With 172 votes in favor and 34 against, iThe Senate approved the bankruptcy law reform. The new law envisages important changes for companies, among which the alert mechanism aimed at preventing corporate crises from becoming irreversible and the new instruments aimed at promoting mediation between debtors and creditors stand out.
#Senate The reform of the bankruptcy law becomes law. A contribution to a healthier economy that will help growth
— Paolo Gentiloni (@PaoloGentiloni) 11 October 2017
"I never use these terms but it is a reform of epochal significance" - commented the Minister of Justice Andrea Orlando – "The system of legislation regarding bankruptcy still dates back to 1942 with a distorted mechanism that has ground up many resources both entrepreneurial and material goods in recent years". "The figure of the bankrupt has changed - continued the Minister of Justice - in fact, we no longer speak of a bankrupt and it is not just a linguistic change, we will no longer talk about it because the person who has suffered an entrepreneurial defeat in some way will be able to try again and not there will be more constraints that today prevent those who have had an entrepreneurial failure of an economic nature”.
But what are the most important changes foreseen by the new law?
Judicial liquidation
The figure of the trustee is gaining importance, who with the reform will have much more powers: he will be able to easily access the databases of the Public Administration, promote legal actions due to the shareholders or company creditors, distribute the assets among the creditors. Finally, a tightening on incompatibilities is foreseen.
Corporate crisis prevention
The new law provides that the debtor or the Court (subject to notification by public creditors) can activate a preventive phase of alert in order to avoid the explosion of a corporate crisis that could become irreversible.
If the procedure is activated on a voluntary basis, the debtor will be able to count on the assistance of an ad hoc body created at the Chambers of Commerce and will have 6 months to reach an agreement with the creditors.
If, on the other hand, the procedure is initiated ex officio by the Court, the Judge will have to summon the debtor immediately, on a confidential basis, while entrusting an expert with the task of resolving the crisis. Also in this case there will be six months to reach an agreement.
If, on the other hand, the procedure is initiated ex officio by the Court, the Judge will have to summon the debtor immediately, on a confidential basis, while entrusting an expert with the task of resolving the crisis. Also in this case there will be six months to reach an agreement.
The negative outcome of the alert phase is published in the business register.
The entrepreneur who activates the alert mechanism in a timely manner, or makes use of other institutions for the agreed resolution of the crisis will be entitled to a "premium": non-punishment of bankruptcy crimes if the pecuniary damage is particularly small, mitigating for other crimes and reduction of interest and penalties for tax debts.
Important exception: listed companies and large companies are excluded from the alert procedure.
Easier processes
In dealing with the proposals, priority is given to those that ensure business continuity, provided that they satisfy the creditors as much as possible. Judicial liquidation therefore becomes an extrema ratio.
The new law aims to reduce the duration and costs of bankruptcy proceedings (by making the management bodies responsible and limiting pre-deductible credits). The competent judge will be identified on the basis of the size and type of insolvency proceedings, in particular assigning those relating to large companies to the corporate court at the district level of the court of appeal.
Debt restructuring incentives
The limit of 60 per cent of credits for the approval of the debt restructuring agreement will have to be eliminated or at least reduced.
Preventive agreement
The rules on the agreement change. Alongside the continuity agreement, the composition aimed at the liquidation of the company is admitted if it is able to ensure the payment of at least 20 percent of the unsecured credits.
Business group insolvency
A unitary procedure arrives for the treatment of the crisis and the insolvency of the companies of the group and, even in the case of separate procedures, there are obligations of collaboration and mutual information on the part of the proceeding bodies.
