The New Italian Corporate Crisis and Insolvency Code
The Code of Corporate Crisis and Insolvency recently adopted in Italy provides for a new comprehensive and organic legislation on the crisis and insolvency of enterprises, which is consistent with the European directive no. 2019/1023, requiring each state to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt.
While the Code will become effective only in August 2020, certain provisions, including those regarding several amendments to Italian law, are currently in force. For instance, the new wording of article 2086 of the Italian civil code requires the company to endow itself with organizational, administrative and accounting structures aimed at promptly detecting the state of distress when insolvency can be avoided in time.
At a first glance, the new rules are informed by some distinctive definitions included in Italian Bankruptcy Law (e.g. the definition of “insolvency” remains unchanged). However, the relevant provisions designed to prevent insolvency and trigger consultation procedures are completely new.
New provisions also aim at limiting judicial compositions with creditors, and provide for out-of-court consultation procedures that may help distressed companies to return to solvency. Many events of default can also be prevented by executing agreements with creditors or resorting to a restructuring or insolvency procedure.
As a result, a distress composition body has been established within the competent chambers of commerce (Organismo di composizione assistita della crisi, or “OCRI”), which assists the companies during negotiations with creditors up to a maximum period of 6 months. New rules will be also in place for distress or insolvency procedures within corporate groups.
As certain provisions are already applicable and enforceable, anyone who has a current or future claim against an Italian company susceptible to financial distress should timely seek advice as to the effects and remedies provided by the new Code of Corporate Crisis and Insolvency.