The Tribunal of Milan allowed a concordato preventivo proposal to be amended, providing that additional resources for the creditors could be made available through a lien on real estate property belonging to a shareholder of the company.

The case

NCTM Studio Legale Associato assisted a company in filing and subsequently amending a concordato preventivo proposal before the Tribunal of Milan.

After the initial admission of a liquidation concordato proposal, the Judicial Commissioners asked that admission to the procedure be revoked according to art. 173 IBL, on the grounds that there was no sufficient commitment by a shareholder of the company to provide additional resources to the creditors (without which the proposal would not be feasible), considering that a mandate for the sale of the property was issued. The company, therefore, amended the proposal, changing the mandate into a lien on the property in favour of the creditors pursuant to art. 2645-ter ICC, conditioned upon final confirmation by the Tribunal of the concordato.

The issues

Art. 2645-ter ICC – introduced by law-decree No. 273 of 30 December 2005 – states that:

  1. liens can be registered in the land or other registries, in order to make them enforceable vis-a-vis third parties, when they are established by a public deed whereby real estate property or other registered assets are reserved to the benefit of individuals or entities for purposes which can be considered worth being protected by the law;
  2. any interested party can take action in order to enforce the purposes for which the property or assets have been liened;
  3. liened property or assets can be attached or seized only for receivables arising from grounds consistent with the purpose for which the property or assets are reserved.

This rule of law set forth provisions relating to the effects of the lien, but not the grounds with respect to which the lien can be established.

Whether this kind of special lien can be used also in the context of a concordato preventivo proposal has been debated in case law, leading to opposite conclusions (in the sense that the lien is admissible see Trib. Lecco, 26 April 2012, in; in the sense that the lien for such purpose is null and void see Trib. Vicenza, 31 March 2011, in Fall. 2011, 1461; App. Trieste, 19 December 2013, in; Trib. Reggio Emilia, 27 January 2014, in Fall. 2014, 907).

The main remarks of the Courts against the valid use and enforcement of Art. 2645-ter ICC liens within concordato preventivo schemes is that no sufficient grounds can be established for the creation of the lien, which can be considered worth being protected by the law.

The decision

The Tribunal of Milan, although not expressly addressing the issue in the rationale of the decision, considered that Art. 2645-ter ICC liens are admissible in connection with concordato preventivo proposals, and therefore that the best interests of the creditors in an insolvency procedure would be an interest worth being protected by the law.

Indeed, the Tribunal has considered favourably the change to the original concordato preventivo proposal of the company – which was actually based on the creation of the lien as a binding measure ensuring that property of a shareholder be reserved for the benefit of the company’s creditors – and consequently rejected the motion by the Judicial Commissioners according to art. 173 IBL and allowed the concordato procedure to continue.

Commentary The decision of the Tribunal of Milan represents an important indication in the context of current case-law, which so far has been mostly reluctant to recognize and allow debtors resorting of a tool which could instead help to better fashion concordato proposal to creditors, and whose purpose seems indeed worth being protected by the law, in the context of the wide flexibility of the terms of the proposal which is stated by art. 160 IBL.

The purpose to cure the company’s state of distress and to ensure the best possible treatment to the company’s creditors in concordato preventivo does look like an aim worth being pursued by the law, through the destination of certain assets to creditors, as it is made clear by policies driving most of the recent reforms of Italian insolvency laws, in particular those of 2012.

Of course, in specific circumstances conflicts may arise with the interests of the creditors of the party who is creating a lien on its own assets – which are thereby taken away from the reach of enforcement actions of those creditors – for the benefit of creditors of a third party. There seems to be little doubt, though, that these conflicts can be resolved through ordinary remedies such as the claw-back action provided by art. 2901 ICC. We would like to point out a further recent experience, in the context of an art. 161, sixth para. IBL concordato preventivo pre-filing before the Tribunal of Bologna, where NCTM Studio Legale Associato advised a client to make the creation of the lien conditional upon an authorization by the Tribunal: also in this case, the Tribunal impliedly acknowledged that Art. 2645-ter ICC liens are valid and enforceable, as it refused to rule on the motion to authorize the lien, thus allowing the concordato preventivo procedure to continue.