Corporate Restructuring in Italy
The CCII is the code of laws which replaces the bankruptcy procedure
Legal tools for Business Crisis and Insolvency of companies in Italy by Corporate Restructuring
The Code of Business Crisis and Insolvency (CCII)
On 15th July 2022, the Code of Business Crisis and Insolvency (Codice della Crisi d’Impresa e dell’Insolvenza, CCII) came into force, which:
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- regulates situations of business crisis arising from insolvency;
- allowing the recovery of the company's production capacity through judicial or extrajudicial solutions.
The CCII replaced the previous bankruptcy law.
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The right choice of the restructuring tool
The current legislation of the CCII code provides companies in crisis with a wide range of legal options to address and resolve the state of business crisis, therefore, it is important to choose the right restructuring tool among those provided for by the CCII code:
A 2 Debt restructuring agreements / Accordi di ristrutturazione dei debiti
B Moratorium agreement / Convenzione di moratoria
C Preventive agreement in business continuity / Concordato preventivo in continuità aziendale
D Preventive liquidation agreement / Concordato preventivo liquidatorio
E Restructuring plan subject to approval / Piano di ristrutturazione soggetto a omologazione
Kinds of companies benefiting of restructuring tools
According to the provisions of the CCII code, companies considered "Non-Minor Companies" can use all the legal options governed by the CCII code, "Minor Companies" are considered those that have:
- total annual assets of €. 300,000.00 in the three financial years preceding the date of filing of the application to open the procedure or from the start of the activity if of shorter duration;
- annual revenues of €. 200,000.00 in the three financial years preceding the date of filing of the application to open the procedure or from the start of the activity if of shorter duration;
- debts, even if not expired, up to €. 500,000.00;
“Agricultural Companies” (those that carry out land cultivation, forestry, animal breeding and related activities) and “Minor Companies” cannot benefit of the following legal tools provided for by the CIIE code:
- judicial liquidation;
- preventive agreement;
- restructuring plan subject to approval.
While, only “Agricultural Companies”, and not “Minor Companies”, can access restructuring agreements and the moratorium agreement.
Powers of the directors of the company in business crisis
The directors of the company in crisis, and not the shareholders, have the power to decide to:
- choose the tools provided for by law for resolving the business crisis;
- do amendments to the articles of association of the company in crisis;
- do increases and reductions in capital;
- do limitations or exclusions of the right of option;
- do mergers, demergers and transformations;
- draft the recovery plan.
In these cases, the shareholders cannot remove the directors, except for just cause.
The recovery plan drawn up by the directors provides for:
- merger, corporate split;
- financial restructuring through capital increases;
- sale of strategic assets.
The shareholders only have the right to be informed of the choice made by the directors and updated on the progress; shareholders may vote if the proposal limits their participation.
Prerequisites for corporate restructuring
A corporate crisis is considered to be a situation in which a company risks becoming insolvent, which occurs when cash flows are inadequate to meet obligations in the following 12 months.
In such cases, the legal instruments provided by law are:
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A1 agreements in execution of certified recovery plans;
A2 debt restructuring agreements (facilitated agreement or extended effectiveness agreement);
C preventive agreement in business continuity:
E restructuring plan subject to approval.
Eventually, even before that, a negotiated composition of the crisis can be activated in cases in which there is a "probability of crisis", when there is an economic-financial imbalance, not such as to determine the failure to cover the obligations of the following 12 months with the corresponding cash flows.
If, however, the company is insolvent, it can access judicial liquidation, which has replaced bankruptcy as provided in abolished old bankruptcy law.
Classes of creditors
Creditors are divided into classes; it is possible to provide for differentiated treatment between creditors belonging to different classes, in order to facilitate reaching the majorities necessary for the approval of the composition.
Classes of creditors include:
- smaller companies holding unsecured credits deriving from relationships for the supply of goods and services;
- companies with privilege, pledge and mortgage.
