New Italian bankruptcy code effective 15 July 2022

The final text of the new code provides a number of options for distressed companies and individual debtors, the most significant of which is the negotiated settlement procedure, expected to provide the legal protection needed during negotiation to find the way out of the crisis at the earliest stage, and provide a registered restructuring plan – the only framework that pushes the agreement with creditors beyond the absolute priority rule.

The negotiated settlements agreement replaces in full alert procedures provided by the 2019 version of the code, and adoption of the agreement is requested by Article 2 of the 1023/2019 EU Directive. Any commercial or agricultural enterprise in financial trouble likely to give rise to an insolvency on the short or medium term can request access to a short and protected path. Within a 180-day time frame, which can be doubled if all parties agree, an independent expert will advise the debtor negotiating an agreement with creditors, based on their restart plan. During this period, suppliers cannot terminate their contracts, and banks cannot revoke or even suspend credit lines or recall borrowed funds. If requested, the court can provide complete or limited protection against creditors’ individual proceedings.

Registered restructuring plans were included during the very last discussion in parliament. Creditors, gathered into classes, can be offered a payment divergent from the pre- empting ranking. The plan is effective and binding with all classes’ approval, on a majority basis. Dissenting creditors can oppose the plan if it is not satisfactory, and the court will decide and proceed if the offer is assumed to be equal to or better than the liquidation scenario.

The new code offers to debtors and advisors a couple of new options to manage company, group, or individual financial troubles. Let’s see what the concrete application will be in the near future.

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