The so-called “blank” composition with creditors

1 November 2013
The Italian bankruptcy law has been modified in order to improve the efficiency of the composition with creditors (a restructuring proceeding aimed at re-launching the companies in crisis under the supervision of the competent insolvency court) by article 33 of the Legislative Decree 83/2012.

According to the new regulation the debtor is entitled to file the petition for the admission to the above mentioned composition without the submission of the documents required by law. Therefore, the debtor can file the documents supporting the petition on a later stage (i.e. within a deadline scheduled by the judge and having a range from 60 to 180 days from the date of the filing of the petition).

Thanks to this reform, the debtor can anticipate the protective effects arising from the admission to composition with creditors (such as the freezing of the enforcement and interim lawsuits brought by its creditors). Vice-versa, before the reform at hand the protective effects occurred only once all the documentation was filed and consequently the debtor was admitted to the composition with creditors.

Due to this modification, in the 2013 first trimester 3,500 applications for bankruptcy were filed, +12% compared with the same period of the previous year, with a boom of the compositions with creditors (+76% according to Cerved), boosted by the increase in number of this new composition procedure.

Nevertheless, this new instrument has often been used for fraudulent purposes by debtors having the target to benefit the dilatory effect of the rule and to procrastinate their declaration of bankruptcy.

In light of above, through article 82 of the Legislative Decree 82/2013 the legislator introduced some correctives in order to make the process more transparent and to avoid possible abuses. In particular, the latest modifications provided as follows:

  1. the debtor must register a list with the names of the creditors and their respective receivables so to disclose the overall amount of its debts from the beginning of the procedure;
  2. the judge can appoint a judicial commission through the decree scheduling the deadline by which the debtor must submit the further documents required by bankruptcy law. At this stage, the receiver can examine the accounting books and verify the existence of facts that make the debtor’s petition untenable (e.g. fraudulent concealing of credits) ;
  3. at the stage preceding the admission to the composition with creditors, the judge has to obtain the legal opinion of the judicial commissioner before allowing the performance by the debtor of acts of extraordinary administration.

Furthermore, the legislator introduced various recurring informative duties to be acquitted in the period between the filing of the “blank”  petition and decree admitting the debtor to the composition with creditors (e.g. the debtor has to draft a monthly financial report to be checked by the judicial commissioner).

The non-compliance of these obligations leads to the reject of the debtor’s petition.

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