Bankruptcy and startups: the role of the finance police
Pursuant to the Italian Law Decree no. 179/2012, startups are not subject to any bankruptcy procedures other than those provided for in chapter II of the Italian Law no. 3/2012.

This Law provides for two different procedures (an arrangement with creditors or the liquidation of the company’s assets) that may be initiated by a startup facing over-indebtedness.  Over-indebtedness occurs when there is a persistent imbalance between liabilities and assets that can be easily liquidated, as well as an inability to regularly fulfill repayment obligations. The procedures provided for in the Law were first conceived for natural persons and then extended to startups.

To qualify as a startup, a company must meet certain requirements, such as, revenues below € 5 million, R&D investments above a certain threshold, and must be registered in a special section of the Business Register.

Generally, the Business Register is the competent body responsible for periodically verifying that startups registered within the special section adhere to the requirements of Italian Law Decree no. 179/2012.  Registration of a startup in the special section of the Business Register has always been considered conclusive evidence that the company complies with all requirements.

Given the high number of startups established in Italy (9,396 as of March 31, 2018, according the CAMCOM national report), management and control of the Business Register may not be as accurate as it should be.

With the judgement dated January 18, 2018, the Court of Udine challenged the Business Register records for the first time and instructed the Guardia di Finanza (Italy’s Finance Police) to carry out the necessary investigations on the applicant startup in order to verify whether it should have access to the special procedures provided by Italian Law 3/2012.

The judgment of the Court of Udine is available at the following link: https://bit.ly/2Uad4DJ

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