The Court of Bergamo (23 December 2015) authorized a business lease agreement even though a previous public auction could not be held due to the urgency of the case, considering that the mandatory provisions of Art. 163-‐bis of the Italian Bankruptcy Law apply only if consistent with the “pre-‐ concordato” phase.
A company after filing a petition to be admitted to the concordato preventivo procedure according to art. 161, sixth paragraph IBL asked the Court to authorize a lease of business unit according to art. 167, second paragraph IBL which allows acts not in the ordinary course of business in case of urgency.
The company had been unsuccessful in its attempts to find a new investor interested in enetering into a business unit lease agreement before the concordato filing. As a matter of fact, only thereafter a proposal in this respect was received by the company.
The proposal was negotiated with the company and discussed with the Judicial Commissioner and provided for a 12-month term, which was considered sufficient to safeguard the company’s employment levels and to keep the business as a going concern for the time necessary to arrange a public auction within the concordato procedure for the sale of the business unit.
Art. 163-bis IBL provides that a competitive bid process is mandatory to select offers for a business unit lease agreement (and for any sale of business units and assets in general) with a company after it has filed a petition to be admitted to the concordato preventivo procedure.
The issue is whether it could be possible, in certain specific cases and in particular due to urgency reasons, to limit this rule in order to protect the best interest of the creditors and to preserve the going concern value of the business.
The decision of the Court
The Court of Bergamo authorized the business unit lease agreement, aknowledging that it was very urgent in order not to jeopardize the company’s business to be kept as a going concern (indeed, the specific activity carried on by the company could not be continued, once interrupted).
The Court applied Art. 163-bis last paragraph IBL but noted that when considered with respect to a business unit lease agreement, a competitive bid process could be waived and postponed until the sale of the business unit, if the Court finds that it is urgent to set up a business unit lease arrangement as the only scheme available in order to preserve the business as a going concern.
The decisions should be approved, because it allows to apply with some flexibility the provision set foth by Art. 163-bis last paragraph IBL. The provision – which was introduced last summer – is clearly meant to safeguard pre-packaged concordato preventivo plans and proposals, whereby the lessee of the business unit usually is able to become the final purchaser once the business unit is sold later within the procedure. However, it should be considered that often the lease of business scheme is the only way to effectively safeguard a company’s workforce and going concern.
The interpretation offered by the Court of Bergamo allows to take into consideration any urgency reasons in the specific case, which can be duly assessed by the Court and by the Judicial Commissioner, and at the same time the Court can ensure that the provisions of the lease agreement do not grant to the lesee any advantage with a view to the subsequent competitive bid process for the sale of the business unit. This seems to be an efficient balance safeguarding a company’s workforce and going concern and also protecting the interests of the creditors.