The Corporate Crisis and Insolvency Code: a new beginning
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The new Corporate Crisis and Insolvency Code has a dual purpose: to satisfy the need for legal certainties and to streamline procedures.
On 15 July 2022 the Corporate Crisis and Insolvency Code (CCI) will come into force. It is meant to replace the so-called Bankruptcy Law, which, in spite of its numerous updates and changes throughout the years, has been the benchmark for the operators concerned since 1942.
The CCI is the result of work started before the Covid pandemic and is intended to modernise the insolvency regulatory framework by following up on requests by both the European legislature promoting the harmonisation of the laws of Member States and by stakeholders who have sought change following the impact that endogenous or exogenous events had, and continue to have, on our country, even recently.
In particular, after Legislative Decree No. 14 of 12 January 2019, which implemented Law No. 155/2017 and contained the first version of the CCI, further actions were taken, with the aim of acknowledging the impact of the pandemic and the Russia-Ukraine war on our socio-economic framework, and the developments in Community legislation in matters of insolvency (cfr. the implementation of EU Directive 2019/1023 on preventive restructuring frameworks by means of Legislative Decree No. 83 of 17 June 2022, just 30 days prior to the deadline).
In the meantime a number of the provisions that were contained in the "first version" of the CCI have been included in the Bankruptcy Law and are therefore already in force in our legal system (cfr. for example the facilitated restructuring agreements (Article 60 CCI and Article 182-novies Bankruptcy Law) and the restructuring agreements with extended effect (Article 61 CCI and Article 182-septies Bankruptcy Law)).
The Corporate Crisis and Insolvency Code
The CCI has a dual purpose: to satisfy the need for legal certainties (and thus allow reasonable predictability of the decisions of the judiciary); and to streamline procedures, making them more efficient and effective, by way of new rules aimed at promoting proactive management of crises.
Among the numerous (and sometime radical) new provisions introduced by the CCI, it is worth mentioning:
- the obligation of entrepreneurs (both individual and collective) to adopt adequate organisational models and measures to promptly identify a crisis (Article 3 CCI);
- the procedure for a negotiated settlement of a business crisis, already introduced by the so-called Pagni Decree in August 2021 (cfr. our publication of 15 November) and modified by Legislative No. 83 of 17 June 2022, which de facto aims at replacing the alert and crisis settlement procedure contained in the first release of the CCI (Articles 12 and ff. CCI);
- the adoption of a sole model of proceeding to file for instruments regulating crisis and insolvency and for judicial winding-ups (Articles 40 and ff. CCI);
- changes to out-of-court and judicial restructuring proceedings in order to codify the best practices developed by case law and bankruptcy courts over the last decade;
- a new instrument to manage crises and insolvency, such as the "Restructuring plan subject to ratification" (Article 64-bis CCI);
- with specific regard to arrangements with creditors, changes to the mechanisms regulating the aforementioned procedure, with the primary aim of protecting going concerns and, therefore, workplaces (Articles 84 and ff. CCI);
- specific rules covering corporate groups to allow for the joint management of a crisis or insolvency (Article 289 CCI); and
- temporary rules whereby any bankruptcy proceedings and petitions for admission to arrangements with creditors and for ratification of restructuring agreements that are still pending as at 15 July 2022, will continue to be regulated by the Bankruptcy Law (Article 390 CCI).
These new provisions (and, in general, the whole regulatory system) are to be welcomed, given their purpose of facilitating business continuity by offering additional and more flexible restructuring instruments, however, much will depend on how the new, and revised, instruments will be used, and on how much bankruptcy judges will succeed in harmonising the application of these instruments, so as to make it possible to predict the outcome of the procedure and also ensure efficiency and speed.
How can A&O be of help?
A&O can help clients to navigate in the new system and take full advantage of the opportunities that the regulatory framework offers to companies, creditors and investors, without forgetting the principles that shaped the relationship with the judiciary for decades, and which, especially in the initial application stage, will need to be carefully considered to ensure successful operations.