The Court of Como, by order of 27 May 2015, authorised the Judicial Liquidator to settle the dispute with  the lawyer who advised the company in the concordato preventivo procedure, and this even against the advice of the Creditors’ Committee.

The case

The Judicial Liquidator, during the implementation phase of the concordato preventivo, filed an application to the Judge in order to be authorised to enter into a settlement agreement with the lawyer who had provided services in favour of the company during the concordato preventivo procedure, whose cost was allocated both in the concordato preventivo proposal and in the expert’s report accompanying the proposal, as well as in the Judicial Commissioner’s report to the creditors before the vote.

The authorisation was also required due to the fact that the Creditors’ Committee had expressed a negative opinion on such an arrangement.

The issues

The issues raised by the case concern:

  • the possibility to redefine by way of settlement, during the phase of the implementation of the concordato preventivo, amounts of claims allocated in the proposal;
  • the binding nature of the opinion of the Creditors’ Committee.

The decision

As to the first issue, the Judge considers that there are no reasons to exclude that a settlement can be agreement can be entered into by the Judicial Liquidator. This is because in concordato preventivo, unlike in bankruptcy (i) the debtor remains in possession, and can continue to dispose of his rights, (ii) there is no proof of debt phase, (iii) the debtor maintains his locus standi and consequently (iv) the resolution  of disputes must be handled in an ordinary trial, during which the debtor and the creditor may reach a settlement agreement.

The Judge considers, however, that the arrangement of a debt may not lead to a “hidden modification” of the concordato proposal, already approved by the creditors (in this specific case, the Judge points out that the higher cost for legal advice – to be covered through the financial resources provided for in a special fund provided by the restructuring plan – had been highlighted by the Judicial Commissioner in his report to the creditors and the creditors had then expressed their informed consent to the economic terms of the proposal). Finally, the Judge notes that the opinion of the Creditors’ Committee is not binding, since Art. 182 IBL requires that, only for the sale of certain assets (including business units, real estate, registered movable property), and Art. 35 IBL (which – in bankrupcty – provides for the authorisation of the CreditorsCommittee for the acts of extraordinary management) is not recalled by Art. 182 IBL and therefore is not applicable in concordato preventivo.

Commentary

The decision of the Court of Como is certainly to be agreed to, as it conforms to the principles and rules that govern the concordato preventivo procedure.

It is common ground that the amount of any debt specified in the concordato preventivo plan is not binding on creditors that – regardless of any different assessment of the Judicial Commissioner or determination taken by the Judge for the sole purpose of voting – are free to file (and proceed with) their claims in an ordinary trial in the implementation phase of the concordato preventivo, in order to participate to the distribution of dividends on their claim.

From this point of view the decision of the Court is to be noted, as it shows to which extent rules governing the bankruptcy procedure can be applied also to concordato preventivo

The only limit mentioned by the Court is that a different agreement on claims cannot amount to a kind of “hidden modification” of the concordato preventivo proposal already approved by creditors. The question is whether the Court’s decision would remain the same if the facts of the specific case were different, and in particular creditors were not fully informed: would then prevail the need of information of the creditors or the principle – on which also the Court based its decision – that all claims remain unsettled if a dispute arises in the implementation phase of the procedure ? The impression is that a limit to the assessment of a higher claim could be found (especially in this case, due to the fact that the claim is that of the lawyer who had contributed to the preparation of the concordato proposal) only in a recognition by the same creditor of the amount due, which probably was not in the case examined by the Court.