The Court of Cassation with the decision of 3 April 2017, No. 8632 ruled that the confirmation order of the Bankruptcy Court can be appealed, even when there were no oppositions to confirmation, if the Court unilaterally amended the proposal approved by the creditors

The case A company filed a concordato preventivo proposal, based also on the commitment by a third party to assume certain obligations. The proposal was approved by the required majority of creditors. An opposition to confirmation was filed by the Tax Agency, but that was later withdrawn. The Court therefore confirmed the proposal, making however material amendments to its terms by providing a higher amount for the obligation of the third party and the payment to unsecured creditors of 25% share of their receivables instead of a 20% share. The company appealed the order before the Court of Appeals, but that was rejected as not admissible.

The issues Upon confirmation, in the absence of oppositions, the Court is limited to check on the legal terms of the proposal and of the procedure, and is barred from any evaluation on the merits of the proposal approved by the creditors. According to Art. 180 IBL, the order of the Court confirming the proposal in the absence of oppositions cannot be appealed. The issue is therefore whether the Court can introduce amendments to the proposal with a view to confirmation and what is the remedy available to challenge the order when the Court has gone beyond its own powers.

The decision of the Court The Court of Cassation upheld the appeal, considering that the Bankruptcy Court did not have the authority to amend the terms of the proposal of the debtor approved by the creditors and that was not a case of a mere error (as it was suggested by the Court of Appeals) which could be simply corrected by the Bankruptcy Court itself. The Court of Cassation then ruled that the remedy available is the appeal of the order to the Court of Appeals according to Art. 183 IBL, based on the violation of law by the Bankruptcy Court: the limitation to appeal, indeed, is based on the assumption that the Court did actually make a check limited check on the legal terms of the proposal and of the procedure as provided by law, in the absence of oppositions to confirmation. The Court of Cassation recalls a precedent (decision No. 1237/2013) by which it had ruled that the remedy is instead the appeal of the order directly to the Court of Cassation based on Art. 111 of the Italian Constitution, which is available against any final decision on matters of rights of the parties which cannot be otherwise appealed.

Commentary The decision of the Court of Cassation according to which the Bankruptcy Court is not entitled to amend the proposal approved by the majority of creditors does not raise any uncertainty or concern, considered that the matter considered is not a case of mere orders regarding the modalities of implementation of the proposal, which the Court can include in the confirmation order according to the provision of Art. 185 IBL. From the decision it seems that the amendments introduced by the Bankruptcy Court were not necessary in order to make the proposal compliant with mandatory provisions of law, failing which the Court should have denied confirmation. Only in this case, indeed, one could argue that the Bankruptcy Court can fix a legal problem with the proposal of the debtor, which can no longer be amended once the procedure is at the confirmation stage, and the amendment is in the interest of the debtor and of the creditors. Also in this case, anyway, the remedy of the appeal to the Court of Appeals should be allowed, based on the fact that the Court changed the proposal which was made by the company and approved by the creditors. As to the remedy to be allowed, the decision is to be shared whereby it excludes that the appeal should instead be made directly to the Court of Cassation. This because the legal rule excluding the appeal to the Court of Appeals is based on the assumption that the Bankruptcy Court did only acknowledge that the required majorities were reached and that the procedure did correctly unfold, which is not the case when the Court instead amends the terms of the proposal.