i Liquidity and state of the financial markets

The macroeconomic performance of the Italian market has shown a slight downturn in the early months of 2020.

The very high public debt remains a heavy burden on the Italian economy and a major source of vulnerability, especially in the context of protracted weak growth, most recently exacerbated by the covid-19 emergency.

In this sense, the figures for the public debt presented in the Economic and Financial Document of September 2019, setting the economic and financial policies decided by the Italian government on an annual basis and which assumed a debt-to-GDP ratio of around 135 per cent for 2020, may be subject to change.

ii Market trends in restructuring procedures and techniques employed during this period

The latest figures related to insolvency and bankruptcy procedures show that signals of an economic slowdown are beginning to be reflected in the trend of company closures. After 15 positive quarters the number of bankruptcy procedures has increased again. The figure is accompanied by a further increase in the number of non-bankruptcy proceedings and voluntary liquidations.

Statistics from the archives of the Cerved Group SpA show that, in the third quarter of 2019, 2,291 companies applied for a bankruptcy procedure, an increase of 4.2 per cent on an annual basis.

Furthermore, a sharp increase in the number of non-bankruptcy proceedings was recorded, which rose from 271 to 335 (+23.6 per cent) in the third quarter, bringing the total number of procedures opened between January 2019 and September 2019 to 1,047 (+3.7 per cent on an annual basis). The worsening data are due to a sharp increase in the number of composition with creditors proceedings), which, after reaching minimum levels in previous years, grew by 13.7 per cent on an annual basis.

The number of voluntary liquidations has also increased: in the third quarter of 2019 about 12,000 companies started voluntary liquidation, 6.2 per cent more than in the same period of 2018. Overall, 42,000 voluntary liquidations commenced between January 2019 and September 2019, up 4.1 per cent on an annual basis.

iii The impact of the covid-19 emergency

The covid-19 emergency in the first months of 2020 has had significant implications for the Italian economy, and, more specifically, for its effects on the business system.

Although at the moment it is not possible to predict the future development of the emergency, it is important now to consider the impact that this situation may have on the financial structure of companies. The effects of the emergency will be heterogeneous, depending on the size of the company and the sector in which it operates. In this context, it is possible that many companies will add more debt to finance their day-to-day operations and, therefore, the attention of operators will obviously be focused on the evolution of the debt ratio (net financial indebtedness/net equity).

In this sense, the analysis conducted by the Cerved Rating Agency on March 2020 has provided a series of hypotheses aimed at estimating the short and medium to long-term impact of the covid-19 emergency on Italian companies.

In particular, the Cerved Rating Agency has considered two scenarios, varying according to the severity of the impact of the covid-19 emergency and the probability of occurrence. The soft scenario assumes that the global emergency will disappear in about three to six months, thus having a limited impact on both the global and Italian economies. The hard scenario considers the evolution of the disease under extreme conditions. In this context, the global emergency is assumed to be a pandemic crisis and is expected to be under control in no less than six months. This will have a significant impact on both the global and Italian economies.

Assuming the soft scenario, the economic consequences are expected to be moderate and smoothed for Italian companies. The Cerved Rating Agency assumes that the main impact will be in terms of the revenues and margins for companies, with limited change in their financial structure.

In contrast, under the hard scenario, the Cerved Rating Agency expects a significant slowdown in economic growth in the long term, with the risk of a global recession. This could further weaken the Italian economy. In particular, a sharp contraction in exports and industrial production could cause a severe fall in GDP and an increase in debt service costs. Sectors with significant exposure to international trade will be the first to experience such suffering, and ultimately the whole economy could be seriously damaged. As a result, more and more companies are likely to issue new debts, with a significant weakening of their financial structure.


The main source of Italian insolvency law is the Royal Decree No. 267 of 16 March 1942 (the Insolvency Act), as amended and integrated from time to time by the Italian legislature. As will be discussed in Section VI, the Italian government, in application of the Law No. 155 of 19 October 2017, issued Legislative Decree No. 14 of 12 January 2019, containing the Code of the Business Crisis and Insolvency (the Insolvency Code), substantially reforming the procedures used to manage business crises and insolvency. This reform, which should have entered into force in August 2020, following the measures introduced by the Italian government to deal with the covid-19 emergency, will now start on 1 September 2021 and, therefore, the new rules will apply to proceedings starting after this date. It is expected that, before the entering into force of the Insolvency Code, new amendments will be introduced, so that the final reading of the Insolvency Code will wait until 2021.

The Insolvency Act currently in force provides for several bankruptcy and restructuring proceedings that have been amended in recent years, some of which are described below.

i Legal procedures


The bankruptcy proceeding is the most invasive procedure for a debtor. The law specifically indicates which debtors are subject to the bankruptcy procedures (not all debtors can fall bankrupt). In general, the bankruptcy procedure applies to any company or individual entrepreneur whose main activity consists of the production or trade of goods and services. A debtor is declared insolvent when it is no longer able to regularly meet its payment obligations through ordinary means. The insolvency status is per se a situation that justifies a declaration of bankruptcy by the relevant court, even if the insolvency has not been caused by the debtor's misconduct.

The procedure is started by an order of the court having jurisdiction over the debtor's principal place of business on the basis of a petition, which may be filed by the debtor itself (or the directors of the debtor company), a creditor, the public prosecutor or the bankruptcy court ex officio.

The proceeding is carried out and supervised by a receiver (appointed by the court), a deputy judge and a creditors' committee representing all the creditors.

Upon declaration of bankruptcy by the court, the debtor no longer has the legal right to manage its business and dispose of its assets. All legal individual actions taken by the creditors against the debtor and its assets are suspended.

The receiver is a public officer and is required to perform his or her duties in person. The receiver is paid through the debtor's assets, and such remuneration ranks as senior over the creditors' unsecured claims. The Insolvency Act imposes certain specific duties on the receiver: in particular, to manage the company's assets and operate the business in the interest of the creditors. His or her main task is that of disposing of the company's assets and distributing the relevant proceeds to the creditors, who will be reimbursed according to a distribution plan, which must respect the order of claim priorities established by the Italian Civil Code and by several provisions of the Insolvency Act, and be certified by the court. Priorities are normally granted to claims secured by pledges, mortgages or other liens voluntarily granted by, or imposed on, the debtor. The claims of Italian and foreign creditors rank equally.

Before the execution of the distribution plan, the receiver must submit a final report to the deputy judge with a full description of all the activities carried out in managing the debtor's assets as well as in administering its business. Creditors may object to the final report. Once the motions have been decided, the deputy judge orders the implementation of the distribution plan. Creditors are always entitled to file oppositions against the distribution plan to obtain payment of any unrecovered portion of their claims and of interest thereon.

Bankruptcy proceedings may also end up with a settlement accepted by the creditors, as will be described below.

Significant changes to the bankruptcy proceedings have been introduced by Law No. 132/2015. In particular, it introduced the following provisions regarding the appointment and revocation of the receiver, the liquidation phase and the maximum duration of the procedure:

  1. litigation procedures that are related to the bankruptcy proceedings are treated as a priority by courts;
  2. the receiver shall provide a liquidation plan within 60 days of the draft of the inventory and in any case no later than 180 days from the bankruptcy declaration. Law provides for the revocation of the receiver in case of non-fulfilment of these obligations;
  3. payment of liquidated assets prices can be made by instalments;
  4. the liquidation procedure can be completed notwithstanding pending litigation. Further incomes will be distributed according to the court resolution for the approval of the distribution plan; and
  5. the completion of the liquidation procedure shall occur within two years of the bankruptcy declaration. Time extensions can be granted in specific circumstances.

The Insolvency Code will implement certain changes to the current rules. As stated above, it advisable to wait until the final text enters into force to give a summary of such changes.

Settlement of bankruptcy proceedings

The Insolvency Act allows creditors and, under certain circumstances, the debtor to have recourse to a settlement procedure in bankruptcy. In particular, once the court has set out a timetable for the distribution of proceeds, a settlement proposal can be submitted by a creditor or the debtor, provided that the proposed settlement, in principle, guarantees a greater or faster recovery than that envisaged under the bankruptcy distribution.

If the court decides that the settlement proposal is in the best interests of the creditors, the court orders notification of the proposal to all creditors for their approval. For the settlement to be effective, the proposal must be accepted by the majority of creditors.

Composition with creditors proceedings

While the bankruptcy procedure is highly regulated and is under the full control of the court and the receiver, a higher level of autonomy is granted to the debtor in the context of the composition with creditors proceedings.

In general, a company applies for protection under a composition procedure when it is either insolvent (but believes it is in a position to be able to repay its creditors, at least partially) or is in financial crisis but not yet insolvent.

The court, once it has admitted the company to the procedure, appoints a commissioner who acts as a public observer.

During the procedure, the assets continue to be managed by the debtor, while the commissioner supervises the management of the company in the interest of the creditors.

The petition must be accompanied by a concordato plan, which shall include:

  1. an updated economic and financial statement of the company;
  2. an analysis of all the economic activities carried out by the company, including a list of all creditors and a description of the relevant credits and of any pre-emption rights;
  3. a list of all people having personal and property rights over the debtor's assets; and
  4. an estimate of the value of the debtor's assets and particular categories of creditors.

The concordato plan must indicate how and to what percentage the creditors will be repaid and must be accompanied by a report, drafted by an independent third-party expert, certifying the correctness of the company's data and the feasibility of the plan. The commissioner, inter alia, expresses his or her opinion on the feasibility of the concordato plan.

As a general rule, the concordato plan must be approved by a majority of the unsecured creditors, while secured creditors do not vote to the extent that the plan envisages the repayment of their credits in full.

The procedure is regulated by the court, which plays a key role in terms of supervision and implementation. Although an intense debate exists regarding the admissible level of court intervention, much depends on the approach of the territorial court where the procedure is started. Another significant characteristic of the composition procedure is that, once approved with the prescribed majorities, the concordato plan is binding on all creditors (even those dissenting).

The debtor may anticipate the effects of a concordato procedure by submitting a petition for composition with creditors without a concordato plan and postponing the filing of the plan and of all the other documents required by law at a later stage (the pre-concordato request). The pre-concordato request must be filed together with the three latest approved balance sheets of the debtor and a detailed list of all its creditors. The condition for admittance is that a petition for concordato was not unsuccessfully filed by the debtor in the previous two years.

Following the filing of a pre-concordato request, the court, subject to its positive evaluation of the same, admits the debtor to the pre-concordato phase, granting a term between 60 and 120 days (which can be extended for no more than 60 additional days) for filing the concordato plan and all other related documents. The pre-concordato proceeding is intended to allow the debtor to seek immediate protection against enforcement or interim actions brought by individual creditors. During the pre-concordato phase, however, all activities exceeding the ordinary course of business must be authorised by the court. The court often sets thresholds of value above which such authorisation is required.

During the pre-concordato phase, the debtor must provide certain periodical information (mainly financial) to the court, and the court may appoint a judicial officer to monitor the company's activities in the interest of all creditors.

Distressed companies often pose a risk for their partners and counterparties; in fact, in the event that the company is declared bankrupt, any payments made by the debtor up to one year prior to the commencement of the bankruptcy proceedings are at risk of being clawed back or revoked (see Section II.iii). This can often result in further deterioration of the business of the company, thus worsening its crisis. To avoid this, as well as to create incentives for the debtor's business partners to continue dealings with the debtor and facilitate access to credit during the crisis, the law provides, among other things, the following:

  1. from the day on which the request is filed with the Register of Companies (i.e., one day after it is submitted to the court), the debtor may be authorised to engage in specific transactions in the ordinary and extraordinary course of business. All credits resulting from authorised transactions (including unsecured ones) are granted priority status (even over secured pre-petition claims, with certain exceptions);
  2. payments made by the debtor in connection with authorised transactions are not subject to clawback action in the event of subsequent bankruptcy of the debtor; and
  3. similarly to 'first-day orders' set forth by the US Bankruptcy Code, the court may allow the debtor to pay pre-petition claims of critical vendors and suppliers.

Along the same lines, the debtor is allowed to terminate unprofitable or excessively burdensome unperformed contracts with the prior authorisation of the court. This is aimed at preserving the goodwill of the debtor and increasing the chances of its recovery.

Certain rules applicable to composition with creditors proceedings are important, namely:

  1. creditors representing at least 10 per cent of the total debt are entitled to file a competing proposal for a concordato preventivo plan, which shall then be evaluated by the creditors alongside that filed by the debtor. This right is not granted if the concordato plan filed by the debtor provides that at least 40 per cent of unsecured creditors are repaid (30 per cent if the plan provides for business continuity);
  2. a concordato plan that does not provide for business continuity but aims at the liquidation of the debtor's assets for the benefit of the creditors shall provide that at least 20 per cent of the unsecured creditors are repaid;
  3. the court shall start a compulsory tender for the research of the best offer in the event that the concordato plan provides for the transfer of the company, of a going concern or of key assets. Offers will be compared on an economic basis. The court is required to set the criteria for the tender, to be determined on a time-to-time basis depending on the specifics of the case; and
  4. a debtor who has already filed a petition for the admission to a creditor composition procedure or an application for the approval of a debt restructuring agreement can obtain new financing or continue to use existing receivables credit lines on an urgent basis provided that:
    • the new financing is required for urgent operational needs;
    • the debtor is unable to obtain the financing in a different way;
    • the debtor indicates the envisaged use of the financing; and
    • not granting the financing would result in the disruption of the business continuity.

Debt-restructuring agreements

Debt-restructuring agreements, regulated by Article 182 bis of the Insolvency Act, are private agreements whereby the debtor and creditors representing at least 60 per cent of the total credits reach an agreement on the restructuring and repayment of the debtor's debts. Restructuring agreements need to be validated by a third-party independent expert as to their feasibility and are subject to confirmation by the competent court.

Dissenting creditors, however, are not bound by the restructuring agreement and their credits need to be repaid in full within 120 days from the date when the court approves the restructuring agreement or, if longer, from the date when the relevant debts become due.

Certain similarities exist in the restructuring agreements, as well as in the concordato procedure:

  1. the debtor may submit an application to the court to obtain new debtor-in-possession (DIP) financing from banks or other sources of credit, and to pay creditors that are crucial to ensuring the continuity of the business. Such financing will rank as a senior priority, which is an incentive for lenders to provide financing to a distressed company;
  2. transactions carried out by the debtor pursuant to a restructuring agreement are not subject to clawback action in the event of subsequent bankruptcy of the debtor; and
  3. the provisions of law imposing the reintegration of corporate capital in the event of losses are not applicable. This is designed to give a distressed company a breathing space to prepare a restructuring plan without the pressure of complying with corporate capital requirements and injecting new equity when the survival of the company is still in doubt.

Furthermore, Article 182 septies of the Insolvency Act provides that, in the event the majority of the total debt is due to credit and financial institutions, a restructuring agreement entered into by the debtor and creditors holding at least 75 per cent of credits falling into such category is automatically binding for creditors holding the remaining 25 per cent of the credits provided that all creditors have been duly informed about the procedure and all creditors belonging to the same category are treated pari passu.

Compulsory administrative liquidation

Compulsory administrative liquidation is an administrative procedure controlled by state officers instead of by the courts. The procedure is used when the debtor's business is deemed to be of public interest, such as insurance companies, banks, cooperatives and non-profit entities, which are subject to a number of governmental controls. The purpose of this procedure is to achieve recovery of the business through a settlement or an arrangement plan. The debtor, the directors of the debtor company and any of the creditors are entitled to apply to the court to start the procedure. The court is obliged to seek the advice of the governmental agency responsible for supervising the debtor's enterprise. The judge may initiate the proceedings by declaring the insolvency of the debtor and appointing a liquidator. All legal actions by creditors against the debtor are then suspended, with the exception of those aimed at ascertaining the amount of the claim. The liquidator, who also acts as a public officer, is assisted by a supervisory committee consisting of a number of experts, whose number can vary from three to five and who are not required to be creditors of the debtor (even if this might be preferable). Unlike in other insolvency proceedings, there is no requirement for a judge or a commissioner to be in charge. The liquidator must review the claims and evaluate whether the settlement plan is feasible.

Extraordinary administration

The extraordinary administration procedure applies to big companies falling within certain specific requirements, the occurrence of which is checked by the relevant court where the request for the extraordinary administration procedure is filed. The procedure applies to companies employing no fewer than 200 employees for at least one year, and having an overall amount of debt the value of which is no lower than two-thirds of the aggregate value of both assets and revenues. For the application of extraordinary administration, the company must have 'concrete chances for the recovery of its financial stability'. After consultation with the Ministry of Economic Development and the Ministry of Economy, the court issues an order declaring the insolvency of the company. The Ministry of Economy appoints an extraordinary commissioner, who proposes a plan for the disposal of the assets or a recovery plan within 60 days of his or her appointment. All legal actions initiated by creditors against the company are suspended as a consequence of the foregoing order. Special variances of the extraordinary administration procedure apply to (1) large companies employing no fewer than 500 employees in the year preceding the filing of the relevant petition and having a total amount of debts amounting to, or exceeding, €300 million, as well as (2) large companies operating in strategic public services.

ii Duties of directors of companies in financial difficulties

According to the provisions of the Italian Civil Code, the directors of a company must act with a duty of care, avoid conflicts of interest and comply with the law and the company's by-laws in the day-to-day management of the company. In all cases, the directors are jointly liable if they fail to adequately supervise the general conduct of the company's affairs or if, being aware of prejudicial acts, they do not act to prevent any harmful activities, or to eliminate or reduce the harmful consequences of such activities. Liability for acts or omissions of directors does not extend to those directors who, acting without fault, express their dissent without delay, such dissent being registered in the minute book of the meetings and resolutions of the board of directors, with written notice also to the chair of the board of auditors. Again, according to the Italian Civil Code, directors are held liable to the company's creditors for non-compliance with their duties concerning preservation of the company's assets. The action can be brought by creditors when the company's assets prove to be insufficient to satisfy their claims. In the event of bankruptcy or compulsory administrative liquidation, the action against the directors can be brought by the receiver in bankruptcy or by the commissioner. A waiver of the action by the company does not prevent the company's creditors from exercising their legal rights against the directors.

iii Bankruptcy clawback actions

Transactions carried out by a debtor prior to the date of the bankruptcy declaration may be subject to clawback under the Insolvency Act upon certain conditions. The 'suspect period' varies from one year to six months prior to the bankruptcy declaration depending on the nature and characteristics of the scrutinised transaction. In the event that the bankruptcy declaration occurs after the filing of a petition for a concordato procedure, the suspect period commences on the day in which the petition was published in the company register.

In particular, the following transactions are subject to clawback unless the other party proves that it was not aware that the debtor was insolvent at the time of transaction:

  1. transactions for consideration carried out in the one-year period preceding the declaration of bankruptcy if the obligations assumed by the insolvent party exceed by more than one-quarter the paid or agreed consideration;
  2. transactions extinguishing payable pecuniary debts carried out in the one-year period preceding the declaration of bankruptcy if the debt repayment was not made in cash or by other normal payment methods;
  3. pledges, anticresi and voluntary mortgages perfected on the debtor's assets during the one-year period preceding the declaration of bankruptcy to secure prior debts that were not overdue at the time when the security interest was perfected; and
  4. pledges, anticresi, voluntary and judicial mortgages (mortgages created by an order of the court) perfected on the debtor's assets during the six-month period preceding the declaration of bankruptcy to secure overdue debts.

Furthermore, transactions in the ordinary course of business carried out in the six-month period preceding the declaration of bankruptcy may be clawed back if the receiver proves that the other party was aware that the debtor was insolvent at the time of transaction.2


i Legislative Decree No. 14, dated 12 January 2019

Legislative Decree No. 14, dated 12 January 2019, introduced the Insolvency Code, which will be implemented in full in 2021. However, from 16 March 2019, certain provisions are already in force that are considered functional to the new reform process (see Section VI).

ii Law Decree No. 23, dated 8 April 2020

Law Decree No. 23, dated 8 April 2020 (Law 23) introduced certain provisions aimed at regulating the management of the business crisis and insolvency in the context of the health emergency caused by the spread of covid-19.

The entry into force of the Insolvency Code has been postponed to 1 September 2021. According to the Explanatory Notes to the Law 23, this provision is justified to guarantee legal certainty. At this particular time of crisis in the productive and economic system, full application of the new reform could not be guaranteed. With the extension to 1 September 2021 Law 23 allows all parties involved to continue to operate in accordance with practice already consolidated without doubts about interpretation and procedures.

Specific measures concerning bankruptcy procedures, composition with creditors proceedings and debt restructuring agreements have been also introduced.

With regard to composition with creditors' proceedings and debt restructuring agreements, the Law Decree comment provides that:

  1. for procedures already approved by the creditors, the implementation of which was scheduled between 23 February 2020 and 31 December 2021, a six-month extension is granted for implementation;
  2. for procedures pending on 23 February 2020, the debtor may submit, until the hearing set for the approval, a petition to the court requesting a period not exceeding 90 days for the filing of a new restructuring plan or a new proposal to creditors;
  3. if the debtor intends to modify only the time limits for fulfilment, it may file a statement of defence up to the hearing set for the approval, indicating the new time limits and the documentation proving the necessity for such modification (deferment in such cases may not be for more than six months after the original deadlines); and
  4. the debtor who filed the pre-concordato request may, before the expiration of the term granted by the court, file an application for a further extension (up to 90 days). The same application may be filed in the case of debt restructuring agreements.

These new rules are justified by the fact that the current crisis generates concrete risks in relation to those companies that had access to these instruments before the outbreak of the emergency. In these cases, composition with creditors proceedings or debt restructuring agreements with a real chance of success before the outbreak of the epidemic crisis could be irreparably compromised.

With regard to bankruptcy proceedings, compulsory administrative liquidation and extraordinary administration, Law 23 specifically provides for the inadmissibility of all petitions filed between 9 March 2020 and 30 June 2020. In brief, until the covid-19 emergency is over, bankruptcy proceedings are suspended. Such provision, however, does not apply to a petition of bankruptcy submitted by the public prosecutor when the issue of precautionary or protective measures for the company's assets is requested. As evidenced in the Explanatory Notes to Law 23, the above measure is essential, for a limited period, to protect companies from bankruptcy proceedings. The reason is twofold: on the one hand, it aims at avoiding entrepreneurs from being subjected to the growing pressure of bankruptcy petitions filed by third parties and at protecting them from the dramatic choice of filing for their own bankruptcy petition in a situation in which the state of insolvency derives from exogenous and extraordinary factors; on the other hand, it also aims to block the flow of bankruptcy petitions in a situation in which judicial offices have very serious operating difficulties.

Lastly, Law 23 suspends some provisions of the Italian Civil Code concerning company law, with a consequent effect also on insolvency law.


When dealing with distressed companies, whether as an investor, debtor or creditor, special attention must be paid to Law Decree No. 231 of 8 June 2001 (Law 231), which concerns the administrative liability of legal entities, companies and associations without legal capacities, and the consequences of its violation by the company.

In particular, the application of Law 231 becomes more important when the distressed situation of the relevant company is a consequence of (or simply occurs in the context of) the commission by the entrepreneur (or by the board of directors) of specific crimes.

Committing those crimes can trigger the submission of the company itself to certain sanctions, including the confiscation of the company's properties, if the company has not created a system capable of protecting itself from the negative consequences of committing those crimes by physical individuals operating in the name or on behalf of the company. Therefore, in evaluating a business opportunity, the investor must take into account any possible consequences in the event that a violation of Law 231 has been charged to the company. In fact, the creditor's right to be satisfied by the company's assets or the company's right to recover from the distressed situation (sometimes) thanks to the intervention of a third-party investor could be overridden by the state's interest in confiscating all (or part of) the assets of the company, to the detriment of creditors and all other interested parties. According to a recent decision of the Supreme Court, this principle, according to which the interest of the state has priority over the interests of the creditors, has been slightly overridden, to the benefit of the creditors and the company. This decision is important and it would be suitable for a provision of law to be implemented to confirm these principles.


i Regulation (EU) 2015/848

Regulation (EU) 2015/848 (the Regulation), which applies from 26 June 2017 with a few exceptions among Member States, introduced the following:

  1. Article 1 provides that the Regulation applies to 'public collective proceedings, including interim proceedings', aiming at rescue, completion of a debt restructuring agreement, company reorganisation or company assets liquidation;
  2. the rules regulating the applicable jurisdiction and the centre of main interest are now defined by the Regulation as 'the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties' and the national courts are now allowed to claim jurisdiction in the event that 'the company's actual centre of management and supervision and of the management of its interests is located' within its territory, and ascertain ex officio the correctness of the jurisdiction;
  3. it is now possible to suspend or refuse secondary insolvency proceedings in the event of contrast with a connected insolvency procedure dealt by another Member State;
  4. an international network for insolvency databases has been created; and
  5. a duty of cooperation between different Member State courts has been introduced for insolvency proceedings regarding two or more companies that are part of the same group.

ii Directive (EU) 2019/1023

On 20 June 2019, Directive (EU) 2019/1023 of the European Parliament and of the Council (the Directive) was enacted, which deals with preventive restructuring frameworks, discharge of debt and disqualifications, and measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt.

The Directive will enter into force on 17 July 2021. By that date, the Member States of the European Union will have to adopt all the provisions necessary to comply with its provisions, except those for which a longer transposition period is foreseen. The general objective of the Directive is to ensure a minimal harmonisation of the restructuring and insolvency rules in EU territory to promote the full accomplishment of the internal market and to affirm at European level the culture of protection and rescue of companies in crisis, as well as to grant a second chance to debtors in financial difficulties to continue business.

The Directive is complementary to and does not replace Regulation (EU) No. 2015/848. The Directive, consequently, does not undermine the scope of application of Regulation (EU) No. 2015/848, but aims at full compatibility with it, obliging the Member States to provide for preventive restructuring procedures that respect certain minimum principles of effectiveness.

The economic (and political) thinking that has inspired this European intervention is based on the consideration that inter-community economic exchanges are by far the majority, while there are now very few companies operating at national level alone. As a result, the consequences of insolvency have an immediate impact on global markets, discouraging the expansion of cross-border investment. Many investors are alarmed by the consequences of insolvency in a cross-border market because of the difficulties and costs they face in recovering their debt. A uniform European system that is geared to encouraging crisis prevention increases legal certainty for investors and encourages the early restructuring of companies in financial difficulties.


As stated above, a broad and innovative reform has been introduced with the Insolvency Code. The Insolvency Code will enter into force in its entirety in September 2021, except for the regulations that introduce amendments to the Italian Civil Code and that, although they do not regulate purely bankruptcy aspects, are functional to the reform process.

The Insolvency Code has the scope of bringing together all relevant laws concerning a business in crisis, together with significant changes to the current legal system. The fundamental goal of the Insolvency Code is to highlight as soon as possible the symptoms of a business crisis through the provision of warning systems, accompanied by the introduction of a body for the composition of corporate crisis (OCRI), to be set up at the various chambers of commerce, to which the control bodies of the companies and qualified public creditors (such as the Revenue Agency, National Social Security Institute and Collection Agent) will have to report anomalous situations that emerge from the application of certain indicators of the crisis (imbalances of an income, equity or financial nature) related to the specific characteristics of the company and the entrepreneurial activity carried out by the debtor.

The provisions of the Insolvency Code regulate the state of crisis and insolvency of any debtor, including consumers, professionals and entrepreneurs of any size and nature, including agricultural ones, operating as a natural or legal person or other collective body, group of companies or public companies, with the exclusion of public bodies only.

The most important novelty of the reform is the replacement of bankruptcy with judicial liquidation, aimed at liquidating the assets of the insolvent entrepreneur and distributing the proceeds in favour of creditors on the basis of the gradation of their receivables (pre-deductible receivables, secured receivables and unsecured receivables). This procedure is, however, to be considered as an extreme measure, as the main objective of the legislator is to help the company in crisis to recover.

In this context, the alert procedures play an important role and have been introduced by establishing in each chamber of commerce an OCRI to assist the debtor during the procedure. Furthermore, the Insolvency Code has introduced a special procedure for assisted settlement of the crisis, which is aimed at seeking a solution through negotiations with creditors carried out with the mediation of the OCRI and the regulation of reward measured (financial and legal) for debtors that self-report the circumstances of the crisis facing their company in a timely manner, that is, within six months of the occurrence of certain crisis indicators.

Another novelty of the reform is the express recognition of the institution of a group of companies whose fundamental prerequisite is the effective management and coordination activity carried out by the parent company. The current legislation does not allow a group of companies to be treated as a single entity and considers each company an autonomous legal entity. A new set of rules is therefore laid down that provides, for groups of companies, for a uniform procedure before the company's court for access to the various procedures.


1 Tiziana Del Prete is a partner at Grimaldi Studio Legale.

2 Article 67 of the Royal Decree No. 267/1942 (Insolvency Act).