between the company and the various stakeholders (i.e. creditors or, in general, interested third parties): if the recovery of the company is not achievable, the expert will order the closure of the Procedure. 

DEBTOR'S ASSETS PROTECTIVE PROVISIONS

During the Procedure, the debtor can apply to the Court for the application of protective measures aimed at preventing creditors from acquiring pre-emptive rights and/or the possibility for creditors to initiating and/or continuing enforcement and precautionary actions against the debtor's assets.

By accessing the Procedure, the company may also obtain a suspension of the obligations to reduce the share capital and/or recapitalise the company pursuant to Articles 2446 and 2447 of the Italian Civil Code.

COMPANY MANAGEMENT 

During the Procedure, the management of the company (i.e. the powers with regards to the ordinary and extraordinary administration) is retained by the debtor.

However, when the debtor performs acts of extraordinary administration, he is asked to inform the independent expert of the Procedure. 

COURT'S AUTHORISATIONS

During the Procedure, the Court may also authorise the debtor to:

  • take on super senior loans;
  • transfer of undertakings or company branches;
  • restate the conditions of existing contract, in order to take the contract back to equity. 

INCENTIVE MEASURES FOR THE DEBTOR

The company which access the Procedure can also benefit from several incentive measures (i.e. reduction of tax interest to the legal rate and/or tax penalties).

HOW TO SOLVE THE CRISIS

The Procedure allows the company to solve his financial/economic crisis through the following means: (i) the conclusion of a contract with creditors which can ensure business continuity for a period of at least 2 (two) years; (ii) the conclusion of the moratorium agreement pursuant to Article 182-octies of the bankruptcy law; (iii) the conclusion of an agreement that produces the same effects as the agreement pursuant to Article 67, third paragraph, letter d) of the bankruptcy law. 

EFFECTS OF THE PROCEDURE

As long as they are consistent with the progress of the Procedure's negotiations, the acts, payments and guarantees implemented by the company during the Procedure are not subject to clawback actions pursuant to Article 67, paragraph two, of the bankruptcy law. On the other hand, those acts of extraordinary administration for which the independent expert has issued a negative opinion are subject to the clawback actions.

For more information, please contact the authors: Matteo Pasculli and Alice Dognini

Further Reading