Insolvency Law at Italy
Italy's insolvency framework has undergone significant reform with the enactment of the Code of Business Crisis and Insolvency (CCII), which came into force on July 15, 2022. This legislation aligns with EU Directive 2019/1023 and introduces a preventive, rehabilitation-focused approach to corporate distress. (The entry into force of the Crisis and Insolvency Code, The new Italian Insolvency Code enters into force with further amendments, in im-plementation of the Directive (EU) No. 2019/1023 (legislative decree No. 83/2022) | ADVANT Nctm)
Key Features of the Italian Insolvency Law (CCII)
1. Early Detection and Prevention
State of Crisis: Defined as a condition where a debtor is likely to become insolvent, characterized by the inability to meet obligations within the next 12 months.
Obligations of Entrepreneurs: Required to implement organizational, administrative, and accounting procedures to promptly identify signs of crisis, as stipulated in Article 2086 of the Civil Code.
Crisis Indicators: Specific financial indicators, such as overdue payroll debts and unpaid supplier invoices, must be monitored to detect early signs of distress. (The entry into force of the Crisis and Insolvency Code)
2. Negotiated Settlement (Composizione Negoziata)
Introduction: Established by Law Decree No. 118/2021 and integrated into the CCII, this out-of-court procedure assists companies in crisis to negotiate with creditors under the guidance of an independent expert.
Access: Available to all entrepreneurs, including commercial and agricultural, who are duly registered.
Procedure: Initiated through a request to the Chamber of Commerce, accompanied by necessary documentation, including a draft recovery plan.
Protective Measures: Debtors can request the court to apply measures preventing creditors from initiating or continuing enforcement actions during the procedure. (The new Italian Insolvency Code entered into force on 15 July 2022 | ADVANT Nctm, The new provisions brought by Law Decree No. 118/2021 | DWF Group)
3. Restructuring Plans and Judicial Procedures
Certified Reorganization Plan: A detailed plan outlining the debtor's assets and liabilities, actions to restore financial balance, and expected costs and revenues.
Debt Restructuring Agreements: Allows for the settlement of debts with creditors, including public creditors, under specific conditions.
Judicial Liquidation: Replaces the term "bankruptcy," focusing on liquidation as a last resort when restructuring efforts fail. (The Italian Code for Business Crisis and Insolvency: spotlight on the latest amendments - A&O Shearman, The entry into force of the Crisis and Insolvency Code)
4. Recent Amendments (Legislative Decree No. 83/2022)
Implementation of EU Directive: Aligns national law with EU standards on business crisis and insolvency.
Enhanced Procedures: Introduces measures to streamline and improve existing insolvency procedures.
Group Insolvency: Provides a unified approach to the insolvency of corporate groups, allowing for coordinated proceedings. (The entry into force of the Crisis and Insolvency Code)
5. Recent Legislative Amendments (June 2024)
Tax Claim Settlements: Permits the use of negotiated settlements to address tax claims, previously only possible through other procedures.
Auditor Reporting: Establishes a 60-day deadline for statutory auditors to report signs of crisis to the board of directors to avoid liability. (Government approves draft legislative decree on amendments to the Italian Business Crisis and Insolvency Code - Portolano Cavallo)
Practical Implications
For Debtors: The CCII emphasizes early intervention and provides tools for restructuring, aiming to preserve business continuity.
For Creditors: The law introduces mechanisms to protect their interests while encouraging cooperative solutions to financial distress.
For Legal Professionals: The reform necessitates familiarity with new procedures and timelines to effectively navigate the insolvency landscape. (The entry into force of the Crisis and Insolvency Code)
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