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Recent amendments to the Bankruptcy Law

11 December 2020

The amendments to the Italian Bankruptcy Law, in force since 4th December, allow the homologation of the composition with creditors' and debt restructuring agreements even without the approval of the "tax authorities" and/or "the social security bodies".

Law 27 November 2020, no. 159 (published in the Official Journal on 3rd December 2020 and in force since 4th December 2020) (hereinafter "Law no. 159/2020"), has converted into law the Law Decree 7 October 2020, no. 125, providing for "urgent measures related to the extension of the declaration of the epidemiological state of emergency by COVID-19 and for the operational continuity of the COVID warning system, as well as related to the implementation of Directive (EU) 2020/739 of June 3, 2020".

The new provisions, which anticipate those contained in the "New Insolvency Code", allow the homologation of the composition with creditors' and debt restructuring agreements even without the approval of the "tax authorities" and/or "the social security bodies", thereby providing a significant incentive for restructuring operations of companies in crisis.

Article 3, par. 1-bis has amended Articles 180, 182-bis and 182-ter of the Bankruptcy Law.

Article 180, paragraph 4, as amended, now provides the homologation of the composition with creditors' agreement "even in the absence of the vote from the tax authorities or the social security bodies whenever their consent is decisive for the achievement of the majorities pursuant to Article 177 and when, on the basis of the results of the professional report pursuant to Article 161, third paragraph, the fulfilment proposal addressed to tax authorities or to the social security bodies is more convenient than the bankruptcy alternative".

A similar provision has been also included in the fourth paragraph of Article 182-bis of the Bankruptcy Law with reference to debt restructuring agreements.

Given the absence of specific transitional provisions, it should be assumed that the new provisions are applicable also to those proceedings pending on 4th December 2020, in accordance with the general principles of procedural law (in particular, the so called "tempus regit actum" principle).

It will be necessary (and important) to understand in detail the scope and the nature of the judgement of expediency entrusted to the Court.

Doubtfully, these new provisions will be of particular importance to the current economic and social situation. Given the known reluctance on the part of the tax and social security authorities to agree to settlement proposals provided by Italian insolvency law, new provisions could allow the positive conclusion of an increasing number of composition with creditors' and debt restructuring agreements.

Authors: Matteo Pasculli and Alice Dognini.

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