The negotiated settlement of business crisis provided for by the Italian Decree Law 118/2021 introduces into our legal system a new instrument that differs from the range of bankruptcy procedures because it is usually applied during the crisis at a time when the turnaround and continuation of the business activity, directly or indirectly, are still possible. As a matter of fact, the main objective of the legislator is to maintain the value of the company in crisis. Within this context, the figure of the independent expert is introduced, which is certainly innovative in some respects.
Such a figure is characterized by new features for at least three reasons.
- Unlike the certified expert, he is appointed by a commission set up at the regional capital of each Chamber of Commerce; therefore, he’s as an impartial third party before the parties. His third-party status legitimizes such a new role.
- He works maintaining confidentiality, in a non-bankruptcy procedure that may remain unknown to third parties not involved.
- He has an active role in the settlement of the crisis (this is another reason why he differs from the certified expert), verifying in advance whether the conditions for an actual recovery exist and, only if they do, conducting negotiations between the entrepreneur and the creditors.
In addition to this new figure, the negotiated settlement of the crisis is also characterized by other interesting new features, in particular, the fact that it should encourage greater involvement of creditors, who are often passive towards the entrepreneur's requests. The “failure” of the certified recovery plans, pursuant to art. 67 of the Italian Bankruptcy Law, arises from the lack of interest of creditors in participating in them. The “public” creditor only becomes active in the presence of the tax transaction as per art. 182 ter of the Bankruptcy Law and the bank creditor also remains mostly passive, preferring that his credit becomes an NPL to be sold on the market, freeing himself from further duties, responsibilities, and an inevitable provision in the financial statements. The consequence is that many crises that could be resolved result in bankruptcy proceedings with a high loss of value for the community.
At last, however, with the negotiated settlement of the crisis, there seems to be a serious incentive for all the parties concerned to participate in good faith and fairly.
The entrepreneur (and, if set up, the Board of Auditors) receives reports of late payment of contributions or of the existence of tax debts due for amounts considered by the legislator as “significant”, with the risk, in the event of failure to activate the crisis settlement, of being attributed the criminal responsibilities provided for by the Bankruptcy Law for having worsening the crisis, in case of subsequent bankruptcy proceedings. Moreover, even after activating this tool, he must maintain a correct conduct during negotiations if, in the event of failure of these latter, he wishes to access the new procedure of the simplified arrangement with creditors provided for by art. 18 of the Italian Decree Law 118/2021.
The creditor who remains passive in the negotiated settlement of the crisis runs the risk, in case the simplified agreement procedure is adopted, of being repaid only with a "profit" greater than the one which would derive from a liquidation procedure. Even the simple fact that the debtor is still alive could represent a benefit according to the judgement of the Court.
Moreover, in this procedure the creditor does not vote, having only a power of opposition which highlights how, for the legislator, the main prospect to be pursued, if viable, is corporate turnaround.
The entire procedure provides for tight deadlines that show the legislator's desire to resolve the crisis quickly. However, we cannot avoid pointing out that the six months provided for the conclusion of the settlement (which can be extended by a further six months), perhaps represent an excessive stretch, which risks compromising the success of a particularly delicate operation, especially if we consider that the negotiated settlement can begin without the reorganization plan having been prepared by the entrepreneur.
Mr. Fabio Lonardo
Partner RSM Studio Tributario Societario
Expert registered in the List of the Chamber of Commerce of Rome