Pursuant to Articles 2467 and 2497 quinquies of the Civil Code, the reimbursement of shareholder loans to a company and the reimbursement of loans made by companies belonging to the same group are postponed until other company creditors have been reimbursed if:

  • there is an excessive imbalance between the financed company's debt and its net equity; or
  • the financed company's financial situation would be better improved through a capital increase than a loan.

Further, if a company reimburses its shareholders for a loan within one year of its bankruptcy, the shareholders must repay such amount through the bankruptcy procedure.

The rationale of such provisions is to encourage companies' shareholders to finance them through capital contributions rather than loans, which are qualified as debts and must be reimbursed by companies.

However, in light of the COVID-19 emergency, Article 8 of Law Decree 23/2020 (the liquidity decree) suspended the above norms regarding the postponement of shareholder loans made between 9 April 2020 and 31 December 2020. This rule is in addition to Articles 6 and 7 of the liquidity decree, which suspend the Civil Code rules on capital increase in the event of a company's balance sheet losses.

Therefore, the liquidity decree provides shareholders with a more flexible approach to a company's financing during the exceptional financial crisis connected with the COVID-19 emergency in order to avoid disincentivising the use of shareholder loans.

For further information on this topic please contact Antonio Grieco or Eugenio Vaccari at Grieco e Associati by telephone (+39 06 420 3881) or email ([email protected] or [email protected]). The Grieco e Associati website can be accessed at www.griecoassociati.com.