Vol 3 (2006) - Issue 4

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Key Points of Italian Bankruptcy Law Reforms

Italian bankruptcy law reforms: a general overview
After more than 60 years and various attempts, the Italian insolvency regime – which is mainly regulated by Royal Decree No. 267, 16 March 1942 (the ‘Bankruptcy Law’) – has finally been changed.
These changes (jointly, the ‘Reforms’) have been gradually introduced: initially, by Law No. 80, 14 May 2005 (which has converted Decree No. 35, 14 March 2005) and, subsequently, by Law No. 5, 9 January 2005.
Instead of creating a new bankruptcy code, the Reforms have amended the Bankruptcy Law by means of a technique called ‘Novellazione’. This choice has been criticised by some authors who consider that it does not bring about a complete integration of ‘old’ and ‘new’ systems.
Among new features, it is worth mentioning – as the most significant ones – the new claw-back actions and the completely revised preventive arrangement which, together with judicial debt restructurings and out-of-court settlements, offer a full range of arrangements with creditors. In this scenario, the Reforms have considered that the declaration of bankruptcy should be ‘the last choice’ in order to emphasise – where possible – the importance of the elimination of the crisis/insolvency.
New claw-back actions
Voidable transactions
The first significant amendment made by the Reforms is referred to in Article 67 of the Bankruptcy Law. Pursuant to that rule, the following transactions are now subject to the ‘sanction’ of claw-back actions:
(a) transactions at an undervalue and, in particular, transactions in which the obligations carried out and/or undertaken by the bankrupt party are more than 25% beyond what he has been given or promised, or transactions for non-cash considerations made during a one-year period before the insolvency status being declared. These transactions can be set aside by the bankruptcy receiver unless the creditor can prove it was not aware that the debtor was insolvent;
(b) any security granted in a one-year period before the insolvency status is declared and in relation to a pre-existing debt which has not yet fallen due. These securities can be set aside by the bankruptcy receiver unless the creditor can prove it was not aware that the debtor was insolvent;