Liquidity Decree: the insolvency law measures aimed at ensuring the business continuity
The Italian version of this article is available at this link.

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:

  • the extension by 6 months of the terms provided for execution of settlement agreements with creditors and approved restructuring agreements expiring between February 23, 2020 and December 31, 2021;
  • the possibility to obtain an extension of the term for drafting a new proposal or a new plan with regard to the procedures concerning the approval of settlement agreements with creditors or restructuring agreements still pending on February 23, 2020, up to 90 days. This does not apply to settlement agreements already rejected by the majority of creditors;
  • the debtor may unilaterally extend the deadline originally set by the bankruptcy court by no more than 6 months if a longer period is required to fulfill the settlement agreement with creditors or the restructuring agreement;
  • the extension by no more than 90 days of the term set by the bankruptcy court to submit the settlement agreement and plan in case of a “preconcordato” or “concordato in bianco,” as well as for the procedure set forth in section 182-bis, paragraph 7, of the Insolvency Law.

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.

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