New procedure italian bankruptcy debt collection
The new law on bankruptcy in Italy aims to prevent companies from becoming insolvent. Before reaching the point of an irreversible corporate crisis, the new law provides for out-of-court instruments to facilitate mediation between debtors and creditors and to manage debt insolvency.
The role of bankruptcy receiver has been consolidated. He will be able to access Public Administration databases more easily and file legal proceedings which shareholders or creditors are entitled to. Receivers are responsible for allocating the assets among creditors, instead of the delegated judge. However, the receivers are subject to greater scrutiny when it comes to conflicts of interest.
How to prevent corporate insolvencies. Early warning and the role of courts
Debtors may initiate a pre-emptive alert phase if they believe that they are experiencing credit liquidity difficulties. Or, this alert phase can be initiated by courts when reported by public and private creditors. Reporting is mandatory for tax authorities and INPS, the Italian Social Security Agency. Listed companies and large companies are excluded from the new alert procedure.
Advantages and penalties for debtors through the alert procedure
If a debtor voluntarily initiates the alert procedure, they will be assisted by a body set up at the Chambers of Commerce and will have 6 months to reach composition with creditors. This is a similar solution to the one in Greece provided for by the rehabilitation process.
Debt restructuring arrangements
The new bankruptcy law provides for bonuses for entrepreneurs who voluntarily initiate the alert procedure. They will not be punished for bankruptcy offences, if the damage to assets is minor, and will be entitled to a reduction in interest and penalties for tax debts. In addition, the limit of 60% of receivables for the approval of the debt restructuring agreement can be eliminated or reduced. Finally, the new arrangement is permitted alongside the continuity arrangement, provided that it is able to ensure payment of at least 20% of unsecured claims.
Alert procedure initiated by a Court of First Instance upon notification by debtors
If, on the other hand, the proceeding is initiated by a court upon notification by creditors, the court summons the debtor and appoints an expert to resolve the crisis and recover the claims within 6 months.
Going concern and new procedural rules
Among the proposed arrangements between debtors and creditors, those that safeguard going concern will be given priority, but must be able to satisfy creditors. In this regard, judicial winding-up is the last of the possible solutions as a result of the bankruptcy proceedings adopted. Finally, the competent court is determined based on the size of the insolvency proceedings.
Insolvencies of groups of undertakings
The law also provides for more obligations to deal with the insolvency of the companies of a group, even in the event of separate proceedings. The bodies taking action are obliged to inform each other and cooperate in order to successfully address and resolve the insolvency crisis.
Learn more about the new bankruptcy law in Italy with legal assistance from Damiani&Damiani