On 26 April 2016, the Italian Government has introduced a new reform to shorten the length of the recovery of credit, by approving the decree law no. 59 (the Decree), entered into force on 3 May 2016. The Decree aims at fostering and facilitating the recovery of credit throughout enforcement and insolvency proceedings.
The main innovations concern:
- the introduction of the pegno mobiliare non possessorio (a sort of a floating charge);
- certain amendments to the discipline of the so-‐called patto marciano; and
- other relevant changes to the Italian enforcement procedures and the Italian insolvency law.
Pegno mobiliare non possessorio
According to Italian law, loans can be secured by a pledge over certain assets. Nonetheless, the creation of the security required (save for certain specific exceptions) the dispossession of the asset, which could not be utilized by the debtor. Pursuant to the Decree, the Italian Government has now generally introduced the pegno mobiliare non possessorio, which enables the debtor to keep possession of the asset, which may therefore used for purposes connected with the business and which may also be disposed of with automatic transfer of the pledge.
The agreement must contain the details of the creditor, the debtor, the third party granting the pledge, if any, as well as the description of the secured asset and the secured amount.
The pegno must be created by registering it in an electronic register set up by the Italian Tax Authority (Agenzia delle entrate).
The pegno mobiliare non possessorio can only be created following specific subjective and objective criteria.
As to the subjective criteria, the security is only for those debtors who exercise a business activity; whereas, with reference to the objective criteria, the pegno mobiliare non possessorio can only be created over equipment, machineries and other movable assets, excluding real estates and assets filed in public registers such as cars.
In case of enforcement of the security, the creditor, following a notice to the pledgor can, among others:
- sell the pledged assets (the sale has to be done through competitive procedures and with the assistance of experts);
- lease the pledged assets, ((this must be provided for in the agreement, which must list the criteria according to which the lease can be executed); and
- appropriate the pledged assets (again, the agreement must list the criteria according to which the appropriation can be done).
Pursuant to article 2744 of the Italian Civil Code, it is generally prohibited to agree that the ownership of an asset, over which a pledge has been created, is transferred to the secured creditor in case of breach of contract. The above-‐mentioned prohibition, which also applies to mortgage over real estates, has generally been known as patto commissorio (foreclosure agreement).
Notwithstanding the above, for many years, the Italian Supreme Court and the main scholar have recognized the possibility for the secured creditor to appropriate/sale the secured asset, returning to the debtor the difference between the value of the asset and the outstanding debt (the so-‐called Patto Marciano).
A first application of such principle was contained in the decree no. 170/2004, by which the Italian Government admitted the possibility, under certain circumstances, to appropriate/sale financial instruments. In this case, however, the Patto Marciano was only applicable to pledged asset represented by financial securities.
Another application of such principle has now been introduced with article 2 of the Decree, which has further specified the structure of Patto Marciano in respect of real estates. In particular, together with the execution of a loan agreement, the parties can, under certain circumstances, enter into a sale agreement, by which the ownership of a real estate is transferred to the secured creditor subject to the condition precedent represented by the default of the debtor (for more than 6 months after non-‐ payment of at least three monthly instalments or, in case of quarterly instalments or longer, of one instalment), thus without the need to go through the burdensome Court procedure for enforcement of the security. The Court will be, in fact, involved only for the appointment of an expert, who shall appraise the value of the real estate. The Patto Marciano can be entered into in relation to new or existing loan agreements.
The Patto Marciano could be increasingly used by lenders in relation to financing (such as short-‐term financing) that might not be subject to the so called imposta sostitutiva (levied at 0.25% on the secured amount) and in relation to which a mortgage could be taken at relevantly higher costs (2% on the secured amount upon creation of the same plus 0.5% upon cancellation). Indeed, it could be argued that the Patto Marciano, being subject to condition precedent, would be subject to fixed register tax at €200, and that only the subsequent deed of acknowledgment of the occurrence of the condition precedent (i.e. default by the borrower) would be subject to higher registration taxes. In any case, that would mean that lenders could initially add the Patto Marciano to the security package related to such loans, with a negligible cost of €200.
In addition to the pegno mobiliare non possessorio and the patto marciano, the Decree also introduces new measures: (i) to improve the efficiency of insolvency proceedings; and (ii) to simplify and accelerate credit enforcement.
The possibility to manage hearings and creditors meetings by using an online platform are some of the new measures to improve the efficiency of insolvency proceedings.
Furthermore, the Decree has modified the Italian Code of Civil Procedure, in order to:
- amend the form of the pignoramento (seizure);
- reduce the procedural term for the opposition to the enforcement actions; and
- allow the purchaser of an asset, in the context of a judicial auction, to have the asset assigned to a third party named by the same purchaser.