The reform of Italian bankruptcy law has become law. What the lawyer Domenico Damiani says
D. Which are the most important news organic revision of the whole Italian bankruptcy law?
R. In the systematic reform of the legal framework concerning companies in distress and of the Bankruptcy Law regime, the company plays a central role in the economy of the territory. The entrepreneur is no longer a subject to punish, but a subject to help
D. What does it mean?
R. Those who do business always run a risk. Now this risk is shared with creditors as well. This is because companies have an active role in the the society. Enterprises are subjects that provide wealth for anyone not just for the single entrepreneur. The key points of the reform project are the simplification, acceleration and rationalisation of insolvency and bankruptcy proceedings, and the ultimate goal is to improve the outcomes of said proceedings for creditors. This need for reform is particularly strong in light of the increasing levels of non-performing loans
D. Which are the new benefits for companies ?
R. Solid empirical data shows that Italian enterprises in a position of financial and economic distress are usually reluctant to start proceedings aimed at the composition of their crisis. As a result, when they finally make use of the measures set forth under the Italian Bankruptcy Law – such as composition with creditors, and debt restructuring agreements and certified recovery plans – the company has already entered a period of irreversible insolvency. As a consequence, the effectiveness of said measures is impaired. The reform drawn sets forth a crisis alert system for enterprises which is meant to remedy the problems explained above and help to preserve the value of business assets. The main features of such alert procedures is that they take place out of court, which is a factor believed to encourage enterprises to make use of this instrument, considering the stigma that is usually perceived in relation to court-driven insolvency proceedings. Without prejudice to the above, it is worth noting that in order to obtain standstill of all creditors’ requests for payment, the company must file an apposite petition to the court. Moreover, the project of reform envisages different benefits for companies that avail themselves of this system, which are both patrimonial and personal (for example, the waiver of liabilities for management). Another relevant aspect is the strict confidentiality of the whole procedure. The bankruptcy law reform in Italy permits that companies produce business along unsecured creditors. Creditors take part in the company’s debts to ensure the company’s business through a planning of debts and a discount rate for the interests on debts to the State
D. What is new about the the control system?
R. To ensure the efficiency of this crisis alert system, have been reinforcing the powers conferred to the companies’ surveillance bodies and the signalling system that public entities, such as the Revenue Agency, should implement and bring out, according to data in their hands which may indicate signs of distress.
D.Does it mean that there are no more sanctions?
R. The sanctions in bankruptcy law still exist. The crisis alert procedure is voluntary. But if a entrepreneur does not do what the control body orders, or does not activate the alert, he is subject to sanctions. In these cases the bankruptcy proceeds before the Judge. However, the law focuses on introducing provisions that favour agreements which envisage business continuity as opposed to winding-up, which should be considered a limited and residual solution
D. Why was needed a refomr Italian Bankruptcy Law?
R. The aim is to protect enterprises from large global businesses, abandoning the notion of bankruptcy and replace with the more neutral notion of “judicial liquidation of assets”.
D. Does the bankruptcy law reform facilitate credit recovery?
R. The new system of liquidation of a business in Italy is an alternative way to the composition among creditors and to the bankruptcy agreement. The company’s alternative liquidation system doesn’t effect the credit recovery. In relation to the composition with creditors agreements the bankruptcy proceedings in Italy focuses on introducing provisions that favour agreements which envisage business continuity as opposed to winding-up, which should be considered a limited and residual solution. In particular, agreements should be feasible only if the debtor can access new financial resources from third parties which results in a significant increase in the satisfaction of creditors.
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Bankruptcy law: liquidation procedure, insolvency, failure financial debt, indebtedness;