Law Decree no. 83 of 27 June 2015, recently converted into Law 132/2015, which was approved on 6 August 2015 and published on the Official Gazette on 20 August 2015 (the “Law 132”) introduced a number of measures aimed at enhancing the economic growth mainly related to pre-insolvency procedures, enforcement procedures and fiscal benefits.
- AMENDMENTS TO PRE-INSOLVENCY PROCEDURES
- General provisions related to the composition with creditors (“concordato preventivo”) procedure
A concordato preventivo proposal (i.e. a proposal to creditors in the framework of a Court-driven composition with creditors procedure) must now provide for the repayment of at least 20% of unsecured credits, although such limit does not apply if the concordato proposal relates to a “concordato with business continuity” and, therefore, is applicable only when the concordato is of liquidatory nature. The Law 132 extends the timing requested for the homologation of concordato preventivo procedures, which shall occur within 9 months from the filing of the request by the company (whilst the previous timing was 6 months).
- “Alternative” concordato preventivo proposals filed by creditors / competitive offers
According to art. 163 et seq. of Italian Bankruptcy Law (Royal Decree no. 267/1942), creditors representing at least 10% of the credits are now entitled to file a concordato proposal alternative to that filed by the debtor under art. 161 of Italian Bankruptcy Law, provided that the concordatoproposal filed by the debtor is not able to ensure repayment of at least 40% of unsecured credits.
Before the Law 132, creditors could only approve or reject a concordato proposal filed by the debtor without any power to contribute in designing the proposal or a competitive proposal.
The Law 132 does not enter into the merits of possible contents and/or limitations of the alternative proposal and therefore creditor(s) (owing at least 10% of the total debts exposure of the company in distress) may exploit the very broad solutions offered by Italian Bankruptcy Law on possibleconcordato structures.
In any case the possibility of presenting alternative concordato proposals will have positive effects as it will probably discourage the shareholders/management of companies in distress from designing elusive concordato structures aimed at distracting the goodwill of the company in distress and minimizing the distribution of dividends to its creditors.
Additionally, the Law 132 has introduced article 163-bis of Italian Bankruptcy Law, whereby if aconcordato proposal is based upon an offer by a third person for the purchase or leasing of the business of the debtor as a going concern (azienda) or a portion thereof (ramo d’azienda), the Court-appointed commissioner can authorize a competitive tender for submission of alternative purchase offers if the relevant offer is deemed not to be in the best interest of the company's creditors.
- Simplified recourse to pre-insolvency procedures.
A big obstacle in the implementation of restructuring agreements with creditors (accordi di ristrutturazione) was the law requirement whereby all creditors not adhering to such agreements where to be paid in full and in a certain timeframe. So far minor creditors and in particular banks holding non substantial credits towards the debtor exploited this requirement to obtain more favorable treatment as a condition to enter into the restructuring agreement.
In order to avoid or limit this practice, Law 132 has introduced article 182-septies of the Italian Bankruptcy Law, providing that in case of filing of a restructuring arrangement with creditors, if the total debts towards banks and financial intermediaries are not lower than 50% of the whole indebtedness, the debtor can:
- identify one or more classes of banks / intermediaries on the basis of their economic and legal positions and
- request that the restructuring arrangement is effective also for the creditors belonging to such class(es) who have not adhered to the restructuring arrangement, provided that (i) such creditors have been duly informed of and put in the condition to participate to the negotiation of the restructuring arrangement and (ii) the plan has been approved by at least 75% of the credits belonging to each relevant class.
It must be noted that the creditors to which the effects of the restructuring arrangement are automatically extended will be considered as having approved it for the purposes of reaching the 60% of consent required for the homologation of the restructuring arrangement.
The above provisions do not apply to non-financial creditors (i.e. other than banks and financial intermediaries).
Additionally, under the newly introduced art. 182-septies of Italian Bankruptcy Law, if the total debts towards banks and financial intermediaries are not lower than 50% of the whole indebtedness and the debtor agrees upon a temporary moratorium with at least 75% of such creditors, the agreement is effective also towards the dissenting “financial” creditors (banks/financial intermediaries) provided that:
- such other creditors have been duly informed about the negotiation of the restructuring arrangement and put in the condition to participate and
- an expert meeting the requirements under art. 67, para. 3, let. d) of Italian Bankruptcy Law states that the interest of the relevant “financial” creditors are homogeneous.
- Interim financing
Law 132 has also introduced the possibility for a bank/financial company to finance a distressed company pending pre-insolvency procedures, without incurring in bankruptcy crimes, upon a specific authorization by the Court.
The aim of such measure is to allow distressed companies to have access to provisional finance to cope with the immediate needs of financial liquidity.
In particular, under the amended art. 182-quinquies of Italian Bankruptcy Law, the debtor which has filed a proposal for a concordato (composition with creditors) or for "concordato in bianco" under art. 161, para 6 of the Bankruptcy Law (i.e. a “blank” concordato proposal to be completed within maximum 120 days), or has agreed with its creditors upon a restructuring agreement under art. 182-bis, para 6 of Italian Bankruptcy Law, is now entitled to request an urgent authorization of the Court to obtain interim finance (until the concordato or the restructuring agreement is homologated).
To support the request of authorization, the debtor shall state that it has no access to alternative sources of financing and that in the lack of financing it may suffer a serious prejudice (which may lead to insolvency with consequent prejudice to all creditors).
Credits arising in connection with such authorized bridge facilities enjoy a super priority (“prededucibili”) in accordance to art. 111 of Italian Bankruptcy Law, meaning that they will be repaid to the lender with priority over any other (existing) claim against the debtor.
- ENFORCEMENT PROCEDURES
- Simplified research of assets owned by the debtor
Law 132 introduced article 492-bis to the Italian Procedural Civil Code, which allows creditors to ask the Court, even before the enforcement procedure is started, the authorization to request information on the assets of the debtors (including guarantors) directly to the relevant electronic archives (such as: tax authority, register of motor vehicles, etc.) without involving a Court bailiff.
- Simplified claw-back actions
Law 132 also introduced new article 2929-bis to Italian Civil Code, providing for a “simplified” claw back action for the creditor in respect of certain type of transactions put in place by the debtor with the aim to subtract (registered) assets from the attachment by its creditors .
In particular, the creditor can now start enforcement proceedings over the relevant assets without previously obtaining a Court decision clawing back/nullifying the relevant (fraudulent) transaction, to the extent that such transaction had been carried out for no consideration (e.g. gratuitous transfers, or creation of shield instruments such as trusts or the so called fondo patrimoniale - “family trust”).
In case of gratuitous transfers, the enforcement action can be carried out by the creditor also against the third party purchaser.
- FISCAL BENEFITS
Law 132 has significantly innovated the fiscal regime related to deductibility of devaluations and losses related to credits of banks and insurance companies.
Before the above amendments, devaluations and losses related to credits, not originated by sales for consideration, could have been deducted in equal instalments in the current fiscal year and the following four fiscal years.
Devaluations and losses originated by sales for consideration could have fully deducted in the balance sheet related to the current fiscal year.
Following enactment of Law 132, devaluations and losses are now subject to the same fiscal regime and could be fully deducted in the balance sheet of the relevant fiscal year, starting from 2015.
Specific rules for current fiscal year have been provided: Law 132 states that devaluations and losses not originated by sales for consideration and which did not benefit of deductibility under previous fiscal regime are deductible in the limit of 75% of their amount. The residual part of their value could be deducted according to different percentages up to the fiscal year 2025.