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Business Support and Faster Credit Recovery in Light of new Italian Rules
Emanuella Agostinelli, Partner, Curtis, Mallet-Prevost, Colt & Mosle LLP; Milan, ItalyAs anticipated in a previous article in this publication, while an extensive restyling of the Italian Bankruptcy Law is due to come into effect in the near future, the Italian Government has put particular effort in providing a quick response to a general need to increase the efficiency (and the speed) of credit recovery in Italy by means, among others, of a series of innovations on securities and enforcement proceedings.
This article will focus on this new package of urgent measures that have been enacted by Law Decree No. 59, 3 May 2016 (the 'Decree') which has been implemented by amendments, Law No. 119, 30 June 2016 (the 'Conversion Law').
1. The new Italian Non-Possessory Pledge
Under the Italian law, one of the most typical types of security granted by a borrower (or by a third party in the interest of the borrower, as the case may be) to secure the borrower’s obligations, is a regular pledge which is basically granted against assets such as equity interest, receivables, and contractual rights or over credits or moveable property.
This pledge, however, is generally created by means of the delivery to the creditor of the pledged assets and, as a consequence, this transfer deprives the borrower of assets that may be necessary to the running of his business. In addition, in a regular pledge, no disposals can be made by the debtor of the pledged collateral for the entire duration of the pledge. In order to create a more flexible tool for lenders and borrowers and in line with what already exists in other jurisdictions, the Decree has introduced a new non-possessory security interest over moveable assets ('pegno mobiliare non possessorio') which basically does not require the grantor to lose possession of the secured assets and allows him to continue operating his business through the use of the assets, even if pledged.
In particular, this security can be granted in connection with the operations of the business by any commercial entrepreneur who is enrolled in the company register ('Registro delle Imprese') against moveable assets, with the exception of those registered in specific public registers (such as cars, boats, ships and aircraft).
The pledged assets can be current and/or future assets (on an individual or collective) basis, to the extent that the deed of pledge makes reference to a general category of assets or a total value.
To better clarify, the Conversion Law has specified that this category includes intangible assets ('Beni Immateriali') and receivables acquired in the ordinary course of business.
As mentioned, this security can be performed without physical delivery of the assets to the pledgee ('Spossessamento') and, as a result, the pledgor is entitled to use, transform or even dispose of those assets unless the deed of pledge provides otherwise and to the extent that such a disposal is made in compliance with the ordinary economic use of the assets themselves.
Within such a framework, the security interest is of a 'revolving' nature, similar to the structure of the UK floating charge and, as specified by the Decree, the Non-Possessory Pledge automatically attaches to the transformed assets (in case of transformation of the original asset), to the new assets (in case of substitution) or to relevant proceeds of the sale without any further formalities required and without it being considered as a new pledge.
Before the Decree, the only security interest which, under the Italian Law, allowed the pledgor to dispose of the secured assets was the so called 'Special Privilege' ('Privilegio Speciale'), a type of security which can also be granted over specific moveable property not listed in a public register.
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