Pre-insolvency flexibility
Some innovative reforms have created new possibilities – and flexibility – for Italian companies in distress. Chiomenti Studio Legale’s Carmelo Raimondo and Marco Pagani disucss the new rules for pre-insolvency creditor arrangements
T
he framework for pre-insolvency creditor arrangements (concordato preventivo) in Italy has been amended to improve the financial and business crisis faced by Italian companies. The new provisions are drawn from US Chapter 11, and the
overall reform of the country’s pre-insolvency creditor arrangements is aimed at aligning the Italian business environment with other jurisdictions. As with every substantial legal reform, the application of these new rules will require some analysis until market practice is established based on the parameters established by the Italian courts. On June 15 2012, the Italian Government (Consiglio dei Ministri) approved Law Decree
No 83 (Development Decree) to introduce certain urgent measures aimed at the growth and development of Italy’s economy. The Development Decree was successively amended and converted into law through the approval of Law No 134 on August 7 2012. Among the various innovations introduced by the Development Decree to face the
effects of the economic downturn are the amendments to insolvency proceedings under the Italian Bankruptcy Law. The underlying rationale of these amendments (which are contained in article 33 of the Development Decree) is to offer Italian companies in finan- cial difficulties more flexible schemes which allow them to overcome their difficulties while preserving their business continuity. In many aspects the amendments (provided for under article 160 and following of the Italian Bankruptcy Law) to the regulation of pre-insolven- cy creditor arrangements (concordato preventivo) are inspired by Chapter 11 of the US Bankruptcy Code.
recently shown a great deal of care in preventing any abuse of this procedure
“ ” 034 Courts have
Pre-insolvency creditor arrangements Pursuant to article 160 and 161 of the Italian Bankruptcy Law, for an Italian company to have pre-insolvency creditor arrangements approved, it must submit to the court a detailed plan. This must contain an analytical description of the modalities and timing for the implementation of the proposed arrangements, and the feasibility of the plan must be assessed by an expert. Contents of the proposal may vary, however article 160 lists a num- ber of non-compulsory alternatives. Options available to the company include: disposal of assets; implementation of extraordinary transactions; issuance of shares to creditors; and different treatments of the various classes of creditors. Before submitting the pre-insolven- cy arrangement to creditors, this has to be approved by the court. A key change introduced by the new pre-insolvency creditor arrangements is that the
company can submit to the court a request to admit a pre-insolvency creditor arrangement without submitting the arrangement plan. The full detailed proposal of pre-insolvency creditor arrangement would be submitted at a later stage. The amended article 161 of the Italian Bankruptcy Law provides that the company can
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