The recent reform to the Italian Bankruptcy Law to support the restructuring of the crisis of the companies

Following its approval on 5th August 2021 by the Council of Ministers, the Law-Decree n. 118 was published on 24th August into the G.U. n. 202 about the topic of "Urgent measures in the field of business crises and business reorganisation, as well as further urgent measures in the field of justice". 

Firstly, the Law-Decree postpones the entry into force of the Italian Crisis Code until 16th May 2022 (Art. 1, letter a), further postponing to 31 December 2023 the “crisis alert related procedures” introduced by Article 12 of the Crisis Code. 

The Decree is particularly innovative as it introduces: 

1. a form of voluntary assisted mediation to help companies in difficulty (operative starting from 15 November 2021) 

1. the new simplified arrangement with creditors for the sale of assets (article 18)  

1. some elements to amend the Bankruptcy Law. 

Below are summarised the main elements of interest.  

 
The negotiated settlement for the solution of the business crisis 

It is part of a negotiation process aimed at the recovery of the enterprise, whose activation will be left to the discretion of the entrepreneur. The proceeding, characterized by absolute confidentiality, will be available - starting from 15th November 2021 - for all commercial entrepreneurs presenting conditions of capital or economic-financial imbalance, without any size requirement. 

The request to access to this procedure will be submitted through a digital platform. 

Accordingly, the entrepreneur will be assisted by a third-party independent expert with specific skills on the management of economic enterprises crisis, who will be entrusted with the task of facilitating the negotiations with creditors necessary for the recovery from the company’s debts. The expert will be appointed by a commission consisting of three members appointed for two years, among experts in the field whose list will be draft by the Chamber of Commerce. There will be also a training course that still need to be identified by the Decree of the Ministry of Justice that will also establish the IT platform. 

This procedure, leading to an easier solution to the crisis, will also allow the applicant to benefit from specific measures to protect the assets such as, for example, the exemption from enforcement and precautionary actions on the assets without detrimental to pending contracts. Moreover, the establishment of pre-emption cases (excepted the employment claims) will be prohibited as well as the declaration of bankruptcy. 

At the end of this proceeding, to be concluded within 180 days starting from the acceptance of the assignment by the expert, these are the possible scenarios: 

1. the classical outcomes according to the traditional bankruptcy law, such as the certified plan, the restructuring or moratorium agreement, or the arrangement with creditors and the self-bankruptcy application; 

1. the sign of an agreement with one or more creditors, suitable to ensure business continuity for a period of not less than two years, according to the expert's final report; 

1. An agreement signed by all parties involved in the negotiation, including the expert, which will produce the effects of the certified plan pursuant to art. 67, paragraph 3, lett. d), Bankruptcy Law, without the need for certification; 

1. the simplified liquidation arrangement, introduced by this Law-Decree. 

Simplified arrangement with creditors for the liquidation of assets 

Introduced by the article 18 of the Law-Decree with mostly liquidating purposes, it will be activated within sixty days since the negative outcome of the negotiations started for the negotiated settlement of the crisis which is indeed a prerequisite to access to this institution. The entrepreneur must submit to the Court a proposal for a composition with the transfer of assets together with the selling plan, requesting for their approval after a previous judgment on the feasibility and, secondly, on the lack of prejudice pursuing this solution with respect to the alternative bankruptcy. 

The main "simplification" of this proceeding consists in having eliminated the meeting (pursuant to Article 174 Bankruptcy law) and the vote of the creditors. Even the minimum level of satisfaction for unsecured creditors must be considered as to be exceeded according to the absence of any explicit reference to Article 160. Moreover, this theory relies on an interpretation consistent with the purposes pursued by the legislator with the introduction of this Decree-Law, whose main objective is to introduce new effective tools less onerous than those already existing, to promote the companies affected by the pandemic to identify viable alternatives for the corporate recovery. 

Changes to some articles of the Bankruptcy Law  

The Article 20 of the Law-Decree contains several changes to some articles of the Bankruptcy law, where the most relevant regards: 

• art. 180, providing that the approval of the arrangement with creditors may take place even in the absence of adhesion of public creditor  
• art. 182 quinquies; (“Provisions on financing and business continuity in the arrangement with creditors and in the debt-restructuring agreements”) 
• art. 182 septies (extended-effect of restructuring agreements);  

the following articles have also been introduced:  

• art. 182 octies (moratorium convention), according to which "The moratorium agreement concluded between an entrepreneur, including non-commercial ones, and his creditors, aimed at provisionally regulating the effects of the crisis and having as its object the extension of the maturities of claims, the waiver of acts or the suspension of enforcing and conservative actions and any other measure that does not involve waiver of credit, in derogation from Articles 1372 and 1411 of the Civil Code, is also effective against non-member creditors who belong to the same category"  (I co.). 
• art. 182 novies (preferential restructuring agreements),"The percentage referred to in the first paragraph of Article 182-bis shall be reduced by half where the debtor: (a) has waived the moratorium referred to in points (a) and (b) of the first paragraph of Article 182-bis; (b) has not brought the action provided for in the sixth paragraph of Article 161 and has not requested the suspension provided for in the sixth paragraph of Article 182-bis."