Covid-19 in Italy: Liquidità Decree dedicates articles to insolvency procedure

Firstly, the implementation of the remaining rules of the Crisis and Insolvency Code ("Codice della crisi e dell’insolvenza - Legislative Decree no. 14 of 12.01.2019”) is deferred until 1.09.2021, in order to protect the productive economic system to prevent a temporary financial imbalance from being considered as persisting and thus causing the exit from the market of some companies that are still performing.

Again, for the purposes of protecting the entrepreneurial market, until 31 December 2020 the obligations for companies of recapitalization, reduction of share capital or transformation provided by articles 2446, 2447, 2482-bis and 2482-ter of the Italian Civil Code are suspended. It is also provided for the ineffectiveness of the cause for the dissolution of the Company due to the reduction or loss of capital (articles 2484, no. 4 and 2545-duodecies of the Italian Civil Code).

Correspondingly, the principle of valuation of financial statement items on a "going-concern" basis is suspended (Article 2423-bis, par. 1 of the Italian Civil Code; see also Article 2428 of the Italian Civil Code on the drafting of the annual management report).

The temporary disapplication (until 31.12.2020) of the rules on the subordination of loans made in favour of the Company by shareholders or by those performing management and coordination activities (articles 2467 and 2497 quinquies of the Italian Civil Code) has also been provided for, in order to encourage alternative sources for the possible financial sustainability of the Company.

The sphere of Company’s protection also extends to the access to insolvency procedures.

With regard to Agreements with creditors and Debts restructuring agreements, the deadlines to comply with these already approved procedures, expiring between 23 February 2020 and 31 December 2021, are extended by six months.

In the proceedings still awaiting for the approval, instead, the debtor Company may file a instance to the Court to obtain an additional period of up to ninety days to amend the plan and the terms of payment proposed to creditors. This possibility, however, is precluded if the creditors have already voted against homologation of the proposal.

The debtor, before the approval of the plan and of the proposal by creditors, may also file a memorandum only containing an indication of new deadlines for the fulfillment of these procedures. Such deferral may not, however, exceed six months.

In addition, the debtor who has obtained the granting of the term provided for by Article 161, par. 6, L.F. already extended by the Court, even if a declaration of Bankruptcy is pending, may request a further extension of ninety days, specifically motivated and justified by the circumstances arising from the Covid-19 epidemic. This last request may also be submitted by the debtor Company who has been granted the time limit as per art. 182-bis, par. 7, first sentence.

Finally, it should be noted that all the bankruptcy petitions filed between 9 March 2020 and 30 June 2020 are not prosecutable and this without requiring that the state of insolvency be related to the epidemiological emergency.

This in order to control the imbalances due to exogenous and extraordinary circumstances and to avoid an overburdening of the judicial offices. However, petitions filed by the Public Prosecutor accompanied by a request for the issue of precautionary or conservative measures to protect the company's assets are still admissible, in order to avoid dissipatory conducts, including those of criminal relevance, to the detriment of creditors.