In the recent rescue of two major national banks, the Ministry of Economy and Finance considered the banking sector's traditional measures for an administrative compulsory liquidation to be inadequate and insufficient. As a result, it issued Decree-Law 99, which placed the banks into administrative compulsory liquidation and introduced instruments to manage their financial crisis.
Decree-Law 83, which reformed Italian bankruptcy law, entered into force in August 2015. One of the drivers of the reform was a desire to discourage pre-packaged restructuring deals originating from the debtor and to implement the efficiencies of concordato preventivo (ie, composition with creditors) proceedings, opening them up to the market and generating new opportunities for both investors and distressed companies.
The Rordorf Commission was established in January 2015 to develop draft legislation to reform the existing Insolvency Act. One of the commission's primary goals is to provide for the coordinated management of financial distress and insolvency in corporate groups through the introduction of group-wide pre-bankruptcy composition agreements. Parliament recently approved an excerpt of the commission's proposed reforms, which will be transposed into decree-laws following Senate approval.
Debt restructuring agreements provide an instrument to entrepreneurs in financial distress that wish to undertake a negotiated solution with creditors in an out-of-court process. A ministerial commission on the rules governing insolvency procedures has recently stressed the need to revitalise this instrument by making a contractual compact enforceable and binding on all creditors – even those that are not parties to it.
The minister of justice set up a commission in 2015 to develop draft legislation designed to reform, review and reorganise the rules governing insolvency procedures in Italy. Of the tools considered by the commission, the pre-bankruptcy composition agreement procedure is believed to be the most effective tool to solve business crises favourably. Indeed, if correctly applied, it can protect a debtor's business in potentially reversible insolvency situations.
The minister of justice set up a commission in 2015 to develop draft legislation designed to reform, review and reorganise the rules governing insolvency procedures in Italy. The commission's proposed statutory instrument introduces alert and mediation procedures to safeguard a troubled firm's value by hastening the timely discovery of conditions of financial and business distress without the need to wait for the firm's too-often belated reaction.
Changes have been introduced to the Insolvency Act concerning the assignment of assets and the performance of composition agreements. The legislature has revised the rules on the performance of composition agreements by providing for new collaborative duties. Further, a new form of debt restructuring has been introduced for the benefit of businesses with debts claimed by banks or other financial institutions.
Parliament recently introduced changes to the Insolvency Act which address bankruptcy, debt restructuring arrangements and the pre-bankruptcy agreement procedure. The most significant changes to the latter include the treatment of executory contracts and bridge loans in support of firms subjected to the pre-bankruptcy agreement procedure.
Parliament recently introduced major changes to the Insolvency Act with the aim of fostering economic growth. Pre-bankruptcy agreement procedures have been opened up to competition, allowing creditors to submit competitive proposals. This is expected to avert the risk of unsuitable pre-bankruptcy agreements being proposed and could result in significant rates of debt satisfaction.
Composition is one of the legislative tools that helps businesses to avoid being declared bankrupt. It allows a debtor in difficulty to submit a proposal to creditors for approval on the basis of a plan providing for the appropriate timing of debt extinguishment. Pre-composition allows a debtor to benefit from the protective effects of a composition proper before filing the requisite statutory documents.
The pre-bankruptcy composition with creditors, governed by the Bankruptcy Act, is a popular legal tool used to bring about an agreement between the debtor and its creditors under the supervision of a tribunal. The act allows creditors to seek termination of the agreement due to non-performance, provided that the debtor's failure to perform "is not of minor importance"; however, interpreting this phrase requires careful assessment.
Striking a limited company from the Companies Register is not an isolated move, but the outcome of several actions carried out in the liquidation process. Under an early approach supported by the Supreme Court, neither removal from the register nor the company's dissolution through the opening of the liquidation procedure can extinguish the company. However, an alternative approach has recently risen to prominence.
A notable recent amendment to the Bankruptcy Act is a provision that an insolvent debtor may file a 'blank' (ie, reserved) petition for composition with creditors. This allows the debtor to accelerate the operation of certain protective effects without having all of the documents needed to make a full application for creditor composition. Although widely used since its introduction, this procedure has raised several controversial issues.
The Decree-Law on Urgent Measures for the Country's Growth made major amendments to the Bankruptcy Act in respect of pre-bankruptcy composition with creditors, which is one of the most common tools to manage insolvencies. The pre-composition device has been widely used – and misused – since its introduction. With a view to removing ambiguities, Parliament recently took remedial action by issuing a new decree-law.
The concordato preventivo procedure allows a debtor to submit a proposal to a majority of its creditors that outlines the applicable measures and timeframe for the satisfaction of its debts in a judicial process supervised by a tribunal. However, despite recent legislative changes, the extent of the tribunal's investigatory powers remains poorly defined. A recent Supreme Court decision has provided welcome clarity on the matter.
In addition to amendments to the composition procedure, the Decree-Law on Urgent Measures for the Country's Growth introduced new provisions applying to debt restructuring agreements pursuant to Article 182bis of the Insolvency Act, as well as some crossover provisions applicable to both composition with creditors and debt restructuring agreements.
In order to foster economic growth, Parliament has amended the Insolvency Act. The changes are intended to allow businesses in financial difficulties to have faster and simpler access to insolvency procedures by affording them an opportunity to apply for new loans and to rely on legal protection at an early stage in preliminary negotiations with creditors.
New legislation allows a person who is ineligible for bankruptcy proceedings to discharge his or her indebtedness through a procedure that involves all of his or her creditors, even if only some of them participate in the agreement. However, will the benefits to creditors of accepting such a proposal be sufficient to dissuade them from seeking individual enforcement actions?
Before the reform of Italian insolvency law, the mainstream view was that no limitations should be placed on a court's power to test the debtor's compliance with the objective and subjective conditions for admission to the composition procedure. However, a greater emphasis on the private autonomy of the parties has led to new approaches to a judge's review of composition proposals and their accompanying plans.
Bankruptcy is increasingly regarded as a last resort for a struggling company. Changes to the composition procedure promote the parties' shared interest in negotiating a solution to the debtor's difficulties. The result is a legislative framework that is better suited to a commercial environment in which competitiveness, reactivity and flexibility are key requirements.