Vol 10 (2013) - Issue 3

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New Italian Restructuring Options in the Light of the Latest Reforms

The Italian bankruptcy regime has been significantly amended several times since '2005' and, gradually, the aim of these changes has always clearly been to emphasise the rehabilitation of a company rather than its liquidation.
The major legal framework for Italian insolvency and restructuring is currently based on:
(a) Royal Decree No. 267, 16 March 1942 (the 'Bankruptcy Law') which, as mentioned, has been subject to various reforms the latest of which came into force on 11 September 2012 by means of Law No. 134, 7 August 2012;
(b) Law No. 3, 27 January 2012 and further amendments (the 'Composition of the Crisis Law'), which established special proceedings applicable to consumers and entities not subject to any proceedings regulated by Bankruptcy Law; and
(c) Law Decree No. 179, 18 October 2012, finally approved by Law No. 221, 17 December 2012 (the 'Development Decree') which has specifically amended the Composition of the Crisis Law.
The latest reforms (jointly, the 'Reforms') – which will be discussed in this article – have been timely, as they came in a very difficult economic climate and, by regulating the stages of a company’s crisis which previously had always been ignored, delineated the distinction between those solutions aimed at ensuring the continuity of a business and those only aimed at managing a liquidation.
On the basis of the above mentioned legislation and with the advent of the Recovery Plan pursuant to Article 67 of the Bankruptcy Law mentioned below – which follows an entirely extrajudicial path – there are now a number of solutions available for a company in crisis, that must be carefully evaluated based on the circumstances of each specific case.

1. The Recovery Plan
The first restructuring option is regulated by Article 67, paragraph 3, lett. (d), of the Bankruptcy Law which provides for an out-of-Court solution set out by a 'Recovery Plan'.
This option is essentially a protocol that only a company facing a 'state of crisis' (generally interpreted as being a short-term liquidity crunch) can implement in order to restructure all or part of its indebtedness.
According to the Reforms, the Recovery Plan must be supported by a report issued by an independent expert (i.e. a certified public accountant or an audit company to be appointed by the company) attesting to the veracity of the corporate data and the feasibility of the company complying with the plan, including the budget and the other agreements for the purpose of avoiding the insolvency crisis in the future.
In this regard, it must be pointed out that, while in the past the professional’s intervention was limited to an overall evaluation of the plan, this independent expert has now become a permanent interlocutor of the debtor and must be consulted, for example, in the event of changes to the plan.
There is no involvement by a Court or other authority in the preparation, review or execution of the plan. The benefit of a Recovery Plan, which can also provide for differential treatment of creditors, is the protection that it offers to creditors taking part in the restructuring, in that transactions undertaken pursuant to a Recovery Plan (including new loans and securities) are exempt from claw-back in the event of a subsequent declaration of insolvency of the debtor.
Furthermore, pursuant to the Reforms, criminal sanctions do not apply to directors, creditors and lenders acting in the context of a Recovery Plan and within the framework that the Reforms have established in this respect.