The Court with two recent decisions (6 April 2017, No. 8903 and 13 April 2017, No. 9547) confirmed that the Public Prosecutor is entitled to file for bankruptcy also in case he became aware of the insolvency in the course of a probe regarding other companies or individuals and within the concordato preventivo procedure.
In the case of the decision No. 8903, the Prosecutor became aware of the insolvency in the context of a probe (criminal seizure of assets) regarding the directors of the Company for embezzlement crimes. In the case of the decision No. 9547, the Prosecutor had requested the declaration of bankruptcy while delivering his negative opinion on the concordato preventivo proposal by the debtor. In both cases the appeal against the declaration of bankruptcy was rejected and the debtors then further appealed to the Court of Cassation.
The Prosecutor does not have a general power to file for bankruptcy, neither is he/she entitled to carry on investigations on his/her own initiative seeking to unveil specific insolvency situations. The Prosecutor has instead a limited power in cases that are expressly provided by Art. 7 IBL, namely when insolvency results: (i) in the context of a criminal proceeding; (ii) from certain circumstances including when the debtor is at large or the assets have been embezzled; (iii) from a notice by a Judge who became aware of the insolvency during a civil proceeding. The issues pertinent to the cases at hand are those regarding a) the scope of the «criminal proceeding» entitling the Prosecutor to act, and b) the specific situation of the concordato preventivo procedure, in particular whether the Prosecutor should receive a notice by the Judge, how the Prosecutor should issue the bankruptcy request and whether the relevant proceeding should follow according to the general rules set forth in Art. 15 IBL.
The decision of the Court
The Court of Cassation rejected both appeals. In the case of the decision No. 8903, the Court ruled that a «criminal proceeding» shall be construed widely and not limited to the specific section of the proceeding having reached the trial phase. This is due to the fact that the Bankruptcy Court no longer has a power to declare bankruptcy on its own motion and, therefore, the law meant to widen the relevant powers of the Prosecutor to any case when he/she became aware of the insolvency in the exercise of his/her duties. In the case of the decision No. 9547, the Court recalls that the Prosecutor shall be notified of the petition of the debtor to be admitted to the concordato procedure and he/she is therefore considered as taking part to the same from the beginning and in any subsequent phase: the law provides that the Prosecutor perform his/her role in different ways, including attending to hearings and formulating his/her requests orally. The Prosecutor can therefore request the declaration of bankruptcy within the procedure, without any specific formality, while he/she needs to abide to the procedure governed by Articles 7 and 15 IBL only when starting a self-standing proceeding for the declaration of bankruptcy.
Both decisions can be agreed to, as far as two fundamental principles are safeguarded: (i) that the Prosecutor become aware of the insolvency while performing his/her duties, without specifically looking after a «new and arbitrary probe for insolvency on his/her own initiative»; (ii) that due process be in any case followed and, therefore, the debtor not be deprived of any defensive right or option before bankruptcy is declared. In the case of the decision No. 8903, the Court followed certain prior decisions of its own (see recently Cass. No. 10679 of 2014, No. 8977 and 23391 of 2016, no. 2228 of 2017). In the case of the decision No. 9547, the Court recalled the principles according to which the declaration of bankruptcy can be issued also following the hearing at which the debtor is heard before the concordato procedure is opened (see Cass. No. 12957 of 2016, no. 25587 of 2015, No. 11423 of 2014), or at which the decision on a petition to terminate the concordato procedure is discussed (see Cass. No. 9271 of 2014). This means that the concordato can be converted into bankruptcy only as a consequence of an event preventing the concordato to go ahead: in the past, as it is well known, in such cases the declaration of bankruptcy was inevitable and issued by the Court on its own motion, while today a request by a creditor is necessary. The Prosecutor can then act, when he/she finds that the request has grounds, lacking an initiative by the creditors.