Two recent decisions of the Tribunals of Ferrara (8 April 2014) and Palermo (9 June 2014) address some of the major issues involved in group restructurings under Italian insolvency laws: conditions and features of a single “concordato preventivo” procedure for all the companies of the same group
In both cases, the insolvent companies of the same group filed a request for admission to the procedure of “concordato preventivo”, based on a single reorganization plan providing for a coordinated and rational management of the group’s assets for the purpose of satisfying the creditors of the various companies.
Italian insolvency laws do not provide for a specific regulation of group “concordato preventivo” procedures.
The two decisions addressed some issues arising in this respect, whether for all the companies of the group (i) a single pleading for admission to the procedure of “concordato preventivo” can be filed, (ii) a single reorganization plan and a single proposal to the creditors can be set up, (iii) a single “concordato preventivo” procedure can take place, and (iv) majorities for the approval of the proposal should be reached at the group level or with respect to each of the companies of the group.
The Court Ruling
In the case before the Tribunal of Palermo (i) a single pleading by all the companies of the group for admission to the procedure was considered admissible, (ii) a single reorganization plan referred to the group business unit as a whole was considered admissible, as it was in the interest of the creditors and such as to a) favour a coordinated liquidation process, b) consent the set-off of the intragroup indebtedness, c) allow business activity of the group as a whole to continue through a SPV, provided however that the plan and the accompanying expert’s report d) separately indicate assets and liabilities of each single company and e) consent to each single creditor to evaluate his own receivables vis-a- vis each company and the impact of the proposal on their discharge as an alternative to bankruptcy liquidation, (iii) a single procedure was carried on, with a single Judge in charge and a single Judicial Commissioner and a single creditors’ meeting, and (iv) majorities were calculated at group level, and not for each single company.
In the case before the Tribunal of Ferrara (i) each company filed a separate request for admission to the procedure, (ii) a single proposal to all group’s creditors was considered admissible, providing for the assignment of all the group’s assets to the creditors (“cessione dei beni”) based on a merger of all companies of the group – conditional upon the confirmation of the concordato by the Tribunal – so that the performance of the concordato could be entrusted to a single company, which could provide for the sale for the highest possible return the business units and the real estate of the group in order to pay the creditors, (iii) a single procedure was opened by the Tribunal, after proceedings originated by the single pleadings were joined and (iv) the Tribunal ordered that majorities be calculated for each single company, and not at group level, because each company must be treated in insolvency procedures as a separate entity with respect to the relevant assets and liabilities, before the merger can take place with effects limited to the performance phase of the “concordato preventivo”.
The handling of insolvency of a group within a single “concordato preventivo” procedure is appropriate from different points of view: (a) with respect to the contents of the restructuring plan, this allows to consider in a single perspective the consequences of insolvency, defining a single plan for obtaining the best possible return from the sale of the assets (or the continuing business activity) of the group as a whole and for coordinating intragroup relationships; (ii) with respect to timings and costs of the procedure (e.g. by appointing a single Judicial Commissioner), this also works in the best interest of the creditors.
Only in recent years, case law has addressed consistently the various issues raised by the lack of specific provisions of insolvency laws: a group “concordato preventivo” seems now to be admissible for a vast majority of precedents (see Trib. Terni 30 December 2010; Trib. Roma 7 March 2011; Trib. La Spezia 2 May 2011; App. Genova 23 December
2011; Trib. Benevento 18 January 2012; Trib. Roma 25 July 2012; App. Roma 5 March 2013; Trib. Rovigo 5
Most issues seem to be now solved under case law rules that are widely shared, with specific respect to specific conditions that the group “concordato preventivo” plan and proposal must provide in order to considered admissible, along the same path followed by the two decisions presented here:
- the rules establishing the correct venue for the “concordato preventivo” procedure according to Art. 9 IBL must be observed (see App. Roma 5 March 2013) and therefore each of the companies of the group must have its own principal place of business within the territory of the same Tribunal;
- a group “concordato preventivo” procedure can be carried on based on a single proposal and reorganization plan for all the companies involved (see Trib. Asti 24 September 2012);
- the reorganization plan and proposal must consider separately each companies’ assets and liabilities, in the phase prior to approval by the creditors and confirmation by the Tribunal (see App. Roma 5 March 2013; Trib. Roma 25 July 2012), while in the phase of performance of the concordato – when the treatment of creditors of each of the group’s companies has been defined according to principles of Italian insolvency laws – a single entity can be entrusted with all of the group’s assets and liabilities, by way of merger or transfer;
- a single procedure can be carried on, with a single Judge in charge and a single Judicial Commissioner;
- conditions for final confirmation of the concordato must be met for each of the companies of the group: indeed, the reorganization plan being one for all companies, c ould not be confirmed and performed also for the other companies (see Trib. Roma 18 April 2013).
An issue which is still controversial is that of the majorities for approval by the creditors, as the two decisions presented here show, having reached opposite conclusions:
- some precedents require a separate approval by each of the group companies’ creditors, at separate creditors’ meetings (see Trib. Asti, 24 September 2012; Trib. Benevento 18 January 2012);
- other precedents, instead, allow a single majority a group level (see App. Genova 23 December 2011; Trib. La Spezia 2 May 2011; Trib. Terni 30 December 2010).