Vol 6 (2009) - Issue 5

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The Italian Restructuring Framework: A Brief Overview

1. A stream of changes after a long period of apparent stability

After a long period of stability lasting over sixty years, the Italian insolvency regime has been subject to numerous and wide ranging modifications. From late 2003 a special procedure for the Parmalat case was hastily drafted and enacted which initiated a process that has profoundly modified the aim and objectives of this whole area of law.

Historically many attempts to reform the royal decree 267/1942, (‘the insolvency law’), the main source of Italian bankruptcy law and an apparent product of the Fascist regime (yet the result of over twenty years of scholarly work), came to little tangible results. Shortly before the reforms covered in this article for instance, the ‘Trevisanato’ commission, created in 2002 with the highest commitment to conduct a thorough and scholarly review of the matter and propose changes, was unable to come to fully shared conclusions among its members and published different versions of most of its proposed articles.

In 2005, through the much debated instrument of the urgent law decree – which limits the opportunities for debate within Parliament and bears the risk of not being made a permanent law after 60 days, the first innovations were introduced that chose to maintain the royal decree in force and amend several sections. This approach is called ‘novellazione’ and requires utmost care in coordination to achieve a successful ‘transplant’. This first phase of reform focused on pre-insolvency proceedings, significantly changing existing proceedings and introducing new ones as well as providing a much awaited revision of the discipline of avoidable transactions.

Clearly those changes were not as sudden as it may seem as jurisprudence had over the years already crystallised several solutions adopted by the 2005 and subsequent reforms of the Royal Decree 267/1942.

In 2006 the so called ‘organic reform’ was accomplished by legislative decree 5/2006 that became fully effective on 16 July 2006, mainly impacting the administration of liquidation proceedings (‘Fallimento’).

Again in September 2007, barely a year after the completion of the organic reform, new amendments were introduced by legislative decree 169/2007. These amendments came into full effect on 1 January 2008 and had the advantage of being the result of a review of the issues and observations that emerged from practice after the 2005 reform.

Additional changes, impacting one or two articles at a time, were implemented in 2009. In February these changes modified the new scheme of arrangement with fiscal authorities (‘Concordato Fiscale’) and as recently as July there have been further amendments in the scheme of arrangement in bankruptcy (‘Concordato Fallimentare’). The latest changes can be regarded as having a more limited impact and ‘fine tuning’ in this area.

Despite the fact that some commentators have criticised reforming such an important area of commercial law in ‘instalments’ – and perhaps continuing to do so – several other notable commentators have equally expressed substantially positive opinions on the resulting current framework. Indeed both insolvency and restructuring practitioners, banking executives and entrepreneurs, felt that the pre-war statute (and the matching bankruptcy practice) required significant modernisation to cope with the changed economic and social reality of the country.