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TRANSCRIPT
Collecting in Italy
• ThepaymentbehaviorofdomesticcompaniesispoorandtheaverageDSOisexcessive,eventhoughtheregulationsonlatepaymentsaremoreconstrainingthantheapplicableEUrules.
• Proceduraldelaysandcostsarehighwhileenforcingcourtdecisionsmayprovetobearealchallenge.Thus,commencinglegalactionwithoutfirstestablishingapre-legalcollectionstrategyisunreasonable.
• Whenthedebtorisinsolvent,debtrenegotiationmechanismshavebeenputintoplacebuttheyremainmostlyunusedinpractice.Liquidation(bankruptcy)thereforeremainsthedefaultroute,butleaveslimitedopportunitiesforunsecuredcreditorstorecovertheirdebt.
Collection complexity
Complexity relating to
Notable High Very High Severe
Payments
Court proceedings
Insolvency proceedings
Notable Severe
Euler Hermes
CollectionProfileItaly
ContentsGeneral Information........................................................................................................................................3
Availabilityoffinancialinformation................................................................................................................3Maincorporatestructures...............................................................................................................................3Regulatoryenvironment..................................................................................................................................3
Getting Paid........................................................................................................................................................4
DaysSalesOutstanding(DSO).......................................................................................................................4Latepaymentinterest.......................................................................................................................................4Debtcollectioncosts.........................................................................................................................................4Ownershipprotection......................................................................................................................................4Payments............................................................................................................................................................. 5
Collecting Overdues........................................................................................................................................6
Amicableaction.................................................................................................................................................6Legalaction.........................................................................................................................................................6Alternativestolegalaction..............................................................................................................................8
Handling Insolvent Debtors..........................................................................................................................9
Insolvencyproceedings...................................................................................................................................9
Days Sales Outstanding (DSO): DSO is85daysonaveragein2016(comparedto88daysin2015).
General information
Availability of financial informationItmaybedifficulttoobtainreliablefinancialinformationonItaliancompaniessincethelegalframeworkdoesnotprovidebusinessesanyincentivetodoso.Relyingonitsstrongterritorialorganizationbasedondelegations,andaconnectedinternaldatabase,EulerHermesallocateseachcompanyagradereflectingitsfinancialhealthandhowitconductsbusiness.Thegradesrepresentacoreofourknowledgeandanalyses,andhelpclientsidentifyandavoidrisk.Dataiscontinuouslymonitoredtoofferthemostup-to-dateinformationtosupportmanagementdecisions.
Main corporate structuresLiabilityforbusinessdebtsisdeterminedbylegalstructures,whichmaybedescribedasfollows:• SoleProprietorshipisavailableforsmallbusinessesmanagedby
anindividualandforwhichnocommercialstructureisnecessary.Inthiscase,theownerisheldliableforallbusinessdebts.TwoormoreindividualsmayalsodecidetoshareownershipandresponsibilitiesthroughPartnerships(societàinnomecollettivo,s.n.c.),inwhichcasethepartnersmaybejointlyandindividuallyliablefortheactionsoftheotherpartners.LimitedLiabilityPartnerships(societàinaccomanditasemplice,s.a.s)alternativelyofferlimitedliabilitytothepartners.
• Incorporatedentities(SocietàdiCapitali)arealsoavailable.LimitedLiabilityCompanies(societàaresponsabilitàlimitata,Srl)areinpracticethemostfavoredlegalentitiesbecausetheyrequireareasonableminimumcapitalamount(EUR10,000)whilethepartners’liabilityislimitedtotheircontribution.Joint-StockCorporations(societàperazioni,SpA)areusedforlargerstructuresandrequireaminimumcapitalamountofEUR120,000whichmustbedividedintotradableshares.Intheseentities,theshareholders’liabilityislimitedtothevalueoftheirshares.
• ForeignbusinessesmaysettleinItalythroughBranchOffices(sedesecondaria),buttheseentitiesarenotseparatefromtheparentcompany’slegalstructureandthusoffernoliabilitylimitations.Forthisreason,subsidiariestendtobesetupthroughSrlbusinessstructures.JointVenturesmayalsobeestablishedbycontractorthroughpartnerships.
Regulatory environmentItalyhasaCivilLawsysteminwhichtherulesarecodifiedandbindthecourts.Bycontrastwithcommonlawcountries,thecaselawthereforeonlyhasalimitedimpactonthecourts.BusinessrelationsareregulatedundertheCivilCode(CodiceCivile),whilelitigationproceedingsaregovernedbytheCodeofCivilProcedure(CodicediproceduraCivile).Allbusinessclaimsfallunderthejurisdictionofordinarycourts(Tribunale)sometimesorganizedinspecializeddivisionsdependingontheirsize.AppealcourtsaswellasaSupremeCourtofCassationalsoexist.
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Getting Paid
Days Sales Outstanding (DSO)CollectionoflatepaymentsinItalycontinuestobedifficultdespiteagradualimprovementinpaymentbehavior,withDSOunder90daysin2016(85dayscomparedto88daysinthepreviousyear)intheprivatesectorandsixmonthstoayearwhendealingwithapublicpartner.Thismaybeconsideredanissueinsofarasthelawstipulatesthatpaymentoughttooccurwithin30days,butthismayalsobeexplainedbythefactthat,asaresultoftheeconomiccrisis,businessestendtousedelaysasacreditmanagementsubstitute.Moreover,therecentreformof theinsolvencylawaimedatlimitingthedamagecausedbythelackofsupportfromthebankingindustryhasalloweddebtorstoobtainmoretimetopaytogetherwithmorefavorableconditions.Additionally,debtorstendtobecomeincreasinglyuntraceable.
Late payment interestLatepaymentinterestmaybechargedtothedebtorinItaly.TheRecastDirective2011/7/EUwhichstipulatesthatpaymentsintheEUmustbemadewithin60dayswastransposedintodomesticlaw(DecretoLegislativo9novembre2012,n.192)buttherulesinItalyarestricterthantheEUrequirements:asageneralrule,business-to-
Late payment interest: Asageneralrule,business-to-businesstransactionsmustbepaidwithin30calendardaysfollowingthedateofreceiptoftheinvoicebythedebtor.
businesstransactionsmustbepaidwithin30calendardaysfollowingthedateofreceiptoftheinvoicebythedebtor.Beyondthispoint,creditorsareentitledtoclaiminterestwithouthavingadunningletter,atarateprovidedinthecontractualagreement.Intheabsenceofsuchanagreement,thereferencerateoftheEuropeanCentralBank(reviewedeachJanuaryandJuly),increasedbyatleast8%points,maybeapplied.Althoughauthorizedbylaw,theseagreementsoftenconstitutesignificantnegotiationtoolsbuttheyshouldbesignedbybothparties,otherwisetheycouldbeconsidered“unfairterms.”
Debt collection costsInaddition,thedirectiveentitlescreditorstoreceive(withoutrequestingit)aflatEUR40sumtocompensatetheirrecoverycostspluscompensationforanyrecoverycostsexceedingthatsum.Inpractice,Italiandebtorsrarelyagreetopaylatepaymentinterest,whichisthenessentiallyusedasanegotiationtool.Again,havingbothpartiessignanydocumentisimportant.
Ownership protection:RetentionofTitle(RoT)agreementsaimingatpreservingownershipovergoodsuntiltherelatedinvoiceispaidinfullisadmittedunderItalianlaw,butremainsuncommonforseveralreasons.Firstly,RoTprovisionswouldonlybeenforceableprovidedthattheyhavebeenregisteredbeforeanotaryataverifiabledate(‘datacerta’asprovided
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underArticle1524oftheCivilCode,andunderArticle11(3)ofLegislativeDecree231/2002implementingDirective2000/35/EConcombatinglatepaymentincommercialtransactions).Havingsaidthis,thepublicityrequirementmaybeexplainedbythefactthatRoTinItalywasoriginallyrelatedtoinsolvencyproceedingsandaimedatpreventingcollusionbetweenadefaultingdebtorandacreditortothedetrimentofothercreditors.Secondly,itisuncertainwhetherextendedRoTaimingatpreservingownershipovergoodsdespitetransformationbythebuyerwouldbeadmittedbyItaliancourts.EnforcingRoTprovisionsisdifficultinpracticebecausetheprocedureiscostlyandremainsirregularduetoalackofrecentrelevantcaselaw.
Payments• Themostcommonpaymentmethodsareasfollows:
Sepabanktransfersareamongthemostpopularpaymentmeansastheyarefast,secured,andsupportedbyanincreasinglydevelopedbankingnetworkinternationallyanddomestically.
• Alternatively,StandbyLettersofCredit(abankguaranteesthedebtor’screditqualityandrepaymentabilities)andguaranteebondsconstitutereliableguaranteeswhichcanbeinterpretedasasignofgoodfaithsincetheycanbetriggeredasa‘paymentoflastresort’iftheclientfailstofulfilacontractualcommitment.
Also,confirmedDocumentaryLettersofCredit(adebtorguaranteesthatacertainamountofmoneyismadeavailabletoabeneficiarythroughabankoncecertaintermsspecificallyagreedbythepartieshavebeenmet)maybeconsidered.
• BillsofExchange(cambiali)aregenerallyusedasdebtrecognitiontitlesratherthanaspaymenttools.Ifleftunpaid,theyconstituteenforceableinstrumentswhichcanbeusedagainstthedebtorwithouthavingPaymentInjunctions.
• Itisalsocommonforchecks(assegni)tobeusedthiswayand,ifleftunpaid,theyareenforceablewithinamaximumperiodofsixmonthsfromtheduedate.Since2006,unpaidchecksmustfurthermoreberegisteredwiththeCentraled’AllarmeInterbancaria(inwhichcasethedebtorwouldbeexcludedfromthebankingsystemforsixmonths).
• PaymentwouldoccurthroughRIDserviceswhichallowcollectingreceivablesfromthedebtor’sbank,basedonanauthorizationgrantedbythebuyerandrequestingtheirbanktoacceptdebitorders.Alternatively,bankreceipt(alsocalledRI.BA.)isafinancialinstrumentusedforbusinessmanagement,opentoall,whichallowscreditorstoreceiveasumofmoneyrelativetoaspecificinvoicefromthedebtor’sbank(throughproductionofsupportingdocuments)Inaddition,itisalwaysadvisabletonegotiatedownpayments.
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Collecting overdues
Amicable actionNegotiatingAmicablesettlement(transazione)opportunitiesshouldalwaysbeconsideredasanalternativetoformallegalproceedingswhicharelengthyandcostly.Priortocommencingformallegalaction,obtainingapaymentinstalmentagreementor,atleast,aformaldebtrecognitiontitleisalwaysworthwhileas,ifthedebtorfailstopay,thesewillthenallowthecreditortoobtainanenforceableInjunctionOrderthroughafast-trackproceeding.Inaddition,beforestartinglegalproceedingsagainstadebtor,checkingthatthedebtorisnotlistedontheOfficialRegisterofBankruptcies(PubblicoRegistrodeiFalliti)isadvisable,asitallowsverificationastowhetherthecompanyisstillactiveandwhetherrecoverychancesareatbest.Inaddition,itisessentialtobeawareofthedebtor’ssolvencystatus:ifinsolvencyproceedingshavebeeninitiated,itbecomesimpossibletoenforceadebt.
Legal action
Ordinary proceedingsMediationisnolongerapre-legalactionrequirement.Nonetheless,legaldunningoughttostartwitharegisteredDemandLetter(LetteraMonitoria)recallingthedebtor’sobligationtopaytheprincipaltogetherwithlatepaymentinterest(ascontractuallyagreedortakingalegalrateasareference).Whenthedebtisundisputed,fast-trackproceedingsmayallowdebt-relatedlitigationstobesettledwithminimuminvolvementofthecourts.First,injunctionproceedingstoobtainaPaymentDecree(‘decretoingiuntivo’underLawno.69/2009)maybecommencedprovidedthatthecreditorprovesthatthedebtiscertainandundisputed(i.e.byprovidingabadcheckoradishonoredbillofexchange,orders,invoicesandproofofdeliveryshowingthatthegoodshavebeenreceivedbythedebtor).ThecourtgrantsanOrdertoPaywithin40dayswhich,ifdisregarded,allowsaWritofExecution(Attodiprecetto)enforceablebyabailiff(ufficialigiudiziari)throughaseizureofthedebtor’sassets.Inaddition,thedecreeconstitutesavalidtitlefortheregistrationofajudicialmortgageagainstthedebtor’spropertywhichmaybetriggeredwhentheamountatstakeissufficientenoughinorderfortheproceduretobecost-effective.Objectionhowevertakestheclaimtoformalordinaryproceedings.Othersummaryproceedingsalternativelyallowtherecognitionofcreditors’rights(procedimentosommariodicognizione)providedthatundisputableevidencemaybeprovided.Theordermaybeappealedwithin30days,inwhichcasetheclaimthenleadstoaformallawsuit).WhenthedebtorcompanyhasassetsinotherEUMemberStates,aEuropeanPaymentOrderprocedurefacilitatingtherecoveryofundisputeddebts(underRegulationECNo1896/2006)maybetriggered.Inthiscase,thedemandingpartymayrequestadomesticcourttoissueanOrdertoPaywhichwillthenbeenforceableinallEuropeanUnioncountries(exceptDenmark)withoutexequaturproceedings.
Collection @ Euler HermesItisalwaysadvisedtoattemptcollectionpriortoanylegalactioninordertomaximizechancesofsuccessfulrecoveryandavoidlegalcostsanddelays.Ourkeyprincipleistocollectincloseproximitytothedebtor,usingaseriesofletters,emailsandphonecallsinthelocaldebtorlanguage.OurWorldCollectionNetworkofEulerHermesofficesandexternalprovidersareexpertsinprofessionaltradedebtcollectionandnegotiation,ensuringpositiveoutcomeswhileretainingimportantclientrelationships.EulerHermescanhandlethecompletecollectionsprocessfromamicable,pre-legalactionthroughtojudgmentandenforcement.
Whentheoptionofcommencingformallegalproceedingsremains,theclaimantmustfirstfileaclaimwiththecourt(citazione)andservesummonstothedebtor.Thedebtormayfileadefence(comparsadicostituzioneerisposta)within90daysthroughapreliminaryhearing.Thepartiesarethenaskedtoprovidebriefsandevidencetothecourt,buttheproceedingstakeplaceinvarioustime-consumingphases.Ifthedebtorfailstobringadefence,thecreditorisentitledtorequestadefaultjudgmentbutthisdoesnotnecessarilyshortentheproceedings.Italiancourtsnormallyawardremediesintheformofdeclaratoryjudgments(acknowledgingtheexistenceofaright,forinstance),constitutivejudgments(alteringtheparties’relationship),specificperformanceandcompensatorydamagesbuttheycannotawarddamageswhichhavenotbeenrequestedbytheparties.Punitivedamagesarenotavailable.Overall,formallitigationinthecaseofdebtcollectiondisputesisunsatisfactoryandpre-legalactioneffortsshouldalwaysbefavored.
Necessary documents• Notarizedpowerofattorney• Copiesordersheets• Copiesofinvoices• Relevantforwardingpapers/proofofdeliverysignedbyeitherthe
carrierorthedebtor• Originalabstractofcreditor’saccountancybook,wherethe
outstandinginvoicesarelisted(mustbelegalizedbyaNotaryPublicforItaliancreditorcompanies)
• Legalrepresentative’snameandjobprofile/companyposition
Time limitationsBusinessclaimsmustgenerallybebroughttocourtwithintenyears(‘prescrizione’underArticle2946oftheCivilCode)butvariousrulesapply.Howeverthelimitationperiodcanbeinterruptedbysendingadunningletterbyregisteredmail.Inthiscasethelimitationperiodwouldrestartfromthereceiptofthedunningletter.Claimsrelatingtofaultygoodsmustbebroughtwithinoneyearstartingfromthedeliverydatebutwithineightdaysfromthediscovery.
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Provisional measuresWhileanordinarylawsuitistakingplace,thecreditorcanaskthejudgetoexecutethetitleonaprovisionalbasis.Provisionalmeasuresmayalsohelppreservethecreditor’sinterestspendingafinaldecisioninsofarasthecourtsmayordertheprovisionalattachmentofthedebtor’sassets.Inthiscase,thedebtorretainspropertyovertheirassetsbutlosesthefacultytodisposeofthemaslongastheproceedingscontinue.Suchprovisionalorderswouldonlybegrantedprovidedthattheclaimanthasdemonstratedtheimmediatenecessityofdoingso.Inemergencysituations,thecourtmayrenderitsdecisionexparte(i.e.intheabsenceofthedebtor),asitdeemsappropriate.
Lodging an appealDecisionsrenderedinfirstinstanceproceedingsmaybebroughttoappealwithin30daysfollowingtheirdeliverytotheparties.SincetheLegislativeDecree38/2012hasenteredintoforce,theclaimantmustobtainaleavefromthecourtdeclaringthattheappealclaimisadmissible.DecisionsrenderedinthesecondinstancemaybeappealedagainstbeforetheSupremeCourt,whichisonlycompetenttoconsidererrorsoflaw(suchasafailuretostatereasons,alackofjurisdiction,anincorrectinterpretationofthelaw,etc.).
Enforcing court decisionsAjudgmentisenforceableassoonasitbecomesfinal(i.e.whenallappealvenueshavebeenexhausted).Ifthedebtorfailstosatisfythejudgment,itispossibletorequestthecourttoordercompulsoryenforcementmeasures(processodiesecuzione)intheformofattachmentofthedebtor’sassets,orofagarnisheeorder(allowingthepaymentofthedebttobeobtainedfromathirdpartyowingmoneytothedebtor).Inpractice,recoveryagainstathirdpartyowingtothedebtorwouldtendtobemorecost-effective.Priortocommencingexecutionproceedings,theexecutiveorder(titoloesecutivo)mustbeservedtothedebtortogetherwithaformalrequesttomakepaymentwithintendays(precetto).Thisgivesthedebtoranopportunitytobringanotherdefence,thusdelayingenforcementfurther.Ifthecourtrejectsthedefence,anapplicationtoproceedtoforcedexecutionmaybefiledwiththebailiff’scourt(ufficialigiudiziari).Giventhelengthoflegalproceedingsasawhole,itisoverallstronglyadvisabletoinquireaboutthedebtor’scapacitytopaythedebtpriortocommencingalawsuit.
How long could legal action take?Undisputedclaimsmaybesettledinfourmonthsbutthetimescaletoobtainanenforceablecourtorderwoulddependonthecourt,theregionandthecomplexityofthecase.Overall,disputedlegalproceedingscouldtakethreeyearsonaverage.Asaresult,legalactionmightnotalwaysbeworthwhileandpriorityshouldbegiventopre-legalcollectionefforts.Enforcementmayalsolastforyearsasitmaydependonauctiondelays,andisalsoveryexpensive.LegalactionindebtcollectionisthesameforItalianandforeigncreditors,sothecourtsdonotrequiremoretimetodecideondisputesfiledbyforeigncreditors.
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Litigation @ Euler HermesShouldlegalactionbenecessary,EulerHermescanprovidesupportthroughoutthelegalprocessfromjudgmenttoenforcementviaourWorldCollectionNetworkofEulerHermesofficesandexternalproviders.Legalactioncanoftenbecomplicatedandexpensive,soyouwillbeinformedofallcostspriortoanyactionandadvisedonwhichrouteisbesttotake.
How much could this cost?Asageneralrule(underArticles91-92oftheCivilProcedureCode),thecourtswouldorderthedefeatedpartytocompensatethewinningpartyforallorpartofitslitigationcosts.CourtfeesinItalyhavebeennoticeablyincreasedbythegovernmentinrecentyearsandlegalrepresentationtendstobecostly.
Alternatives to legal action
Alternative Dispute Resolution methods (ADR)AlternativeDisputeSettlementmethodssuchasmediationorarbitrationmayrepresentasignificantwaytoavoidlengthyproceedingsbeforegeneraljurisdictioncourts;howeveritisrarelyusedinItalyinrelationtodebtcollectionproceedings.
Foreign forumsGiventhedifficultytoobtaintimelydecisionsfromdomesticcourts,thepartiesmayconsidersettlingdisputesundertheauspicesofaforeignforum(i.e.aforeigncourtoraforeignlaw)asthismayhelpavoidingtheriskofanydebtor’sexceptionduringthelawsuit.ItalyisasignatorytotheRomeIRegulationonthelawapplicabletocontractualobligations,whichstipulatesthatthepartiestoacontractmay,bymutualagreement,choosethelawapplicabletothiscontract,andselectthecourtthatwillhavejurisdictionoverdisputes.ItalyisalsoasignatorytotheHagueConventionof15June1955,thelawapplicabletotheinternationalsaleofgoods,whichstipulatesthatcontractsshallbegovernedbythelawchosenbytheparties,thegeneralspiritoftheagreementandthecircumstancesofthecase.
Enforcing foreign awardsInfact,theideaofsolvingdebtthroughforeigncourtsisreasonableasforeigndecisionsmaybeenforcedinItaly,eventhoughpatiencemayberequired.Variouscircumstancesmayapply.Ononehand,decisionsrenderedinanEUcountrywouldbenefitfromparticularlyadvantageousenforcementconditions.ApartfromEUPaymentOrderswhicharenormallyenforceabledirectlyindomesticcourts,thetwomainmethodsofenforcinganEUjudgmentinItalyarebytheuseofaEuropeanEnforcementOrder(EEO,asprovidedunderRegulationECNo.805/2004)whentheclaimisundisputed,orbyregisteringthejudgmentundertheprovisionsoftheBrusselsIRegulation(44/2001).Ifthejudgmentqualifiesasanuncontestedclaim,itcanbeenforceddirectly(i.e.withoutregistration)byuseofanEEOprovidedthatthedebtorhasidentifiedassetsinthecountry.AEuropeanSmallClaimsProcedure(asprovidedbyRegulationEC861/2007)aimingateliminatingintermediatestepsmaysimilarlyberelieduponwhileenforcingdecisionsuptoEUR2,000.Iftheclaimisdisputed,theprocedureforregisteringanEUjudgmentwithdomesticcourtsisrelativelysimple.Thejudgmentholdermustapplytotherelevantcourtforthejudgmenttoberegisteredandprovidethecourtwith,amongotherdocuments,anauthenticatedcopyofthejudgment,acertifiedtranslationand,ifinterestisclaimed,astatementconfirmingtheamountandrateofinterestatthedateof
theapplicationandgoingforward.Oncethejudgmenthasbeenregistered,itcanbeenforcedasifitwereissuedbydomesticcourts(accordingtotheRecastRegulationEC1215/2012,suchanexequaturprocedureisnolongerrequiredfromJanuary2015).Ontheotherhand,judgmentsrenderedinforeigncountriesoutsideoftheEUwouldnormallyberecognizedandenforcedonareciprocitybasisprovidedthattheissuingcountryispartytoabilateralormultilateralagreementwithItalydraftedforthispurpose.Intheabsenceofreciprocalarrangements,exequaturproceedingswouldtakeplacebeforedomesticcourts.Asageneralrule,foreignjudgmentscannotbereviewedonthemeritsofthecase,butthecourtswoulddenyadmissibilityforanumberofreasons,forinstance:wheretheforeigndecisionisneitherfinalnorenforceableintheissuingcountry,deemedincompatiblewithItalianpublicpolicyorwithdecisionsrenderedbyItaliancourts,ifthedefendanthasnotbenefitedfromadueprocessoflaw,iftheforeigncourthasawardedpunitivedamages,etc.ItalyisasignatorytotheNewYorkConventionontheRecognitionandEnforcementofForeignArbitralAwardsof1958,thereforeitsdomesticcourtsoughttorecognizeandenforceawardsrenderedthroughinternationalarbitrationproceedings.
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Handling insolvent debtors
InsolvencyinItalymaybedefinedastheinabilityofadebtortopayitsdebts.ItalianBankruptcyLawisbuiltuponvariousregulations,themainofwhichistheRoyalDecreeNo267of16March1942,whichhasbeenrecentlyamendedbytheLawDecreeno.83of22June2012(DecretoCrescita).Theinsolvencyframeworkplacesasignificantemphasisondebtrestructuringasanalternativetoliquidation,howeverinpracticebankruptcyremainsthedefaultproceedingsothatcompanyrescueattemptsarenotwidespread.Infact,multiplerescueproceduresmaybefound,whichmakestheprocesscomplex.
Insolvency proceedingsOut-of-Court proceedingsThe2012Reformlawfirstentitlesadebtorfacingfinancialdifficultiestofileanout-of-courtapplicationforcompositionbyanticipation(pre-concordato/concordatoinbianco).Negotiationonacompositionagreement(accordodiristrutturazionedeidebiti)wouldthuscommence60to120dayspriortoinitiatingformaldebtrestructurationproceedingsbeforethecourt(ConcordatoPreventivo,seebelow)asameanstoanticipatethestayofenforcementproceedingsagainstthecompany.Duringthisperiod,allexecutionproceedingsarepreventivelyfrozentillthecourtdeclarestheadmissionofthecompanytoConcordatoPreventivo.Underthe2012Reform,thedebtorretainscontroloverthecompany’sassetsandactivities(underthecontrolofasupervisor).
Alternatively,anewpre-agreedcompositionplanmayalsobeagreed(ristrutturazionedeldebito)withtheapprovalofcreditorsrepresentingatleast60%ofthedebtorcompany’sdebt.
Restructuring the debtConcordatoPreventivoproceedingsareawayforaseriouslyinsolventcompanytoavoidbeingforcedintobankruptcy.Thedebtorfilesaproposaltothecourttorepaythetotalamountoutstandingtothesecuredcreditorsandavariablepercentagetotheunsecuredcreditors.NewItalianlawdecree132/2015hasintroducedminimumpercentagesforunsecuredcreditors(40%inthecaseof‘concordatoliquidatorio,’aimedtoclosethecompany,and30%inthecaseof‘concordatoincontinuità,’aimedtokeepthecompanytrading).ShouldthecourtdecidetoadmitthedebtorintotheConcordatoPreventivoproceedings,aCommissionerTrusteeisappointedandthemeetingofcreditorsisfixedonanagreeddate.Thevotecanbecastwithin20daysfromthedateofthehearing.Asperdecree132/2015,amissingvoteisequaltoanegativevote.Ifthemajorityofthecreditoutstandingisaccepted,thecourtwillofficiallyvalidatetheproceedings(omologazione).Alternatively,theAccordodiristrutturazionedeldebitoaimsatrestructuringthedebtsoastorescuethedebtorcompanyfrombankruptcyproceedings.Anagreementmaybeconcludedbetweenadebtorandtheircreditors(Comitatodeicreditori)whilepursuingbusiness.Directorsremaininchargeofthedailymanagementunderthesurveillanceofajudicialcommissioner,andmaypresentvariousarrangementsintheformofdebtrestructuring,transferofassetsof
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thecompanytoanassumingparty(assuntore),divisionofcreditorsintodifferentclassesaccordingtheirlegalstatusandsimilareconomicalclaims.Since2012,enforcementactionsagainstthedebtormaybestayedearlier,fromthestartoftheout-of-courtcompositionphase.Inaddition,the2012Reformprovidesimprovedopportunitiestoobtainfreshcapitalduringtherestructurationproceedings.Additionalproceduresmayalsostartdependingonthesizeandlevelofindebtednessofthecompany:Prodi’sextraordinaryadministrationproceedings(amministrazionestraordinaria)aresupervisedbytheMinistryofIndustryandapplytocompaniesthathaveatleast200employees,andthattheirdebtequalstwo-thirdsoftheirassets;Marzano’sextraordinaryadministrationproceedings(amministrazionestraordinariaMarzano)applytocompanieswithatleast500employeesthathavedebtsamountingtoatleastEUR300million.
Winding up proceedingsWindingupproceedings(fallimento)areinpracticethestandardbankruptcyprocedureoncefacinginsolventdebtors.Therequestmustemanatefromthedebtor,theircreditorsorfromthepublicprosecutorbutvariousthresholdsapply:thedebtorcompanymustbeacommercialenterprisewithinvestmentsinexcessofEUR200,000(aspertheirlatestannualaccount)andbeinginastateofinsolvencyinexcessofEUR30,000.Uponadmissionoftheliquidationrequestbythecourt,thecreditorsaregivenabouttwomonths(thetimeperiodistobesetbythecourt)toregistertheirdebtsandpriorities.Acourt-nominatedreceiver(curatore)isinchargeofestablishingthecreditors’listandtakesoverthemanagementandadministrationofthecompanyinplaceofthedirectorsuntilthecompany’sassetsaresoldandtheproceedsaredistributedamongthecreditors.Abankruptcyagreement(concordatofallimentare)may,however,beconcludedduringtheliquidationproceedingsifthepartieshaveagreedonaplanregarding(amongothermatters)therestructuringofdebts,thepaymentofcredits,theassignmentofthedebtor’sassetsinfavorofanassignee,thecomposition/paymentofaclassofcreditors,etc.Thebankruptcyjudgewouldverifythecomplianceoftheagreementwiththerelevantrulesofprocedureandobtaintheapprovalofboththereceiverandcreditors’committee.TheCompulsoryAdministrativeLiquidation(liquidazionecoattaamministrativa)procedureappliesinthecaseofcompaniesthatarenotallowedtogobankruptbylawonthegroundsofpublicinterest(forexample,banksandmajorinsurancecompanies).‘Liquidazionevolontaria’applieswhenacompanydeliberatelydecidestostopitseconomicactivities,butsuchproceedingsareregulatedundercivillaw,notunderinsolvencylaw.
Priority RulesPriorityrulesnormallyapplywhiledistributingtheproceedstothecreditors.Priorityclaims(liensovermoveableandimmoveableproperty)wouldberepaidbeforepreferentialclaimsandclaimssecuredbymortgageorbypledge.Newcapitalprovidedtothedebtorduringrestructurationproceedingsanddeemedessentialtothecompany’ssurvivalwouldalsobeconsideredasapriorityclaimunderthe2012Reform.
Cancellation of suspect transactions (clawback)Theinsolvencylaw(Articles64to70)entitlesadministratorsandreceiverstoreviewandcancelanypaymentsmadebythedebtorduringa‘suspectperiod’commencingbetweensixmonthstotwoyearspriortotheopeningoftheinsolvencyprocedure.Typically,transactionsfavoringonecreditorovertheothersorreducingtheestate’svalue(fraudulentacts,undervalueorgratuitousacts,etc.)couldthusbevoid.
How long could insolvency proceedings take?Bankruptcyproceedingscouldspreadoverfivetotenyearsonaverage,although20yearshavebeennecessaryinthemostcomplexcases.
Necessary documents• Notarizedpowerofattorney(ifclaimslodgedbyexternallawyers)• Proofofdebt(forbankruptcyproceedingsandextraordinary
administration,‘amministrazionestraordinaria’)• Copiesordersheets• Copiesofinvoices• Relevantforwardingpapers/proofofdeliverysignedbyeitherthe
carrierorthedebtor• Originaloutstandinginvoices(mustbelegalizedbyaPublicNotary
forItaliancreditorcompanies)• Legalrepresentative’snameandjobprofile/companyposition
Insolvency @ Euler HermesEulerHermesworkscloselywithdebtors,creditorsandlawyerstoprovidesupportduringinsolvencyandrestructuringprocesses.Withmanyoptionsavailablewhenitcomestoinsolvencyaction,wecanofferadviceonwhichoptionismostsuitable.
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