The Court of Forlì (3 February 2016) allowed a competitive bid process to select the purchaser of a business unit during the phase following a concordato “pre-­‐filing”

The case

A company had leased a business unit to a new investor and had filed a demand to be admitted to concordato preventivo according to Art. 161 sixth para. IBL, thus reserving to file later the concordato plan and proposal to the creditors.

The lessee of the business unit insisted to purchase the business unit as a matter of urgency and, therefore, the company filed a request to the Court to authorize an immediate sale.

The issues

It is disputed whether the provisions of Art. 163-­‐bis IBL (mandating a competitive bid process to select the purchaser of business units or assets, when the concordato plan indicates a proposed purchaser) are applicable also in the pre-­‐concordato” phase.

The issue arises because the “pre-­‐concordato” phase runs before the filing of the concordato plan and proposal to the creditors, and Art. 163-­‐bis  IBL requires that the offer triggering the competitive process is included in the plan.

The decision of the Court

The Court of Forlì – having pointed out that the competitive bid regime applies to any kind of concordato (be it a liquidation or a “going concern” plan, or a composite scheme) and to all sales after the concordato filing ruled that Art. 163-­‐bis IBL in combination with Art. 182 fifth para. IBL provides grounds for extension to the “pre-­‐concordatophase.

The Court, considering the urgency of the specific case and the opportunity not to lose a chance to immediately realize a significant revenue for the creditors, authorized a competitive bid process to see whether there could be a better offer for the purchase of the business unit.

Commentary

The decision of the Court is based on the following arguments:

  1. Art. 163-­‐bis IBL is applicable also “to activities to be authorized pursuant to Art. 161 seventh para.”: these are acts exceeding ordinary management after the concordato pre-­‐filing and until the debtor is admitted to the procedure;
  2. Art. 182 fifth para. IBL provides that all sales or transfers of assets made after the concordato filing or pre-­‐filing follow the rules of insolvency liquidation sales: the Court underlines here that the rule does not distinguish between the concordato filing or pre-­‐filing.

The decision follows a precedent of the Court of Rovigo (17 November 2015) which also was underlying the need to take into consideration the peculiarities of the specific case and, in particular, the need to actually pursue the interest of the creditors to receive the highest possible satisfaction of their claims.     A sale of the business also in the pre-­‐concordato phase seems indeed to better aim at the interest of the creditors, avoiding a delay to await that the debtor has filed his own proposal and plan, which might cause favourable opportunities to vanish. A strict interpretation, on the contrary, would not seem to follow the underlying rationale of the rule, and would not yield any apparent benefit.

Indeed, the rule that the offer be indicated in the concordato plan seems to give relevance, for the purpose of triggering the competitive bid process, to (i) the choice of the debtor to proceed to the sale of the business (as an alternative to continue carrying out the activity pursuant to a going concern plan whereby creditors would be paid out of future revenues) as well as (ii) the selection by the debtor in the plan of the offer which the debtor himself considers the most appropriate. In this respect, the request by the debtor to the Court to authorize an immediate sale seems to imply that both these choices have been made by the debtor, and the same is in the case (like the one considered by the Court in its decision) where the debtor, before the concordato filing, has already leased the business to a new investor who made an irrevocable offer to purchase the same.