We have already described the new Code of Corporate Crisis for the management of companies’ in this link about the New Bankruptcy and Insolvency Law. What’s more, the reasons behind the approval and promulgation of the so-called reform of bankruptcy law have been thoroughly explained in Corporate Credit Consultancy Lawyer Domenico Damiani’s video interview. However, it is worth indulging on this topic, given that the legislator has established new procedures, stemming from the background principle whereby an enterprise is no longer a sanctionable subject, but one to protect, so that it can keep playing its social role. As a matter of fact, enterprises produce wealth for all those subjects taking part in its productive and economical cycle – entrepreneur, suppliers, employees.
The new rules of Bankruptcy Law. The role played by insolvency lawyers in the contractual procedure
Technically, the New Code of Corporate Crisis and Bankruptcy was expected to enter into force from the 16th of May, 2022. However, the legislator scheduled the reform of bankruptcy law according to its judgment, and postponed the effectiveness of Title II, containing the rules about early warning mechanisms and assisted crisis management, to the 31st of December 2023. The deferral was due to the necessity to adapt the Code to EU Directive 2019/1023, whose rules must be introduced within the 17th of July 2022. In the meanwhile, the legislator decided to anticipate some of the institutes contained in the Code, such as extensive and facilitated effectiveness agreements and moratorium conventions.
Effectivity from November 2021 of some of the rules of the Code of Corporate Crisis
The new resources immediately implemented by the current bankruptcy law and included in the Code of Corporate Crisis are:extended effectiveness agreements;
- moratorium conventions;
- facilitated schemes of arrangement;
- the provision of co-obligated and unlimitedly responsible partners;
The credit consultancy by an attorney within the procedure of composition of corporate crisis
Finally, starting from the 15th of November 2021, all entrepreneurs listed in the companies’ register who go through conditions of asset imbalance, economical, financial, liquidity difficulty or crisis, and thus risking insolvency towards the State or commercial partners, will be able to benefit from the new procedure of negotiated solution to the crisis. The ratio of the norm is clear – I’m experiencing financial trouble, the State gives me the tools in order to:
- assess the company’s conditions;
- find a balance point with my creditors;
- relaunch the operations.
Bankruptcy Law attorneys are the figures expected to support the entrepreneur either as independent experts, or by helping them in the negotiations prescribed by the new Code. Either case, those experts registered for a period of at least five years in the Register of Certified Lawyers with a documented previous experience in the field of corporate restructuring and company crisis, along with commercialist consultants, work consultants, and business administrators can enrol in the Certified Register set in each Chamber of Commerce. The task of facilitating the necessary negotiations for the company’s restructuring is given to experts nominated from these Registers.
The voluntary basis of negotiation procedures and award facilitations for the entrepreneur
The tool of negotiation procedure can be activated on a voluntary basis. The advantage for entrepreneurs is that in case of failure, the negotiation procedure does not convert into bankruptcy. But that is not the only benefit for those who choose negotiation procedure. In fact, the voluntary access enables other reward measures, such as:
- reduction to legal rate for interests on fiscal debts;
- reduction of tributary sanctions and possibility to pay taxes in instalments.
Other positive aspects of the negotiation procedure. The new ‘bankruptcy’
- Privacy. The attempt to solve the crisis is protected by the principle of privacy: not only is the expert bound to this obligation, but so are all other parties involved in the negotiation;
- The platform to present the solution of the crisis. The application to negotiated composition is filed through the national platform accessible by the local Chamber of Commerce website, where the entrepreneur is registered. The procedures for the application allow the entrepreneur to verify the state of the company and the actual feasibility of the restructuring operation, taking into account the submitted documentation providing a general frame of the company’s accounting, financial and debitory situation.
- The nomination of the insolvency expert. The request for nomination of the expert does not automatically open the creditors’ claims and does not imply any change of ownership from the entrepreneurs’ assets. The obligation to guarantee a non-prejudicial management for the creditors still stands, and, according to art. 2086 of the Civil Code, the entrepreneur keeps ordinary and extraordinary management, including payments settlement. Moreover, the nomination of the independent expert is made by a commission of three members in charge for two years, chosen by the judicial authority, the president of the Chamber of Commerce, and the prefect.
How the negotiated procedure of the crisis is led by the entrepreneur
Negotiation is, and stays for the whole procedure, the entrepreneur’s prerogative. Negotiations are led with the support of their chosen legal advisors. For example, a trusted lawyer can suggest the right moment to protect the assets from initiatives that can jeopardise negotiations and put the company’s reconstruction at risk. In such cases, an attorney that promotes the entrepreneur’s interests can request a projection of assets, asking for the application of protective measures to be confirmed by the judge.
Conclusion of negotiated procedure of corporate crisis solution.
The most favourable outcome for the conclusion of the negotiated procedure of a crisis is the stipulation of a contract with the creditors, whereby both parties are satisfied and which is able to ensure the company’s continuity for a period of no less than two years. Such an agreement can establish:
- moratorium convention;
- restructuring plan with or without certification;
- debt restructuring agreement;
- application for facilitated schemes of arrangement for the liquidation of the assets, or alternatively, access to one of the procedures provided by the current bankruptcy law.
Hence why, the prompter is the voluntary opening of the negotiation procedure, the better can the entrepreneur solve their company’s liquidity, economic or financial crisis.