Reform of Insolvency Legislation is Approved

Restructuring Alert

Italiano: Approvata la riforma della disciplina della crisi di impresa e dell'insolvenza

By: Daniela Andreatta, Federico Perego and Elena Brunetta

On 11 January 2019, the Council of Ministers approved the text of the legislative decree containing the new code of corporate distress [1] and insolvency (the “Insolvency Code”). The new code was adopted to implement Law 155 of 11 October 2017 (the “2017 Law”), with which the Parliament delegated the Government to reform the pre-insolvency and insolvency rules and proceedings so as to supersede the current bankruptcy law (Royal Decree 267/42, the “Bankruptcy Law”), somewhat outdated and fragmented by the many amendments and integrations made over the years.

The publication of the Insolvency Code in the Official Gazette is due in the next few days, and the new code will come into force after 18 months from such publication, except for certain provisions (especially of a corporate nature) that will come into effect after 30 days from the same publication [2].

The Insolvency Code bears the general principles set forth by the 2017 Law [3] and overall reflects the draft legislative decree drawn up by the Commission chaired by Renato Rordorf, established by the Renzi government after the approval of the 2017 Law.

This document summarizes the main new features of the new code and the provisions that will come into force shortly; however, for the sake of brevity, it does not deal with the proceedings dedicated to small distressed enterprises and consumers [4] and the forced administrative liquidation, which will be dealt with separately.

[1] Named “crisis” in the legislative decree.

[2] The vacatio period (the time elapsed from the passing of a bill to the entry into force) was set particularly long in order to allow the legislator to remedy any imperfections of the new text or even improve it in light of the likely requests from the operators in the sector.

[3] For further information, please read Orrick’s Restructuring Alert from 23 October 2017

[4] Eligible for over-indebtedness settlement proceedings (procedura da sovraindebitamento) are consumers, professionals, minor enterprises, agricultural businesses, innovative start-ups and any other debtor who is not subject to court liquidation, forced administrative liquidation or other winding-up proceedings provided for by the Italian Civil Code or special laws. The Insolvency Code defines as “minor” companies that jointly meet the following requirements: (i) assets not exceeding € 300 thousand in each of the three financial years prior to the date of filing for insolvency or from the beginning of the business, if earlier; (ii) revenues, in whatever form they may be, for a total annual amount not exceeding € 200 thousand in the three years prior to the date of filing for insolvency or from the start of the business, if earlier; (iii) debts, including debts not yet due, not exceeding € 500 thousand.