CORPORATE & COMMERCIAL | The impact of the state of emergency resulting from COVID-19 on certain corporate law principles – Focus on the temporary changes provided in Decree Law no. 23 of 8 April 2020

[IMPORTANT NOTE: This document is updated as at April 9, 2020 at 3:00 p.m. given that the state of emergency and the related regulatory framework are constantly evolving on a daily basis, the contents of this memorandum may be subject to further changes].

1. Introduction and regulatory framework

The adoption by the Government of extraordinary and urgent measures to prevent the spread of the virus inevitably had some consequences also on the performance of certain corporate activities.

The reference legislation on corporate law issues, for the time being, is given:

• • by Decree Law no. 18 of 17 March 2020 («Decreto Cura Italia»), which has, inter alia:
    • automatically extended the approval of the financial statements of joint-stock companies to the longer period of 180 days; and
    • provided for the possibility to held audio/video conference meetings also by way of derogation from legal and statutory provisions; and

• by Decree Law no. 23 of 8 April 2020 («Decreto Liquidità»), which, among other things, temporarily provided:
  • i. the disapplication of the obligation to provide (with the adoption of appropriate measures) for losses;
  • new approaches of assessing the business continuity; and
  • the disapplication of the subordination in shareholder’s loans.

2. Decreto Cura Italia

As per the new measures introduced by the Decree Law Cura Italia, please refer to the client alerts recently published on Financial Markets and Corporate & Commercial.

3. Decreto Liquidità

As mentioned above, there are three new regulations that temporarily impact on corporate law.

First things first.

- Losses’ neutralization [1]

It is provided – with reference to the financial years that will close by 31 December 2020 – the disapplication of the articles 2446 and 2447 (for joint-stock companies) and articles 2482-bis and 2482-ter (for limited companies) of the Italian Civil Code.

In this perspective, it will be possible to avoid that the capital losses, due to the current crisis, put the directors in the position to choose, alternatively, between:

• the company’s liquidation, in the absence of a reduction in share capital and, if necessary, an increase of capital to an amount not less than the minimum; and
• the liability’s risk for the non-conservative management of the companies they manage pursuant to Article 2486 of the Italian Civil Code.

- Assessment of the business continuity [2]

When preparing the financial statements in progress as of 31 December 2020, the conservative evaluation of the amounts could be made on an going concern basis if such it has been recognized in the balance sheet for the financial year ended before 23 February 2020 (even if it has not yet approved).

This is to neutralize the negative effects of the current economic crisis and keep the financial statements with a practical and precise informative value also (and above all) in third parties favor.

- Disapplication of the subordination in shareholder’s loans [3]

Articles 2467 (provided for limited companies and considered extendable to joint-stock companies with a restricted shareholding base) and 2497-quinquies of the Italian Civil Code are disapplied with regard to the subordination of loans made – from 9 April 2020 to 31 December 2020 – by shareholders and by those who exercise management and coordination activities.

This measure is therefore intended to encourage, in the context of the current emergency situation, the involvement of those subjects in the collection of financial funds useful for the company’s business continuity.

This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with.

For further information please contact your counsel or send an email to the following address: corporate.commercial@advant-nctm.com or to the following professionals: Paolo Gallarati, Luca Cavagnaro or Filippo Federici.

[1] See Article 6 of the Decreto Liquidità “Disposizioni temporanee in materia di riduzione del capitale sociale” – literally “Temporary provisions concerning the reduction of the share capital”.

[1] See Article 7 of the Decreto Liquidità “Disposizioni temporanee sui principi di redazione del bilancio” – literally “Temporary provisions on financial statements drafting’s principles”.

[1] See Article 8 of the Decreto Liquidità “Disposizioni temporanee in materia di finanziamenti alle società” – literally “Temporary provisions on companies financing”.