Italy
file the ‘blank’ request with the competent court. This is provided that the detailed plan and the other necessary documents are submitted to the court for approval within the time frame estab- lished by the court – which will be comprised between 60 and 120 days from the date of filing the blank request. The possibility of filing a blank request in rela-
tion to the pre-insolvency creditor arrangement procedure is a real novelty in the Italian legal sys- tem. It is important to note that during the time between submitting the blank request and the detailed plan, creditors will be prevented from tak- ing any enforcement action. This gives the compa- ny the necessary time to prepare a detailed propos- al of the arrangements without being threatened by individual creditor actions that could prejudice the implementation of a creditor arrangement (allegedly in the best interest of all the stakeholders of the company). Further, the new regime allows the company to
bring forward both ordinary transactions and transactions not in the ordinary course of business after filing the initial request and the agreement being sanctioned by the court. This is so long as the latter are deemed urgent and have been duly approved by the court. During the same period, the court may order the company to provide peri- odical information so it can monitor the conduct of the company in distress.
Clamping down on misuse The introduction of the blank request concept cre- ates the risk of debtors abusing it by filing such requests without having started any real prepara- tion of a detailed pre-insolvency creditor arrange- ment proposal. In a case of severe financial distress, this would delay the company declaring insolvency in situations that are no longer capable of being remedied. Therefore, the courts have recently shown a great deal of care in preventing any abuse of this procedure. Some Italian courts have already issued guide-
lines to clarify their approach to the blank request procedure. The Court of Reggio Emilia, for exam- ple, has specified guidelines for when the debtor is applying to the court to obtain either: • the authorisation for acts outside the ordinary management of the company; or
• the authorisation to rescind or suspend out- standing contracts (as described below).
In these situations, the blank request must detail
the essential features of the creditor arrangement plan so that the court is able to consider whether the request is admissible. The Court of Milan has instead preferred a
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possibility of filing a blank request in relation to the pre-insolvency creditor
“
arrangement procedure is a real novelty
” The
more flexible approach and will consider admissi- ble blank proposals that describe the minimum content prescribed by law. This gives the debtor the chance to integrate its request during the period granted to deposit the final detailed plan. If the debtor wants to undertake acts out of the ordinary management of the company, or be granted a term longer than 60 days to deposit the final detailed plan, the debtor will have to supply additional information. The Court of Milan also expressed its view on the periodic information that it may ask. This is based on two considerations: • there are still no specialised technical agencies inside Italian courts that may follow distressed companies before the submission of the final detailed plan; and
• it is still not clear how the court may enforce the non-fulfilment of the obligation to supply the periodical information to the court.
In light of these factors, the Court of Milan will
ask periodic information only in case of complex and significant pre-insolvency creditor arrange- ments.
Outstanding contracts Article 33 of the Development Decree also modi- fies the regime applicable to some outstanding contracts in the context of pre-insolvency creditor arrangements. Pursuant to the amended article 169-bis of the Italian Bankruptcy Law, the debtor is now entitled to apply to the court to: • (i) rescind outstanding contracts (ie contracts where the main obligations are still to be per- formed); or
• (ii) suspend their performance of the contract for a period no longer than 60 days.
In both cases, should the court authorise such application, the contractual counterparty is enti- tled to an indemnification. This indemnification claim will be treated as other (creditor) claims aris- ing prior to the pre-insolvency creditor arrange- ment. Article 169-bis does not apply to certain classes of contracts such as, among others, employ- ment contracts and real estate lease agreements.
Pre-insolvency creditor arrangement with going concern Reform of the Italian Bankruptcy Law has also introduced a new specific provision (article 186-bis of the Italian Bankruptcy Law) relating to pre- insolvency creditor arrangements that provide for the continuation of the business of the company in distress. Business continuity can be achieved through the sale of the going concern of the rele- vant company to third parties, and may contem- plate a separate sale of assets deemed not instru-
IFLR|RESTRUCTURING & INSOLVENCY 035
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