The reorganisation effort of distressed companies often requires new funding. This has led the Italian insolvency system to abandon punitive solutions in favour of incentives for companies in distress. An interesting aspect of this change is represented by the new rules adopted in recent years with regard to financing granted by shareholders of companies in crisis.

Shareholder financing

Before the 2010 reform, Article 2467 of the Civil Code was the main provision on shareholder financing of companies, according to which:

The reimbursement of financing of members in favour of the company is postponed to the payment of other creditors and, if made in the year preceding the declaration of bankruptcy of the company, must be repaid.

The contrasting treatment of shareholders and external creditors was justified by the possibility of shareholders having access to all relevant information regarding a company in crisis. Shareholders were therefore presumed to be in a position to diagnose a company's crisis with greater accuracy and promptness than an external lender. Article 2467 aimed to discourage the so-called 'risk of nominal undercapitalisation of the company' – namely, the risk that shareholders transfer business risk to a company's creditors by providing financing to the company through a loan rather than a capital injection.

New provision

In 2010 Article 182quater(3) of the Bankruptcy Law introduced an exception to Article 2467 which provided that receivables arising from the performance of a composition with creditors (referred to in Article 160 and following of the Bankruptcy Law) or a debt restructuring agreement (approved pursuant to Article 182bis of the Bankruptcy Law) made by shareholders (up to 80% of the total amount) are pre-deductibles under Article 111 of the Bankruptcy Law. These benefits will apply for the full amount of the loan where the lender becomes a shareholder of the company in the performance of said composition of creditors or debt restructuring agreement.

The new provision aims to provide a favourable regime for loans granted to failing companies, including those granted by shareholders. At the same time, the 80% limitation threshold aims to avoid opportunistic behaviour (the so-called 'moral hazard') and impose on the lender a certain percentage of risk in the investment.

However, the provision raises two interpretative problems:

  • Is a restructuring plan in which the amount of shareholder credit granted as a pre-deductible is less than 80% admissible? According to the prevalent interpretation, this possibility is available, as it reduces the level of shareholder uncertainty regarding the expectations of recovering the sums invested.
  • What will happen to the remaining 20% (or more, depending on the case) of the shareholder credit? Under the provision, the remaining 20% should be used in the repayment of all other credit, including unsecured credit, and not only to pay pre-deductible credit.

The new provision should be confirmed, with substantially similar wording, in the draft Code of Crisis and Insolvency (new Paragraph 102), which will replace the Bankruptcy Law in the near future. The provision's main innovation will be that the above principle will apply to loans in any form granted by shareholders, including guarantees and counter-guarantees.

For further information on this topic please contact PierDanilo Beltrami at Lombardi Segni e Associati by telephone (+39 02 896 221) or email ( The Lombardi Segni e Associati website can be accessed at

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