On April 8, 2020, the Italian government enacted Law Decree No. 23 (“Decreto Liquidità”) with the purpose of supporting businesses damaged by the effects of the COVID-19 epidemiological emergency.
One of the main purposes of the Liquidity Decree is represented by the intent to keep businesses affected by the COVID-19 emergency to stay afloat. Essentially, the Decree suspends the application of all those provisions of corporate and insolvency law whose application would otherwise force economic operators to wind-up their businesses or incur into insolvency proceedings as a result of a state of insolvency caused by COVID-19. In this respect, a key role is certainly played by the introduction of several derogations to insolvency law, as well as by the postponement of the entry into force of the new insolvency law. In particular, the Decree provides the measures listed below:
1. Entry into force of the new Italian Insolvency Code (Legislative Decree No. 14 of January 12, 2019) is postponed from August 15, 2020 to September 1, 2021 exception made for those provisions already effective (e.g. provisions amending specific sections of the Italian Civil Code concerning corporate law).
In the current situation, it is important that economic operators perceive stability and regulatory certainty with regard to their business activity. In this scenario, the application of the new provisions set forth in the new insolvency code (e.g. the alert system) would inevitably generate negative effects for the majority of companies. Therefore, the Code would fail to meet its purpose, i.e. to facilitate the recovery and the business continuity, considering the bankruptcy of a company as “extrema ratio.”
2. Certain measures concerning settlement with creditors procedures (“concordato preventivo”) or restructuring agreements (“accordo di ristrutturazione”) have been taken to prevent the possibility that procedures with a chance of success before the occurrence of COVID-19 may be jeopardized by the sudden downturn in the economy as a consequence of COVID-19. In particular, section 9 of the Decree provides:
3. No applications for bankruptcy can be filed in the period between March 9, 2020 and June 30, 2020.
The purpose of the measure is to lighten the load on bankruptcy court dockets.
The only exception is represented by the interim and protective measure requests, pursuant to section 15, paragraph 8, of the Insolvency Law, filed by the Public Prosecutor. The purpose of the exception above is to avoid that companies that carry out fraudulent conducts may benefit from the inadmissibility regime.