COVID-19: Business Crisis and Insolvency Code

newsalert 09032020

Prepared by Alessandra Ghisio, Maria Progida, Cristian Sgaramella and Paola Barazzetta

COVID-19: Business Crisis and Insolvency Code – Postponement until 15/02/2021 of the alert procedures

With the Decree no. 9 published in the Official Journal on March 2, 2020, it was decided to postpone by six months the entry into force of the alert procedures introduced by the Code of Corporate Crisis and Insolvency (CCII) for all companies of any size in Italy, as part of the “Urgent support measures for families, workers and companies related to the epidemiological emergency by COVID-19”.

In point of fact, already with the corrective decree to the CCII approved by the Consiglio dei Ministri on 13 February, it was assumed that the entry into force of the reporting obligations imposed on supervisory bodies (art. 14 CCII) and qualified public creditors (art. 15 CCII) would be postponed for a further six months, but only for small companies that did not exceed the parameters set out in art. 2477 of the Civil Code in the last two years.

In this context, the Coronavirus emergency has further stimulated the current initiative to prevent this emergency from having additional negative consequences for companies. In particular, Article 11 of Decree no. 9 states that “The reporting obligation referred to in Article 14, paragraph 2 (i.e. internal alert procedure), and Article 15 (i.e. external alert procedure) of Legislative Decree no. 14 of 12 January 2019, operates from 15 February 2021“.

On the other hand, the date of entry into force of the obligations of the supervisory bodies to report crisis situations to the Board of Directors remains unchanged (15 August 2020), just as banks remain obliged to notify the supervisory bodies of any revisions or withdrawals of loans to their customers.

Likewise, the obligations introduced by the new Article 2086 of the Italian Civil Code – already entered into force on 16 March 2019 – remain unchanged: “the entrepreneur, whether operating in a corporate or collective form, has the duty to establish an organizational, administrative and accounting structure appropriate to the nature and size of the company, also in function of the timely detection of the crisis of the company and the loss of the  going concern, as well as to take action without delay for the adoption and implementation of one of the instruments provided for by the law for overcoming the crisis and recover the business as a going concern”.

In other terms, in relation to the so-called internal alert procedures, the postponement of the deadlines only with regard to the reporting obligations as per paragraph 2 of Article 14 of the CCII, will mean that, as of 15th August 2020, the control bodies and auditors will be obliged to: •verify that the administrative body constantly assesses, taking the consequent suitable initiatives, (i) the adequacy of the company’s organizational structure, (ii) the existence of an adequate economic and financial balance and (iii) what the foreseeable trend of business operations is; •report any signs of crisis to the directors.

At this point if the administrative body fails to provide answers, the answers are inadequate or if it fails to identify suitable measures to overcome the crisis within the next 60 days, the supervisory bodies could not inform the OCRI without delay, but they must postpone any communication until 15 February 2021.

On the other hand, with regard to the so-called external alert procedure (i.e. reporting obligations of qualified public creditors), Decree no. 9 provides for the entire postponement of its entry into force to 15 February 2021.

In any case, the current version of the Decree could be subject to change during the conversion process, but, as things stand, it would seem that the intention was to grant companies more extensive endosociety terms to find a solution to the crisis, before the OCRI is called into question, also in view of the Coronavirus emergency.