With a decree of 11 March 2015 the Tribunal of Reggio Emilia, recalling the case-law principle of the socalled “consecution” of insolvency procedures, rejected the pleading in the proof of debt procedure of a creditor who requested its own post-concordato debt towards the then bankrupt company to be set off against its own pre-concordato receivable.

The case

A company, upon expiration of the term set by the Tribunal following a concordato preventivo pre-filing according to art. 161, sixth para. IBL, filed the concordato proposal, the plan and the documentation required by law. The Tribunal, considering the proposal inadmissible upon legal grounds, with a subsequent judgment declared the company bankrupt.

A bank as a creditor in the proof of debt procedure requested its own post-petition debt towards the then bankrupt company (positive balance of the company’s bank account) to be set off against its own pre-petition receivable (loans made to the company), claiming that the date of the bankruptcy declaration should be considered as to pre- or post-petition status of claims and not the date of the concordato preventivo prefiling.

The issue

It is well known that (i) art. 56 IBL allows payables and receivables to and from an insolvent company to be set off upon the only condition that the facts giving rise to both claims occurred prior to the declaration of bankruptcy; (ii) the rule is applicable also to concordato preventivo, having regard to the date of filing (or pre-filing) of the pleading of the company to be admitted to the procedure (art. 169 IBL).

If one looks at the circumstance that the pleading of the company to be admitted to the concordato preventivo procedure has been declared inadmissible, the consequence is that the only insolvency procedure to have been ever opened is the bankruptcy liquidation procedure and that both the debt and the receivable arose before the declaration of bankruptcy, so that they should be set off according to art. 56 IBL.

Consequences are different if one looks at the case-law principle of the so-called “consecution” of insolvency procedures and, therefore, the cut-off date for pre- and post-petition claims can be considered that of the date of filing (or pre-filing) of the pleading of the company to be admitted to the concordato procedure: in such a case, set-off can be ruled out considering that the claim and the counterclaim would not be both arising before the cut-off date.

The decision The Tribunal ruled that principle of the “consecution” of insolvency procedures apply to the specific case, recalling its rationale being – at the time the case-law was originally created – to allow creditors who made loans to the debtor admitted to a then in force pre-insolvency procedure to enjoy, in the following bankruptcy, a super-priority status for their claims, a rule which was later expressly introduced by reforms of insolvency laws.

The Tribunal bases then its decision on articles 169 and 56 IBL jointly with art. 1241 ICC which allows setoff, in non-insolvency circumstances, when claims are both of a fixed amount, due and payable, and reciprocal (i.e. between the same individuals or entities being at the same time debtor and creditor, respectively).

The Tribunal then goes on noting that from the moment a pre-filing for concordato preventivo is made art. 56 IBL applies and therefore conditions for set-off are not met because: (i) only the bank receivable (and not that of the bankrupt company) arose before the concordato pre-filing and (ii) the receivable arising from the positive balance of the company’s bank account, following the declaration of bankruptcy, cannot be referred to the company itself, but to the estate which is administered in the interest of the company’s creditors.

Commentary

The turning point of the decision of the Tribunal is then the principle of the “consecution” of insolvency procedures. In particular, it is worth noting that the Tribunal considers that such a principle can be applied also in cases when a demand for admission to the concordato procedure is considered inadmissible and, as a consequence, bankruptcy is declared.

The Tribunal states a rule which is innovative, as it departs from the traditional case-law on the specific issue, before recent reforms of Italian insolvency laws: the Supreme Court of Cassation indeed had always ruled that, when the concordato procedure was not actually declared open, conditions for the “consecution” of insolvency procedures principles would not be met and, therefore, art. 169 IBL could not be applied (see Cass. 22 November 2007, No. 24330; Cass. 22 June 1991, No. 7046).