Restructuring and Insolvency

The new Italian Insolvency Code (“CCI”)


The Legislative Decree No. 14/2019 is divided into four parts, the most important of which is the first containing the new CCI composed of 390 articles: the second part includes a few amendments to the Italian Civil Code (“ICC”), the third concerns amendments to Law No. 122/05 (safeguards for purchasers of real estate under construction) and the fourth the entry into force.

The CCI is due to come into force 18 months after its publication in the Official Gazette, except for a few provisions. It is a very broad waiting period, which will presumably allow the implementation of further corrective measures to the text of the CCI.

Below is a brief overview of the main innovations, on which we will come back in more detail in the next issues of our newsletter.

Amendments to the Civil Code in force since 16 March 2019

Of considerable importance is the new second paragraph of Art. 2086 ICC, which provides that companies have a duty to:

  • (i) establish organizational, administrative and accounting structures appropriate to the nature and size of the company, in order to facilitate the early detection of an emerging state of distress; and
  • (ii) promptly resort to the remedies provided by the CCI for overcoming a state of distress and preserving the business as a going concern.

Noteworthy is also the new third paragraph of Art. 2486 ICC on damages resulting from the violation by the Directors of their duties to preserve the asset value of the company for the benefit of creditors. A presumption will be that damage is equal to the decline of the balance sheet net worth of the company between the date when a cause of dissolution of the company occurred and the date when an insolvency procedure was started; however, should this test not be applicable due to a lack of accounting records or for other reasons, a further presumption will be that damage is equal to the difference between actual assets and liabilities in the judicial liquidation.

The main features of the CCI

The CCI preserves the characters and the structure of the existing insolvency proceedings and also largely follows the previous text of the Italian Bankruptcy Law, amended along with the criteria of the law empowering the Government to issue the new Code. The areas where the rules are wholly new are those of (i) the definitions and general principles (Articles 1-11), (ii) the early detection and assisted composition procedure of a state of distress (Articles 12-25), (iii) the single proceeding to access to the insolvency procedures provided by the CCI (Articles 40-53), (iv) the rules for managing the insolvency procedures of groups of companies (Articles 284-292), (vi) the coordination between the judicial liquidation procedure and interim criminal measures (Articles 317-321).

  • a) Procedures governed by the CCI

The CCI provides, on the one hand, the new out-of-court procedure of “assisted distress composition” (composizione assistita della crisi) referred to in § b) below (Articles 12-25) and, on the other hand, the procedures already existing, now defined as “distress and insolvency regulation procedures” (regolazione della crisi e dell’insolvenza), i.e.: (i) certified restructuring plans (Art. 56), (ii) debt restructuring agreements (Articles 57-64), (iii) composition with creditors (concordato preventivo) (Articles 84-120), (iv) judicial liquidation (Articles 121-267) into which it is renamed the current bankruptcy liquidation, and (v) compulsory administrative liquidation (Articles 293-316).

The replacement of the terms “bankruptcy” and “bankrupt” in the CCI is mainly nominal, given that the new “judicial liquidation” retains the features of current bankruptcy.

The procedure reserved to consumers and businesses not subject to insolvency procedures, currently governed by Law No. 3/2012, are now included in the CCI under the names of “restructuring of consumer debts” (Articles 67-73) and “minor composition with creditors” (Articles 74-83), as well as “controlled liquidation of the over-indebted” (Articles 268-277).


  • b) Early detection and assisted composition procedure (Articles 12-25)

The CCI provides for measures aimed at preventing insolvency, through warning tools which provide for “internal” reporting by the statutory auditors of the company and “external” reporting obligations by qualified public creditors (social security agencies, Tax Agencies and tax collectors), in the presence of certain indicators of a state of distress.

Such a reporting is addressed to a newly created non-jurisdictional distress composition body (“OCRI“) within the Chambers of Commerce and is aimed at triggering a consultation procedure (before a panel of professionals and experts designated ad hoc) which should help the distressed company to return to solvency, through agreements with creditors or resorting to a restructuring or insolvency procedure. Failing this (and recurring a state of insolvency), the OCRI sends a report to the Public Prosecutor, who can file with the Court for the opening of the judicial liquidation.

Appropriate incentives are provided to the debtor (including reductions in tax and interest penalties, extra time for filing restructuring plans or agreements in judicial restructuring procedures, some criminal exemptions and softer penalties) where he voluntarily and timely resorted to the composition procedure.

  • c) Protective measures (Articles 8, 20, 54-55)

The CCI provides new rules regarding protective measures for the debtor, pending both an out-of-Court or judicial restructuring procedure.

The automatic stay of individual creditors’ enforcement and interim actions (currently triggered by a filing or pre-filing for a judicial restructuring procedure) will apply only if requested by the debtor. Moreover, the duration of the stay will be determined by the Court on a case-by-case basis (Art. 54).

A stay may also be granted by the Court (Art. 20) in the context of the new out-of-Court assisted composition procedure of a state of distress.

It is worth noting that the total duration of all stays granted to the debtor, in the various situations, including renewals and extensions, may never exceed twelve months (Art. 8).

  • d) Venue (Article 27)

The law empowering the Government to issue the new Code included a directive to ensure that bankruptcy procedures be dealt with by more specialized judges, inter alia, by consolidating only in the major Courts the venue to deal with insolvency procedures.

The CCI has only very conservatively implemented this directive, namely with respect to the concentration of venue for extraordinary administration procedures and groups of companies of significant size.

  • e) Single proceeding to enter judicial restructuring and liquidation procedures (Articles 40-53)

The CCI provides a single procedure whereby all requests to start any of the different judicial restructuring or liquidation procedures with respect to the same business entity or consumer shall be dealt with. It is expressly provided for (Art. 7) that restructuring proceedings as an alternative to judicial liquidation must be considered first, provided that this is in the best interest of creditors.

It should be noted, with respect to the request to start the judicial liquidation procedure, that the CCI provides that it can be filed also by the statutory auditors, and that the conditions allowing the Public Prosecutor to file it have been extended. On the other side, the initiative to start a judicial restructuring procedure remains reserved to the debtor.

A significant innovation concerns the immediate enforceability of the judgment revoking the judicial liquidation, which is no longer conditioned on the decision being final and not subject to further appeal: Art. 53 lays down rules aiming to reconcile the inherently conflicting interests at stake.

  • f) Certified restructuring plans (Art. 56)

Innovations are limited to providing that restructuring plans shall set forth (i) the milestones to check the actual implementation of the plan, and (ii) the actions to be taken in case these are not attained.

  • g) Debt restructuring agreements (Articles 57-64)

The threshold of 60% of the total amount of creditors required to have signed the agreement is reduced to 50% in case no delay is provided for the payment of creditors who have not signed it, or temporary protective measures are not required (“facilitated agreements”, Art. 60).

The possibility of extending the effects of the agreement to creditors who have not signed it is no longer limited to financial creditors, but only if the plan provides that the debtor continues operating the business (“extended  agreements”, Art. 61).

New rules are introduced regarding the renewal of the certification of the plan by the expert, in the event substantial changes are made to the plan or to the agreement, even after confirmation by the Court: in this case, creditors can file an opposition (Art. 58).

  • h) Concordato preventivo (composition with creditors) (Articles 84-120)

The CCI keeps the current structure of the concordato. However, the restructuring plan seems now limited (Art. 84) to the two schemes of (a) liquidating all assets, or (b) preserving the business as a going concern (directly, providing that creditors will be paid out of future earnings, or indirectly, through a sale of business units):

  • (i) a concordato for pure liquidation purposes will be conditioned to the offer of external contributions increasing by at least 10% (compared to the alternative of the judicial liquidation) the satisfaction of unsecured creditors, which must be equal to at least 20%, as currently provided;
  • (ii) a concordato preserving the business as a going concern, in its “indirect” form, is expressly permitted, but only if there is a commitment to keep at least half of the jobs for one year after confirmation of the concordato by the Court;
  • (iii) a concordato preserving the business as a going concern, in its “direct” form, is not conditioned to any of the foregoing as to job retention or satisfaction to creditors;
  • (iv) in case the plan provides to preserve the business (directly or indirectly) and at the same time to liquidate some of the assets (so-called “mixed” plan), the plan will still be considered preserving the business as a going concern (thus, with no minimum 20% dividend to unsecured creditors) if creditors are satisfied to a greater extent by the proceeds coming from the preservation of the business (in case of a sale of business units, proceeds from the sale of the warehouse are expressly included); however, irrespective of the actual amount arising from the (direct or indirect) preservation of the business, the requirement is always met if at least half of the jobs are retained for two years after confirmation.

With respect to the proposal, it should be noted that (a) no restriction is introduced as to the means to satisfy creditors, who can still be offered any cash or non-cash consideration, while (b) it is provided that in some cases creditors need to be divided in classes, including secured creditors who are not fully satisfied, holders of third-party guarantees, creditors making a concordato proposal and parties related to the same (Art. 85).

A pre-filing (allowing a stay of creditors’ actions and a term – subject to Court supervision – to file the proposal and the plan) is still allowed, but with greater limitations: the maximum term is reduced to 60 days, which may be extended by a further 60 days only if there are no pending applications to opening the judicial liquidation.

A significant departure from the current system is that the Court will be required to assess also the economic (and not only legal) feasibility of the plan supporting the proposal (Art. 47).

The CCI (Art. 115) provides that, in the concordato providing for a full liquidation of assets, the judicial liquidator can always bring actions against directors and statutory auditors to recover damages arising from violations of their duties.

  • i) From bankruptcy to judicial liquidation (Articles 121-267)

As already mentioned, the name of the bankruptcy liquidation procedure changes, but not the rules. The impact of the innovations is rather limited, indeed. To point out some among the most relevant:
  • (i) the rule prohibiting set-off of debts and receivables whit a debtor subject to judicial liquidation, in case receivables towards the latter were purchased in the year preceding or after the opening of the liquidation, has been widened to exclude any possible exception (Art. 155);
  • (ii) the look-back period for claw-back actions has been anticipated to the submission of the application to open the judicial liquidation (Articles 163-166);
  • (iii) a specific regulation has been provided for pending employment contracts, which remain on hold until the receiver chooses to withdraw or take over the contracts, within four months from the start of the liquidation, unless the business can be sold as a going concern (Art. 189) (special social security safeguards for employees are also provided by Art. 190);
  • (iv) holders of pledges or mortgages on assets, which the debtor subject to judicial liquidation gave as security for a third-party debt, are now required to file a proof of debt to enforce their security (Art. 201);
  • (v) the final deadline to file a proof of debt has been shortened to six months after the decision on the first lot of proofs of debt (Art. 208);
  • (vi) a concordato fallimentare proposal by the debtor has been conditioned to additional contributions increasing by at least 10% the satisfaction of unsecured creditors (in line with the similar provision of the concordato preventivo) (Art. 240).
  • j) Insolvency and groups of companies (Articles 284-292)

The CCI introduces a set of rules (so far missing in our system) for the management of the insolvency of groups of companies.

This will allow to establish a single procedure for different companies of the group, on the basis of a single restructuring plan, while maintaining the principle of separation of assets and liabilities. Specific rules should allow a single venue for the group, but in case procedures take place before different courts the respective Judges, receivers or judicial commissioners are required to cooperate in order to facilitate a more efficient management of the procedures.

  • k) Over-indebtedness procedures (Articles 65-83, 268-277)

The rules governing the insolvency procedures of smaller businesses, farmers and consumers (so-called over-indebtedness procedures), introduced by Law No. 3/2012, will now be found in the CCI.

Also in this case, as for bankruptcy, changes in the name of the procedures (mentioned above under a) leave the substance mostly unchanged. The main innovations concern (i) an easing of certain requirements for admission to the procedures, (ii) the streamlining of some procedural steps, (iii) the extension to the creditors of the power (previously limited to the debtor) to request the opening of the controlled liquidation, (iv) specific rules for the joint treatment of the insolvency of over-indebted families, (v) the possibility for the debtor ,deserving the benefit, to obtain a discharge, following the controlled liquidation procedure, even in case creditors did not receive any payment.

  • l) Compulsory administrative liquidation (Articles 293-316)

Compulsory liquidation remains the exclusive insolvency procedure for banking, financial intermediation, fiduciary and insurance companies. With respect to other companies subject to supervision by regulatory bodies, it will only be applicable if the liquidation is driven by situations of irregularity and not by insolvency. Coops (except those carrying out banking activities, etc.) and mutual assistance bodies are therefore exclusively subject to judicial liquidation (and are not subject to compulsory liquidation).

  • m) Insolvency procedures and criminal interim measures (Articles 317-321)

The CCI provides a new set of rules dealing with the relationship between insolvency procedures and criminal interim measures, such as seizures. In brief, the CCI provides that criminal seizures aimed at confiscation prevail over judicial liquidation, while judicial liquidation prevails over the so-called “safeguard seizures” which have a precautionary function aimed at preventing further consequences of crimes.




The content of this article is only for information and does not constitute professional advice.
For further information: Fabio Marelli.

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