The Court of Alessandria (18 January 2016) addressed a series of issues regarding various rules meant to allow preserving the business in the concordato preventivo procedure, sell the business through competitive bids, lease the business prior to the application to commence the procedure, "mixed" concordato schemes and objections which key continuing suppliers can raise for past debts
Borsalino Giuseppe & Fratello S.p.A., the well-‐known hat manufacturer and holder of the world-‐famous brand, filed an application for a so-‐called "mixed" concordato preventivo proposal, based on (i) a lease of business agreement entered into just before the concordato filing, but become effective only months later, aimed at the subsequent transfer of the business unit and of the brand to the lessee, acting then as an “assuntore” committing to perform the obligations to creditors provided by the concordato proposal, as well as on (ii) the liquidation of other assets not included in the business transfer to the “assuntore”, including the production plant.
The Court addressed a wide range of debated issues, among which we point out here, namely whether: a) rules meant to allow preserving the business in concordato preventivo are applicable to "mixed" concordato proposal with “assuntore”; b) these rules can also apply where a lease of business was entered into prior to the concordato filing; c) competitive bid procedures to select the purchaser of assets provided by Article 163-‐bis IBL are mandatory also in a concordato proposal with “assuntore”; and d) the Court can authorize, pursuant to Art. 182-‐quinquies IBL, payment of past debts to key continuing suppliers, when they are bound by a contractual obligation to continue their supplies.
The decision of the Court
The Court of Alessandria (Pres. Santinello) ruled on these issues as follows:
- the Court considered that – recalling some precedents – the “assuntore” scheme is only a way to perform the obligations to the creditors according to the concordato proposal, which will be qualified as a liquidation proposal, rather than one meant to allow preserving the business or a "mixed" one, depending on the actual plan provisions from an objective point of view; in the case at hand, the Court considered that the rules meant for concordato "preserving the business" should apply, following those precedents which, in case of a "mixed" concordato proposal, considers that the "prevalent" element in the context of the plan and the proposal would determine which set of rules is applicable;
- the Court confirmed that a lease of business – as a "bridge arrangement" aimed at keeping the business as a going concern for a subsequent transfer – does not exclude that the rules meant for concordato "preserving the business" can apply, even if the lease was entered into before the concordato filing, because the test should be whether from an "objective" – and not “subjective” – point of view the business continues as going concern;
- the Court held that the transfer of the business to an “assuntore” falls within the broad definition of Art. 163-‐bis IBL (requiring a mandatory competitive bid process) because it makes reference to any agreement providing for a subsequent transfer of the business or of specific assets;
- finally, the Court followed a recent and innovative precedent with respect to payment of past debts to key continuing suppliers, excluding that the authorization could be granted when the supplier is obliged to perform its services, adding on that the supplier is not entitled to object that he was not paid those past debts, because the debtor is forbidden by law to make the relevant payments.
The decision of the Court is notable for its detailed and precise reasoning on several topics, which is to be fully shared. On issues related to concordato "preserving the business" – which now play a key role – the Court offers various solutions fitting well into the line of interpretation which is best oriented to actually realizing the purposes of the law, in its most recent evolution.
This is certainly true for the "objective" test for determining whether the business continues as a going concern, as well as for the evaluation in terms of the "prevailing" component of the plan (the same as Trib. Pistoia 29 October 2015): the “prevalence” test is now mandated with respect to the new rules which are applicable only to schemes different from those "preserving the business" and trigger a minimum 20% payment to unsecured creditors as well as the chance (if the debtor does not propose a minimum 30% payment to unsecured creditors) for creditors to make an alternative concordato proposal.
The application of Art. 163-‐bis IBL on competitive sales to concordato with an “assuntore” is indeed a matter on which a doubt may arise: the “assuntore” scheme relates indeed not only to the sale of an asset, but also to the person or entity which assumes the obligation to fulfil the proposal approved by the creditors, so that it may also be considered that “competition” should be framed at the level of the proposal (as a competing proposal pursuant to Art. 163 IBL) rather than at the level of the sale of a specific asset.
Finally, the ruling is important as to the issue on payment of past debts, which follows on the footsteps of the precedent of the Court of Modena of 6 June 2015. The Court of Alessandria draws an additional conclusion from that setting, explicitly stating that the restriction to the debtor in concordato from paying past debts also includes a restriction for the creditor to raise this objection in order to refuse to continue performing a contract: this, as a matter of fact, extends the automatic stay of individual enforcement actions also to contractual remedies.