Italy

Based on Law Decree no. 18 of 17 March 2020, transposed with amendments into law no. 27/2020 (“Decree 18”), and Law Decree no. 23 of 8 April 2020 (“Decree 23”)

1. Which financial (not tax or labour) short-term compensation schemes for immediate losses due to social distancing measures have been implemented? For which industries/sizes of business?

Micro and small and medium-sized enterprises (SMEs), in relation to their indebtedness (if this does not qualify as impaired exposure) towards banks and financial intermediaries, are entitled by article 56 of Decree 18 to obtain financial aid as follows:

  1. credit facilities and loans granted by way of advances on receivables existing on 29 February 2020 cannot be revoked until 30 September 2020;
  2. loans with single reimbursement expiring before 30 September 2020 will be extended until 30 September 2020 at same conditions; 

  3. for loans and other facilities to be reimbursed in instalments, payment of instalments or leasing rentals  expiring before 30 September 2020 is suspended until 30 September 2020 and the repayment plan is extended for a corresponding period without either party incurring any charges.

Such transactions are eligible for a specific guarantee from the National Guarantee Fund (the “Fund”) up to a limit of 33%, on the basis of an upper limit of 1.73 billion euros.

2. Which medium-to long-term stabilisation measures are in place in your jurisdiction?

Pursuant to Decree 23, companies and professionals are entitled to access to loans guaranteed by the State through the Fund or SACE.

Loans are described under answer 3. below and are granted by banks and other financial entities anyway.

3. Which measures (Guarantees, Loans, Equity Injections, etc.) are available?

3.1. Moratoriums

Short-term financial aid is being contemplated in the form of a moratorium under article 56 of Decree 18 (see 1. above).

3.2 New loans guaranteed by the Fund

In addition, the operations of the Fund have been widened so that it can provide - free of charge - a partial guarantee to new loans granted by credit institutions, for a duration of 72 months, for a maximum guaranteed amount per company (or group of companies) of EUR 5 million. For direct guarantee interventions, the coverage percentage can be up to 90 percent of the amount of each financing transaction. 

Only the following entities are eligible to benefit from this measure:

  • SMEs
  • companies employing fewer than 499 employees
  • professionals

The financing transactions which are eligible for the guarantee of the Fund cannot exceed, either:

  1. double the annual personnel costs of the beneficiary in 2019;
  2. 25% of the 2019 turnover of the beneficiary;
  3. the amount needed for working capital and investment costs in the following 18 months in the case of SMEs, and 12 months for midcap companies with up to 499 employees.

For reinsurance coverage, i.e. when the loan is already guaranteed by a specialised entity like “confidi” (the Italian consortium providing guarantees to help companies in obtaining loans), the percentage can be up to 100 percent, subject to certain conditions.

Loans for refinancing transactions of the beneficiary’s debt are also eligible for the guarantee of the Fund provided that the existing loan amount is increased by at least 10%.

Eligible companies are entitled to obtain the loan guaranteed by the Fund even if their exposures are classified as UTP or past-due provided that the aforementioned classification does not date from earlier than 31 January 2020. 

In addition, under certain conditions, loans guaranteed by the Fund can also be granted in favour of companies that, after 31 January 2020, (i) were admitted to a “concordato” procedure (composition with creditors) with continuity of business, (ii) entered into debt restructuring agreements or (iii) proposed a certified recovery plan.

Companies whose exposures are classified as “NPLs” are excluded from the guarantee of the Fund as a matter of principle. 

Admission to the guarantee of the Fund is also envisaged, with 100 percent coverage both in direct guarantee and in reinsurance, for new loans not exceeding EUR 25,000 in favour of SMEs and professionals who self-declare that they have suffered damage due to the COVID-19 emergency.

The Fund guarantee is free of charge.

3.3 New loans guaranteed by SACE

A further measure consists in the State guarantee to be issued through SACE, which has been introduced by Decree 23 in favour of banks and national and international financial institutions and other entities authorised to exercise of credit in Italy for new loans of any type that will be granted to all types of companies until 31 December 2020 (including SMEs and professionals provided that they have utilised in full the guarantees made available by the Fund).

Admission to the new guaranteed loans is subject to certain conditions since the applicant company, as of 31 December 2019, should not have qualified as an “undertaking in difficulty” (UID), and its liabilities, as at 29 February 2020, should not have been classified as “deteriorated”. 

In addition, the company must undertake not to approve the distribution of dividends or the repurchase of shares in 2020 (also for companies belonging to the same group), and to manage employment levels through union agreements (this actually means they cannot dismiss workers without reaching an agreement with unions which seems to be quite a burdensome requirement).

The guarantee can only cover loans granted by 31 December 2020 and with a duration of no more than 6 years for an amount not exceeding the greater of (i) 25 percent of the 2019 turnover and (ii) double the company’s personnel costs for 2019. 

In addition, the guarantee will only cover loans intended to support personnel costs, investments or working capital used in production plants and business activities located in Italy.

The guarantee, which is on first demand, is granted in the maximum percentage of cases, between 70 and 90 percent depending on the size of the company, by way of a simplified process that does not require preliminary ministerial decrees and investigation activities by SACE. This applies in the case of companies with less than 5,000 employees in Italy and a turnover less than EUR 1.5 billion.

It is worth noting that the lenders are free to determine the interest rate and cost of the loan but that these must be lower than those which would have applied in the absence of the state guarantee (as stated by the lender’s legal representative).

The costs of the SACE guarantee are as follows:

  • SMEs: 0.25% first year, 0.5% second year, 1% following years
  • Any other entity: 0.50% first year, 1% second year, 2% following years

4. Have these mid- to long-term stabilisation measures already been notified with EU or other antitrust bodies?

Yes.

5. Which prerequisites are necessary to qualify for a programme?

Measures under 1. above are only available to SMEs and professionals which must self-declare that they have suffered a shortness of liquidity due to Covid-19. 

Measures under 3.2 above (Fund guarantee) are granted to SMEs, midcap companies with up to 499 employees.

Measures under 3.3. (SACE guarantee) are available to all entities (including SMEs and professionals if they have utilised in full the guarantees available under the measure under 3.2).

For further details, see answers above.

6. Are there any major reasons that may inhibit an applicant from successfully applying for a stabilisation measure?

Details have been provided under answers 1. and 3. above.

Access to moratorium is not open to companies whose indebtedness qualifies as impaired exposure as a matter of principle.

Access to the guarantee of the Fund is not open to companies with exposures classified as UTP or past-due if the aforementioned classification dates from earlier than 31 January 2020. 

Companies whose exposures are classified as “NPLs” are excluded from the guarantee of the Fund as a matter of principle. 

The admission to the guarantee of SACE is not open to companies that qualified as an “undertaking in difficulty” (UID) before 31 December 2019 and whose liabilities were classified as “deteriorated” before 29 February 2020.

7. In an international context, are subsidiaries and branches of foreign parent/holding companies eligible to apply? For EU-States: Also for non-EU-third countries?

Measures are only applicable to companies with a registered office in Italy (even if they belong to a foreign group). In the case of the loans guaranteed by SACE, Decree 23 explicitly provides that the guarantee is also granted in favour of international financial institutions.

As far as the lenders are concerned, foreign banks must also comply with the provisions of the decrees under discussion.

8. Do your country’s stabilisation schemes foresee restrictions on use of cash/other restrictions?

For obtaining the guarantee by SACE, the company must undertake not to approve the distribution of dividends or the repurchase of shares in 2020 (also for companies belonging to the same group) and to manage employment levels through union agreements.

In addition, the guarantee only covers loans intended to support personnel costs, investments or working capital used in production plants and business activities located in Italy.

9. How are insolvency application deadlines handled in times of Corona?

All judicial terms are suspended until 11 May 2020 for all proceedings with few exceptions which do not comprise insolvency proceedings.
Pursuant to Decree 23, all petitions for insolvency filed against companies up to 30 June 2020 will not be processed (even those proposed by the company itself), with the sole exception of those filed by the public prosecutor. 

The entry into force of the new Code of Corporate Crisis set for August 2020 has been deferred to 1 September 2021.

With further reference to insolvency measures, the deadlines for the execution of “concordati preventivi” (composition with creditors) and approved debt restructuring agreements which expire between 23 February and 31 December 2020 will be automatically extended by six months (thereby causing a rescheduling of the related payment obligations). 

When filing a blank concordato or during the negotiations to finalise a debt restructuring agreement, it will be possible to request an additional term up to 90 days of the automatic stay of enforcement and ad interim actions.

10. How far have local insolvency/restructuring laws been changed/eased which might have an impact on international businesses?

The main changes to legislation which have been introduced to restructuring/insolvency laws consist in the prolongation of certain terms related to concordato preventivo and debt restructuring agreements as detailed under answer 9. above; the possibility for companies which were admitted to the “concordato” procedure with continuity of business, which entered into debt restructuring agreements or which proposed a certified recovery plan, to obtain the guarantee of the Fund on new loans, as detailed under answer 3. above.

For the sake of completeness, it is worth mentioning that the rules on compulsory liquidation as a consequence of loss liquidation eroding the share capital of a company will not be effective until 31 December 2020 in order to avoid losses caused by the epidemiological crisis leading to the liquidation of companies still performing. Moreover, in drawing up the financial statements, companies will be allowed to perform an assessment of the items taking into account the pre-crisis Covid-19 situation. Finally, until 31 December 2020, the law provisions on the subordination of shareholders’ loans are not applicable.

Also, the suspension of all judicial terms will certainly impact on existing and forthcoming proceedings.

No.

No additional measures on top of those already provided for under Italian Insolvency Law such as composition with creditors (Concordato Preventivo), restructuring agreements (Accordi di Ristrutturazione del Debito) and certified recovery plans (Piani Attestati di Risanamento).

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Paolo Bonolis
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Rome