Negotiated settlement for the resolution of enterprise crisis 26 October 2021 – Posted in: News – Tags: , , ,

Edited by the lawyers Mr. Augusto Vacca and Mrs. Silvia Sulli

Law No. 147 of 21 October 2021 was published in the Official Gazette No. 254 of 23 October 2021, by which Decree-Law No. 118/2021 on urgent measures concerning business crises and company reorganisation, as well as further urgent measures in the field of justice, was converted with amendments.

This legislative measure, besides confirming the postponement to 16 May 2022 the date of enforcement of the Corporate Crisis Code, which we have already discussed in a previous article, introduced into our legal system the institution of the “Negotiated settlement for the solution of corporate crisis”.
This is a new instrument designed to support businesses that, despite being in difficulty, can still be restored by avoiding bankruptcy.

This instrument, which will become fully operational from 15.11.2021, is aimed at commercial and agricultural entrepreneurs who find themselves in conditions of patrimonial or economic-financial imbalance that make their crisis or insolvency probable. It can be activated, on a voluntary basis, by submitting an application to the secretary-general of the CCIAA (Chamber of Commerce, Industry, Handicraft and Agriculture) in whose territorial area the company’s registered office is located, requesting the designation of an independent expert.

For this purpose, a list of independent experts suitable for conducting the procedure will be drawn up, and they will be appointed from time to time by a special commission established at each Chamber of Commerce. In addition, a national telematic platform will be made operational where operational indications for the drafting of the reorganisation plan, a practical test for the verification of the reasonable feasibility of the reorganisation and a protocol of rules on the conduct of the negotiated settlement will be made available. According to the legislator’s intentions, the expert will have to be third and independent with respect to the requesting company and will have to facilitate negotiations between the entrepreneur, creditors and any other interested parties, in order to identify a solution for overcoming the conditions of difficulty that determined the opening of the proceedings.

The entrepreneur who decides to activate the procedure will be able to ask the competent Court for the application of protective measures capable of guaranteeing that, during the pendency of the procedure, creditors cannot acquire right of preemption, nor initiate or continue executive or precautionary actions on his assets or on the assets and rights with which the business activity is exercised, with the one exception of credit claimed by workers. Moreover, until the conclusion of the negotiations or the filing of the negotiated settlement petition, no sentence can be pronounced declaring the bankruptcy or state of insolvency of the company, and the applicability to the entrepreneur of certain obligations provided for by law regarding the subject of capital reduction for losses even below the legal limit will be suspended (Art. 2446, second and third paragraphs, Art. 2447 and Art. 2484, first paragraph, no. 4 of the Civil Code for s.p.a. and s.a.p.a. and Art. 2482bis, fourth, fifth and sixth paragraphs, 2482ter and 2545duodecies c.c. for s.r.l.). Lastly, the law also provides for bonus measures of a tax nature for the entrepreneur who activates the procedure.

During the proceedings, the entrepreneur will maintain the powers of ordinary and extraordinary administration of the company, but will have to manage it in order to avoid jeopardising the economic-financial sustainability of the business, and will have to previously notify the expert only if he performs acts of extraordinary administration or makes payments that are not in line with the negotiations or the prospects for the company’s recovery.

It seems important to clarify that, pursuant to the law in question, the acts, payments and guarantees implemented by the entrepreneur in the period following the expert’s acceptance of the assignment may not be subject to the revocatory action, as long as they are consistent with the progress and state of negotiations and with the prospects of reorganisation existing at the time when they were carried out.

The Court may also authorise the entrepreneur or one or more companies belonging to a group of companies to contract predeductible financing.

The law identifies a number of possible alternative outcomes of the procedure, depending on whether or not the entrepreneur, with the support of the expert, reaches a suitable solution to overcome the crisis.

In particular, having identified a suitable solution, the entrepreneur may either:

  • conclude an agreement with one or more creditors suitable to ensure business continuity for a period of not less than two years;
  • conclude a moratorium agreement pursuant to Article 182octies of the so-called “Bankruptcy Law” (i.e. Royal Decree No. 267 of 16 March 1942), also introduced by Decree-Law 118/2021;
  • conclude an agreement with one or more of the creditors and the expert that will produce the effects set out in Article 67(3)(d) of the Bankruptcy Law, i.e. the so-called ‘certified reorganisation plan’, but without the need for the attestation required by the aforementioned rule.

If no solution can be reached in the procedure, the entrepreneur, at the end of the negotiations, may nevertheless:

  • apply to the Court for approval of a debt restructuring agreement pursuant to Article 182bis et seq. of the Bankruptcy Law, although with certain peculiarities;
  • apply for a simplified composition agreement for the liquidation of its assets according to the terms and characteristics identified by the same law, or access one of the other procedures governed by the Bankruptcy Law.

Ultimately, the new instrument introduced by the legislator is, at least in its intentions, aimed at incentivising the early emergence of the crisis upon the request of the entrepreneur who finds himself in the conditions required by law, in order to achieve, where possible, the reorganisation of the company.

In addition to the novelty of the procedure in and of itself, this instrument presents an important peculiarity that could characterise future regulatory interventions also in other areas than bankruptcy and para-bankruptcy; in fact, although designed to operate on a negotiating level, it envisages spot incursions by the ordinary judiciary, which is called upon to intervene and pronounce itself only on crucial junctures of the procedure in the presence of a specific request by the entrepreneur (i.e. admission to the enjoyment of protective measures, authorisation to contract financing, etc.).