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Position of creditors

Forms of security

What are the main forms of security over moveable and immoveable property and how are they given legal effect?

  • Mortgages – established over real estate and movable assets registered with public records (eg, cars and boats). A mortgage is given legal effect with the registration in the relevant register.
  • Patto marciano’ – conditional sale of real estate provided as a clause in a loan agreement, whereby the parties provide that title to the property will be transferred to the creditor if the debtor is in breach of contract, on certain conditions.
  • Pledge – established over movable assets and receivables. A pledge is given legal effect through a written agreement, the delivery of the pledged assets or notification to the debtor or receipt of its acceptance. To be enforceable with regard to an insolvency procedure, the creditor must also provide irrefutable evidence that the agreement was made before the insolvency procedure.
  • Floating charge on movable assets – special kind of pledge (for claims against debtors exercising business activity) which enables the debtor to use and dispose of the goods within its business activity.
  • Preference – a preference is provided by law based on the grounds for the claim (eg, employment, professional services or taxes). Preferences can be general (ie, they can provide a lien on the whole of movable or immovable assets of the debtor) or special (ie, they can provide a lien on specific assets or categories of assets).

Ranking of creditors

How are creditors’ claims ranked in insolvency proceedings?

Super-priority creditors Super-priority creditors are entitled to be paid in full before any other creditor. These claims arise in general when the debt is undertaken or assumed by the bankruptcy receiver (eg, when the receiver decides to continue performing a contract or costs of the procedure) or arise in connection with a restructuring procedure which happened to evolve into bankruptcy liquidation.

Secured creditors Secured creditors are entitled to be paid with priority only out of the proceeds from the sale of the assets on which they have a mortgage, pledge or preference.

Unsecured creditors Unsecured creditors rank equally and share the residual cash after super-priority and secured creditors.

Subordinated creditors  Subordinate credits are entitled to be paid only after all other creditors have been paid in full; notably, these include shareholders for loans to the company.

Can this ranking be amended in any way?

Ranking of creditors cannot be modified by agreement between the parties. However, a single creditor can waive its right to preference or be treated as a subordinated creditor to all or specific creditors.

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