Concordato Preventivo

Pursuant to Art. 160 IBL, a Company may propose an arrangement to the creditors based on a restructuring plan (whose feasibility must be certified by an expert professional) which may provide that:

• debts are restructured or discharged in any form, including transfer of assets or debts, extraordinary transactions, assignment of shares, debentures, warrants and other notes
• the most common plan provides for the assignment of all assets to creditors (“cessione dei beni”): in this case a Judicial Liquidator is appointed for the sale of assets, collection of receivables and payment of dividends to creditors;
• all assets of the debtor may be transferred to an “assuntore”, i.e. a third party assuming, as a consideration for such transfer, the obligation to perform all the conditions provided by the restructuring plan;
• creditors may be divided into different classes, with different treatment, as long as privileged creditors are not treated less favorably than lower-ranking creditors; classes can be decided by the company admitted to “concordato preventivo”, based on reasonable criteria.

There is no requirement for a minimum payment to unsecured creditors, but only in case of a concordato “con continuità aziendale”, i.e. the restructuring pan provides that (i) the Company continues to trade, or (ii) the business is transferred as a going concern to a third party. If this is not the case, unsecured creditors must be paid at least 20% of their claims.

Secured creditors must receive no less than the liquidation value of the assets on which they have preference (such a liquidation value must be certified by an expert with a sworn appraisal).

The debtor can seek immediate protection from creditors’ enforcement actions by filing a request for admission to the procedure, lacking the required documentation, proposal and plan which can be submitted later, within a term (from 60 to 120 days) set by the Court (so-called “concordato con riserva” or “concordato in bianco” or “pre-concordato” phase).

When a complete request for admission to the procedure is filed, the competent Court appoints (i) a Judge in charge of the procedure and (ii) a Judicial Commisioner (a professional) whose main duties are to supervise the debtor’s ordinary management during the procedure and to issue a report to creditors on the proposal and on the feasibility of the retructuring plan.

The unsecured creditors (including secured creditors for the portion of their credit which is not fully satisfied under the plan) then vote on the proposal at the creditors’ meeting. Creditors holding at least 10% of the claims can submit alternative proposals, unless the debtor offers to pay at least 40% of unsecured claims (30% in case of a concordato “con continuità aziendale”).

The proposal is approved if it is voted favorably by creditors the amount of whose credits represents the majority of the credits admitted to vote. In case creditors are divided into different classes, such majority must also be reached within the majority of the classes; in this case, therefore, a double majority is required.

If the required majorities are reached, the Court confirms the approval of the “concordato preventivo”, subject to the rejection of oppositions by interested parties, if any.

All debts are discharged for the portion not being satisfied under the “concordato preventivo” proposal.