October 19, 2017
Bankruptcy and insolvency reform act
The draft law n. 2681 for the bankruptcy and insolvency reform was approved on 11th october 2017by the Senate of Italian Repubblic.
Within twelve months the Chamber of Deputies will have to adopte one or more legislative decrees to develop the organic reform of insolvency proceedings and the review of privileges and guarantees.
Bankruptcy and insolvency reform act will change traditional expression “bankruptcy” in “compulsory winding-up”. Costs and duration of insolvency procedures will be reduced and the competent Judge will be identified according to the size and type of the proceeding. A single model of assessment of state of crisis or insolvency will also be adopted, getting involve each category of debtor, with the exception of public authorities.
The official receiver will have enhanced power, for example to access pubblic databases and to promote judicial actions. However, incompatibility protocol will be more strictly controlled.
Another change will concern to liberation of a bankruptcy person from the remaining debts to creditors. The debtor could apply for bankruptcy debt discharge procedure after three years from the opening of proceedings. Special form of debt discharge for minor insolvency will also be provided.
“Alertness” and an out-of-court settlement will be introduced to support the company and to anticipate the state of crisis. This preventive phase wil be entrust to public entity or to expert appointed by Judge. The agreement with creditors to solve the crisis will be reached within 6 months of activating the alert phase. The entrepreneur who will promptly activate the alert will enjoy reward systems. Listed companies and large firms will be kept out.
The reform will also rationalize the institute of “scheme of arrangement”. The “going concern basis” will be safeguarded, maintaining hight level of employment and ensuring greater creditors’ satisfaction.
The “debt restructuring agreement” will be promoted. It will be expected that the debtor could ask that the effects of the restructuring agreement will be extended to the minority of creditors who have not adhered to the agreement. Decision-making process will be faster than before.
Finally, the reform of the bankruptcy law will recognize the centrality of corporate control, thus reinforcing the role of auditors.