Vol 12 (2015) - Issue 5

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Latest Developments in Italian Restructurings in Light of the Justice for Growth Decree

As outlined in previous articles in this publication, past reforms of the Italian bankruptcy system have mainly focused on preserving the value of the business both for the purpose of maintaining employment and of protecting valuable assets, rather than only managing the liquidation of the company.
In this regard, the attention paid to the extra-judicial 'Recovery Plan' provided by Article 67(3)(d) of Law No. 267, 16 March 1942 (the 'Bankruptcy Law') and the introduction of the 'blank proposal' in the context of the preventive arrangement procedure are only some of the most recent examples of this trend.
In recent months, however, besides the abovementioned general objectives, expedience has drawn the attention of the Italian Government to the maximisation of the creditors’ payoff and the limitation of the duration of insolvency procedures within a reasonable timeframe. These aspects have gained primary importance as a consequence of the general need to increase the efficiency (and the speed) of credit recovery in Italy in order to support the economic growth of the country, as it will be more extensively discussed in the final remarks of this article.
In this respect, the recent Law Decree No. 83, 27 June 2015 (the 'Justice for Growth Decree', already enforceable although pending final approval by law, which is expected by the end of August 2015) has enacted a new package of urgent measures directly affecting the enforcement proceedings regulated by the Italian Civil Procedure Code and, to a lesser extent, by the Italian Civil Code, as well as the Bankruptcy Law. This article will focus on the modifications to the latter, although a very brief overview will be also provided with respect to some other major innovations, for the sake of completeness and to better appreciate the spirit of the reform.
It is worth emphasising that these latest amendments to the Bankruptcy Law must be evaluated in a broader perspective of coordination with the global legislative framework. This task is one of the focuses in the Italian lawmakers’ agenda with the goal to lead, hopefully in the medium-term, to a deep restyling of the Bankruptcy Law.

1. The new provisions concerning bridge financing
With a view to fostering the idea of rehabilitation of businesses facing a state of financial crisis, back in 2012 the First Development Decree introduced Article 182-quinquies of the Bankruptcy Law, which allows a company which has filed, among other things, a petition for preventive arrangement (or even a blank proposal thereof) or a debt restructuring agreement, the chance to obtain loans or to pay prior debts, provided that an independent professional certifies that such measures are in the best interest of creditors and relevant authorisation is issued by the competent court.
The Justice for Growth Decree has now amended the same Article 182-quinquies of the Bankruptcy Law by granting a company undergoing, as mentioned, a preventive arrangement or debt restructuring proceedings, the option to obtain the authorisation to underwrite new loans for the purpose of meeting urgent needs concerning the business, even without the necessity of a previous certification by a professional.
In particular, this possibility is granted until the expiration of the term for the filing of the proposal, the plan and the other relevant documentation of the preventive arrangement (Article 161(6) of the Bankruptcy Law), or until the hearing for the approval of the debt restructuring agreement (Article 182-bis(4) and (7) of the Bankruptcy Law).