The decision of the Court of Rovereto of 13 October 2014 and the Court of Bergamo of 26 September 2013 took opposite stands on the issue of the allocation, for the purposes of the concordato preventivo proposal by the debtor, of cash generated by future operation of the business following confirmation of the proposal.

The case

In both cases, a company filed a concordato preventivo proposal based on a plan providing that business would continue being carried on by the debtor, with different classes of creditors which would receive (i) full payment, as to super-priority receivables, (ii) payment up to the liquidation value  of  the  debtor’s  assets pursuant to art. 160, second paragraph, IBL as to secured receivables and (iii) payment with cash flow which would have been generated by future operation of the business, as to unsecured receivables.

The  proposal was  approved  in  both  cases  by  the  majority  of  the  receivables  and  by  the  majority  of  the classes. In the following confirmation phase of the  concordato,  the  Court  assessed  whether  the  proposal could be considered admissible, considering that specific objections by the secured creditors not fully paid were filed in this respect.

The issues

According to the ruling of the Court of Cassation of 8 June 2012, No. 9373, when the concordato proposal provides for the partial payment of receivables having general  preferential  rights  over  the  entire  estate (which is the case for most common secured claims such as those of  employees  and  the  tax  and  social security agencies), unsecured creditors cannot be satisfied out of the debtor’s assets: as a consequence, the concordato proposal is admissible only if the resources to pay the secured creditors are made available by third parties, as “external funding”. This is because, pursuant to Art. 160,  second  paragraph,  IBL the proposal providing for different classes of creditors cannot have the effect of reversing the order of the preferential rights provided by law.

The Courts of Rovereto and of Bergamo therefore had to consider the issue whether future earnings can qualify as “external funding”, considering that these are assets which do not exist in the estate of the debtor at the time of the proposal and of the confirmation of the concordato.

The decision

The Court of Bergamo ruled that future proceeds cannot be considered as “external funding”, since only a contribution coming from a third party can so qualify, while expected cash flows from future operation of the business, are indeed generated by the debtor’s estate. With reference to the specific case, the Court refused to allow full payment of a class of unsecured creditors composed of key suppliers, maintaining that this would amount to a clear modification of the order of the preferential  rights  provided  by  law.  The  Court  then rejected the demand for confirmation of the concordato proposal.

The Court of Rovereto confirmed instead the concordato proposal, underlying that the resources arising from (in the specific case) the completion of existing construction sites, would have been otherwise lost in case of liquidation without a continued operation of the business. The Court, following a precedent of the Court of Monza of 22 December 2011, ruled that all proceeds arising from the concordato, which add on the value of the estate of the debtor which could be otherwise obtained from the liquidation of the assets,  must  be considered as “new funding”.


The two decision reflect the conflicting approach of lower Courts on this issue.

The decision of the Court of Bergamo voices a cautious attitude and “mistrust” surrounding  concordato proposals providing for continued operation of the business by the debtor, as this could be seen as a last desperate attempt to overcome insolvency, which can turn out to create additional damage to the creditors , further increasing the overall indebtedness. It is also well known that this is an issue of fact which is for the creditors to assess with their vote. If this could be an underlying and unexpressed reason of the decision, the legal arguments of the Court point to the strict enforcement of the prohibition to reverse the order  of preferential rights according to the criteria indicated by the Court of Cassation, pursuant to which the entire value of the debtor’s assets must to be allocated to the secured creditors, and the unsecured creditors can be paid only with external resources.

The decision of the Court of Rovereto expresses instead an more open approach, which is to be preferred because it is in line with the rationale of the law, not only considering the new rules aimed at expressly regulating (and therefore supporting) concordato proposals providing for continued operation by the debtor of its business: indeed in this case the law requires that the debtor proves that this is more favourable for the creditors than the alternative of liquidation.

In this perspective, it is barely questionable that the secured creditors, having by law the guarantee of a minimum level of payment that would be obtained failing the approval of the concordato, do not suffer any prejudice from the proposal, while it could only benefit not only the community of creditors generally, but also all the parties who have an interest in keeping the debtor’s business alive, above all employees and suppliers. An interpretation strictly focused on the protection of preferential rights, to the detriment of the interest of broader communities, does not appear reasonable.