Securities are mainly divided in:

• securities over material assets (“garanzie reali”), such as real estate, equity shares, movable property, intangible property, intellectual property, accounts, etc, granted by the debtor or a third party (natural or legal person), acting as a guarantor; and
• personal guarantees (“garanzie personali”), where a third party (natural or legal person), different from the debtor, acting as guarantor, promises to pay back a debt or obligation if the main borrower defaults, being liable with all of his/her/its assets.

The most common types of securities in the Italy are:

Mortgage: it is granted over an immovable property or a registered movable asset (such as ships, motor vehicles, etc), it is granted by the debtor or a third party in favour of the creditor, as a security for the fulfillment of an obligation.

Mortgage must be registered in a public real estate registry by a notary in order to produce any effect against third parties. The registration remains effective for twenty years and shall be renewed in order to maintain its effect.

Pledge (possessory): it is granted over an unregistered movable asset, to be physically delivered to the creditor (save for non-possessory pledge). Pledge does not usually require registration in a public registry office, but for some specific assets, such as quotas representing the corporate capital of limited liability companies (“società a responsabilità limitata”). The provisions ruling the pledge is contained in a proper agreement between the pledgor and the pledgee.

Pledge (non possessory): Law Decree No 59/2016 of 3 May 2016, Decree No 114/2021 and, operatively, Revenue Agency resolution No 26/2023, introduced a new form of pledge, so-called “non-possessory pledge” (“pegno non possessorio”), in order to secure receivables in connection with the ordinary conduct of business.

Transfer of title: The above mentioned laws also introduced a new form of corporate financing secured by the transfer to the lending party of a real estate asset and conditioned to the possible breach by the borrower of certain obligations under the relevant facility agreement.

Liens: differently from securities, liens (“privilegi”) are not contractually agreed between the parties but arise automatically by operation of law to guarantee certain categories of claims. Liens do not require any form of publicity, even when they apply to immovable property (“privilegio generale”).

In enforcing their security package, secured creditors may face some practical difficulties, depending on whether it happens out-of-court, judicially, or in an insolvency proceedings.

1. Out of court

• Debtor opposition: even though secured creditor holds a valid security interest, debtor or third parties may oppose enforcement, delaying it, or forcing the creditor to initiate judicial proceedings.
• Asset valuation: impartial appraisal of the secured asset is usually required in order to avoid any abuse by creditor who must always return the value exceeding the amount claimed. This step can be contested, particularly if creditor intends to take ownership of the asset or sell it out of court.
• Competing claims: if the secured asset is encumbered by multiple securities and/or liens, creditor may have to compete with other concurrent creditors, reducing credit satisfaction by applying priority rules strictly stated by the civil code.

2. Insolvency proceedings

Once an insolvency procedure is opened, secured creditors are satisfied:

• According to the order laid down by specific rules provided by the law, regardless of any contractual intercreditor covenants;
• Following certain rules and, specifically, in order to enforce their rights every claim, even if secured, must be determined according to the strict provisions set forth by Legislative Decree No. 14 of 2019, so called Crisis and Insolvency Code (“CIC”).

More specifically:

• Stay of actions: once judicial liquidation is opened, individual enforcement actions are stayed. The secured creditor can no longer act independently but must file a claim in the insolvency proceeding.
• Delayed realization: the asset is sold by the insolvency practitioner according to procedural rules, which can take a long time.
• Distribution of proceeds: Even if secured, creditor’s satisfaction may be reduced because proceeds may be partially or entirely absorbed by super-priority claims (e.g. costs of the insolvency proceedings).
• Challenges to the security interest: During claims verification, the existence, validity, or priority of the security interest may be disputed, particularly if it was created within suspect periods (e.g., within six months before the opening of proceedings).

Starting from 15 July 2022, the Bankruptcy Law dated 1942, after its 80 years of application, has been repealed by CIC which has been subject to a series of subsequent amendments completed last September 2024.

CIC regulates situations of “crisis” (i.e., the state of the debtor that makes insolvency probable, manifested by the inadequacy of the prospective cash flows to meet its obligations in the next 12 months) or “insolvency” (i.e., the state of the debtor manifested by defaults or other external facts showing that the debtor is no longer able to meet its obligations on a regular basis).

CIC applies to natural and legal persons, being consumers, professionals or entrepreneurs.

CIC provides for a thorough discipline regarding instruments for the regulation of crisis and insolvency (“strumenti di regolazione della crisi e dell’insolvenza”), meaning the measures, agreements and procedures aimed at the rehabilitation of the debtor, judicial liquidation being the last resort.

Such legal instruments are, namely:

1. Certified recovery plan (“piano attestato di risanamento”);
2. Debt restructuring agreement approved by the court (“accordo di ristrutturazione dei debiti omologato”);
3. Restructuring plan subject to court approval (“piano di ristrutturazione soggetto ad omologazione”);
4. Judicial composition with creditors, either with the aim of business continuity or for a liquidation purpose (“concordato preventivo in continuità / liquidatorio”); and
5. Over-indebtedness crisis resolution procedure (“procedura di composizione della crisi da sovraindebitamento”), applicable to consumers, professionals and minor entrepreneurs.

All the aforementioned instruments can be preceded – not compulsorily – by the negotiated settlement of business crisis (“composizione negoziata per la soluzione della crisi di impresa” – “CNC”), whose main purpose is to facilitate the early emergence of the crisis and the activation of remedies for maintain business continuity and preserve jobs.

Generally, debtor continues to manage the business, even though certain restrictions may apply, such as in the judicial composition with creditors whereby debtor retain the management and the administration of his assets under the supervision of the appointed officer (“commissario giudiziale”) and shall be required to obtain court authorization for acts of extraordinary administration.

The relevant restructuring plan must be drawn up by the debtor, preferably with the support of independent professionals and must be reasonably capable of ensuring the satisfaction of creditors, either in whole or in part, and the continuation of the business.

Depending on the procedure, creditor involvement may vary, ranging from simple negotiation to formal approval by creditor majorities.

In judicial procedures court assesses the lawfulness, feasibility, and fairness of the plan prior to its confirmation (“omologazione”), which is a condition for its enforceability; the purpose is to promote early intervention, preserve going concern value where possible, and ensure equitable treatment of creditors.

CIC contains specific provisions ruling new financing granted to debtor benefiting from special priority rights, provided that certain prerequisites are met.

Specifically articles 99, 100 and 101 CIC provide those claims arising from financing granted:

• in connection with certified restructuring plans; or
• upon court authorization;

rank prior to unsecured and even secured creditors should a bankruptcy procedure be commenced; the aim of the legislator is to provide lenders with more comfort in evaluating the creditworthiness, especially when such financing is deemed essential to preserve the enterprise value and preserve business continuity.

Restructuring proceeding cannot generally release claims against non-debtor parties, unless in some specific circumstances.

For example, when a debt restructuring agreement is perfected among the parties (debtor-creditors) and it is approved by the court, then:

• The remission of the debt granted to debtor releases the guarantor from their obligation;
• The agreement with debtor is effective also in favour of unlimited liability shareholders (please note that if they have provided guarantees, then they continue to be liable for this different reason, unless otherwise provided).

Moreover, judicial composition with creditors effects also apply to unlimited liability shareholders and terminates any judicial liquidation proceedings initiated against them.

It is customary that if any liability arises against directors and/or auditors under an insolvency proceeding they are settled with the competent statutory officers.

As to creditors’ organisation and representation, CIC provides that in judicial liquidation procedure the delegated judge appoints the creditors’ committee, consisting of 3 (three) to 5 (five) members chosen from among creditors, so as to represent in a balanced manner quantity and quality of the claims and having regard to the possibility of satisfaction of the claims.

The creditors’ committee supervises the actions of the receiver, authorises its acts and expresses opinions in the cases provided for by law, or at the request of the court or the delegated judge.

Any member of the creditors’ committee may inspect the accounting records and documents of the proceedings and have the right to request information and clarifications from the receiver and the debtor; the same powers may be exercised by each creditor, subject to the authorisation of the delegated judge.

Advisory fees are usually covered by the debtor only in out of court procedures; in judicial procedure creditors bear their own advisory fees, but cost-sharing or reimbursement may be negotiated as part of the plan and is subject to judicial approval.

CIC provides for “warning signals” that, even before the emergence of crisis or insolvency, facilitate their prediction, such as:

1. the existence of debts for wages that are at least 30 days past due and equal to more than half of the total monthly amount of wages;
2. the existence of debts to suppliers that are at least 90 days and exceeding the amount of debts not past due;
3. the existence of exposures to banks and other financial intermediaries that are past due for more than 60 days or that have exceeded the limit of credit facilities obtained in any form for at least 60 days, provided that they represent at least 5% of total exposures;
4. the existence of tax and social security debts over certain thresholds.

As for the CNC, Ministerial Decree of March 21, 2023 (completing the CNC regulations provided by CIC), provides for a practical test which – even though it may not be considered a crisis indicator – nonetheless it allows the entrepreneur to assess the extent to which the recovery of the company is reasonably achievable and, at the same time, helps the expert of the CNC to understand whether there are concrete prospects for business recovery.

In a nutshell, the complexity of the restructuring is assessed by comparing the amount of debt to be restructured with the amount of free cash flow that can be used to service it each year.

CIC imposes proactive duties on directors and on auditors and liquidators. Article 120-bis CIC imposes on directors the duty to assess and determine whether to initiate a crisis or insolvency resolution legal instruments, defining the restructuring proposal content and the terms and conditions of the business plan (either on a going concern or in a gone concern basis).

Failure to comply with these duties may result in directors being held personally liable for damages suffered by creditors as a consequence of delayed filings or mismanagement. In cases of fraudulent or negligent bankruptcy (e.g., for concealment or dissipation of assets), directors can face criminal prosecution, and directors may be disqualified from holding office and held jointly liable for company debts in aggravated cases.

Should the state of crisis or insolvency not be removed through one of the legal instruments described above (see § Local restructuring proceedings), then debtor shall satisfy creditors by the liquidation of the relevant assets, through:

• The simplified judicial composition with creditors (“concordato semplificato”), but only in case of an unfavourable conclusion of the negotiations with creditors carried out by debtor in the CNC;
• The judicial liquidation (“liquidazione giudiziale”) which applies to commercial entrepreneurs who are not a “minor enterprise”.

For sake of completeness, the compulsory administrative liquidation (“liquidazione coatta amministrativa”) procedure shall be also mentioned governed by a specific law different from the CIC.

Those are in court procedures aimed at winding up debtor’s assets, satisfying creditors according to statutory priorities, and ultimately dissolving insolvent debtor as a legal entity.

During such procedures, debtor is subject, pursuant to Article 142 of CIC, to the so-called “divestment” (“spossessamento”), because debtor is deprived of the management of the business.

In particular, judicial liquidation is declared by the competent court, upon request by debtor, creditors or the public prosecutor; the main bodies are the delegated judge, the receiver and the creditor’s committee.

Judicial liquidation proceedings may, in certain cases, take a considerable amount of time, even years; depending on the qualitative and quantitative composition of the assets to be liquidated, the number of creditors, etc.

Due to the circumstance that judicial liquidation opens creditors’ competition on debtor’s assets, from the date of the declaration of judicial liquidation commencement, no individual enforcement or precautionary action, even for claims accrued during the judicial liquidation, may be initiated or continued on the assets.

Any claim, even if it benefits form a pre-emption or prededuction right, as well as any real or personal right, over movable or immovable assets, must be previously verified by the court.

Claims secured by pledge or privileged pursuant to the civil code may be realized outside of judicial liquidation even during the proceedings, provided that they have been admitted to bankruptcy with priority.

In order to be authorized to sell the secured assets, creditor must apply to the delegated judge, who, after hearing the receiver and creditors’ committee, shall issue a decree setting the time of the sale and determining the procedures; the delegated judge may also decide to assign the assets to the creditor who made the application for it.

Foreign creditors are not dealt with in a different way in proceedings in the Italian jurisdiction.

During an insolvency procedure and in particular under a judicial liquidation, creditors are not entitled to enforce their claims directly against the debtor’s assets, but must instead participate in a collective process starting from the filing of an application for admission to bankrupt liabilities as set forth by the delegated judge and being paid pursuant to the final reimbursement plan abiding by the mentioned priority order.

Creditors committee, if any, may represent creditors’ interest during the procedure (see above).

As to the reorganisation plans, they are more proper to the restructuring procedures, rather than to the insolvency ones.

CIC (Article 56) provides for certain requirements and forms governing any reorganisation plan.

In particular, the plan must have a certain date and must contain:

a) the name of the debtor and any related parties, its assets and liabilities at the time of submission of the plan and a description of the economic and financial situation of the company and the position of the workers;

b) a description of the causes and extent of the crisis or insolvency situation;

c) the intervention strategies;

d) a list of creditors and the amount of the claims for which renegotiation is proposed and the status of any negotiations, as well as a list of non-participating creditors, indicating the resources allocated to the full satisfaction of their claims;

e) any new financing contributions envisaged and the reasons why it is necessary for the implementation of the plan;

f) the timing of the actions to be taken, which allow for verification of their implementation, as well as the initiatives to be taken in the event of a deviation from the planned objectives;

g) the business plan and an indication of its effects on the financial plan, as well as the time needed to ensure the rebalancing of the economic and financial situation;

g-bis) a detailed indication of the expected costs and revenues, the financial requirements and the related methods of coverage, also taking into account the costs necessary to ensure compliance with regulations on occupational safety and environmental protection.

Under an insolvency procedure, creditors are satisfied in accordance with a statutory order of priority; the Italian system of privileges is one of the most complex in the European Union and should have been subject to a thorough reform, which has not yet been implemented.

In principle, secured creditors (whose claims are backed by a specific asset or a collateral of the debtor) are paid first

Thereafter, come unsecured (“chirografari”) creditors, as they do not benefit from any specific security over the debtor’s assets.

Finally, there are subordinated creditors, whose claims are satisfied only after the secured creditors and unsecured creditors.

CIC has introduced some significant changes in this regard.

Under the restructuring plan subject to court approval, the entrepreneur may provide for the satisfaction of creditors, after dividing them into classes according to their legal position and homogeneous economic interests, distributing the value generated by the plan even in derogation of Articles 2740 (ruling that debtor is liable with all of his/her/its present and future assets) and 2741 (ruling the competition among creditors based of relevant priority rights) of the Civil Code and the provisions governing the ranking of legitimate causes of priority; the requirement is that the proposal is approved by the unanimous vote of the classes.

Moreover, under the judicial composition with creditors aimed at business continuity, the liquidation value is distributed among creditors in accordance with the ranking of legitimate causes of priority, meanwhile for the value exceeding the liquidation value, it is sufficient that the claims included in a class receive overall treatment at least equal to that of the classes of the same grade and more favourable than that of the classes of lower grades.

External financial resources (eg granted by shareholders and/or investors) may be distributed in total derogation from the above provisions.

The opening of the judicial liquidation doesn’t only “cristallise” the debtor’s assets, but also allows for the restoration of the same by removing the effects of dispositive acts carried out by the debtor prior to it.

In particular, debtor’s pre-insolvency transactions can be challenged with the “claw-back action”. Indeed, pursuant to the Articles 165 and 166 of CIC the receiver is entitled to seek the ineffectiveness of acts performed by the debtor during certain suspect period preceding the opening of the judicial liquidation.

The insolvency claw-back action does not render the act void but only relatively ineffective to creditors, with the following effects:

• The asset is recovered into the assets of the insolvency procedure; and,
• The party who has to return the asset is admitted to the liabilities of the judicial liquidation.

Please note that payments made and guarantees granted in execution of one of the instruments for the regulation of crisis and insolvency are exempted form claw-back actions; such exemption does not apply in cases of wilful misconduct or gross negligence on the part of the professional certifying the plan or wilful misconduct or gross negligence on the part of the debtor, when the creditor was aware of this at the time of the performance of the act, payment or provision of the guarantee.

Under the CNC, the application of protective measures (Article 18, paragraph 5 of CIC) prevents the termination of pending contracts solely due to the submission of the application to access the procedure, or even due to the existence of defaults by the debtor.

Under the judicial composition with creditors (on a going concern basis), pending contracts (still ongoing but not yet performed or fully performed at the time of the application) continue to produce their effects. The debtor may request the court’s authorization to suspend and/or terminate such contracts only if they are incompatible with the proposed Plan (Articles 94-bis, 95, and 97 of the Italian Business Crisis and Insolvency Code).

As to restructuring plans subject to court approval (Article 64-bis of CIC), rules applicable to existing contracts mirror those set for the judicial composition with creditors, ie the general rule is continuation of existing contracts, their suspension or termination being the exception.

Finally, in judicial liquidation proceedings, the general rule is the suspension of existing contracts upon the commencement of liquidation. The receiver may choose either to terminate or continue the contracts (Article 172 of CIC). Contractual clauses that provide for termination due to the commencement of judicial liquidation are deemed ineffective. However, if the creditor initiated an action for termination prior to the commencement of liquidation, the proceedings may continue, and the resulting judgment will produce the effects of any termination. The general rule of contract suspension may be reversed if the receiver is authorized to continue the business operations during liquidation, in which case the default rule becomes contract continuation.

In order to facilitate the transfer of businesses or business units, an exception is made to the joint liability rule set forth in Article 2560, paragraph 2 of the Italian Civil Code, which – under normal (solvent) circumstances – establishes the buyer’s joint liability with the seller for the pre-existing debts of the business.

Specifically, subject to compliance with certain publicity requirements, the transfer of a business or part of it may be authorized by the court – even prior to the approval  – neutralizing the effects of Article 2560, paragraph 2 of the Civil Code; Article 2112 of the Civil Code (Maintenance of workers’ rights in the event of a transfer of business) remains applicable, the buyer remaining jointly liable with the seller for debts towards workers.

This exception applies in the following contexts:

• in the CNC, pursuant to Article 22, paragraph 1, letter d) of CIC;
• in restructuring agreement subject to court approval, pursuant to Article 64-bis, paragraph 9-bis, of the CIC;
• in the judicial composition with creditors, pursuant to Article 118, paragraph 8, of CIC;
• in judicial liquidation, pursuant to Article 214, paragraph 3, of CIC.

More in general, transfers of assets in a restructuring or insolvency situation must comply with the principle of competitiveness, ensuring that the maximum value is obtained from the market to be made available to creditors; stricter procedures apply in cases such as judicial liquidation, whereas more flexible requirements are observed in instruments like the negotiated settlement for enterprise crisis solution.

CIC promotes the early detection of corporate distress and, to this end, imposes upon the entrepreneur the duty to adopt appropriate organizational, administrative, and accounting measures, as well as the obligation to promptly undertake the necessary initiatives to address the state of crisis.

The law also imposes duties on other entities – such as auditors, public creditors, banks and financial intermediaries – to promptly notify the entrepreneur of the occurrence of conditions of financial or economic imbalance that make a crisis or insolvency likely, including delays in payment of tax or social security debts.

This above duties are aimed at imposing the entrepreneur to promptly react; failure to comply with these duties may expose directors to civil and criminal liability, which may result in the removal of the director for just cause.

With regard to the availability of insurance coverage for directors and/or shareholders, Directors & Officers (D&O) insurance provides protection against potential claims for damages arising from civil, criminal, or administrative liability incurred in the performance of their duties, except in cases involving fraudulent conduct or violations of the law.

Nor restructuring neither insolvency proceedings may have the effect of releasing directors (and other stakeholders) from liability for previous actions and decisions.

Generally speaking, duties of directors are laid down by the Italian Civil Code; they shall perform the duties imposed on them by law and by the articles of association with the diligence required by the nature of their office and their specific powers.

Directors of a joint stock company are liable to:

• The company itself for damages arising from the failure to perform their duties;
• The company’s creditors for any failure to comply with their obligations to preserve the integrity of the company’s assets;
• Shareholders or third parties for damages suffered as a direct result of intentional or negligent acts committed by the directors.

Directors owe their responsibility not only to the relevant shareholders and stakeholders in general, but, incrementally in distressed situations, to all creditors.

For example, directors and apical officers, such as general managers/directors, are held liable in the event of abusive use of credit (“abusivo ricorso al credito”) ie when they resort or continue to have recourse to credit by concealing their state of insolvency.

In order to determine whether the foreign restructuring or insolvency proceedings and relevant decisions issued by a foreign court can produce legal effects in Italy, over a local debtor, it is essential to check whether there is a specific convention in place between Italy and the foreign State or, for EU Member State, whether relevant European Union legislation applies.

As a principle, Italian court has jurisdiction if the debtor has its COMI (“Centre Of Main Interest”) in Italy (even if the company transferred its COMI abroad within the year preceding the filing of the application with the foreign court).

The Italian court may issue a ruling concerning the restructuring or insolvency of a debtor company whose COMI is located abroad, but which maintains an establishment in Italy; however, such jurisdiction is limited to assets located within Italian territory.

A decision on restructuring or insolvency rendered by a court of a non-EU country, or of a country with which Italy has no applicable convention, may only be recognized in Italy through an exequatur procedure. In such a case, the Italian court must verify, among other things, compliance with the adversarial principle, that the foreign judgment is final and binding, and that it does not conflict with any Italian judgment or pending proceedings, in accordance with the provisions of Law No. 218/1995.

Italy, like most EU countries, has never transposed the UNCITRAL legislation on Model Law (neither on Cross-Border Insolvency, nor on Recognition and Enforcement of Insolvency-Related Judgments), even though, outside the scope of the relevant EU Regulation, it has clearly inadequate legislation consisting of a few provisions of CIC and the old private international law act of 1995, supplemented by a few international conventions.

Difficulty remains for lawyers in European Union countries, who are used to a different system with many more exceptions, to accept a system that makes lex concursus the universal cornerstone of all relevant legislation, in the clear belief that the venues for opening cross-border proceedings are few, well defined, and based on common and shared principles.

Even though no cases are known of challenges to the recognition of English proceedings in Italian jurisdiction following the Brexit, it is likely that also Italian judges will take in due consideration the fact that, after Brexit, European insolvency procedures lost the privilege of the automatic recognition in the United Kingdom, as the UK legislator did not retain the principle under art. 19(1) of the Regulation (EU) 2015/848 (as a consequence, the recognition of any European insolvency procedure will be under the procedures pursuant to the “Cross Border Insolvency Regulations 2006”, which implemented the UNCITRAL Model Law in the United Kingdom).

As they are now foreign insolvency proceedings, the opening of a European insolvency procedure is a neutral event for the English law; it is likely that the exact opposite will happen with the English procedures in Italy.

CIC contains for specific provisions governing the Italian jurisdiction:

• Article 11 states that, without prejudice to international conventions and European Union legislation, Italian jurisdiction over applications for access to a crisis management and insolvency instruments or insolvency proceedings governed by this law, shall exist when the debtor has its COMI or an “establishment” (“dipendenza”) in Italy;
• Article 26 provides that entrepreneurs whose COMI are located abroad may nonetheless be admitted to an Italian crisis and insolvency regulation instrument or be subject to insolvency proceedings in Italy, even if similar proceedings have been initiated abroad, when they have an “establishment” in Italy.

To such extent, Italian courts will likely act in accordance to judgment of September 19, 2024 (Case C-501/23), of the Eighth Chamber of the Court of Justice, which confirmed that, pursuant to Article 3(2) of the Regulation (EU) 2015/848 of the European Parliament and of the Council of May 20, 2015, on insolvency proceedings, if the COMI is located in the territory of a Member State, the courts of another Member State have jurisdiction to open insolvency proceedings against that debtor only if the debtor has an establishment in the territory of that other Member State.

The Court of Justice also clarified that Article 3(1)(3) of Regulation, must be interpreted as meaning that the concept of “COMI” does not correspond to the concept of “establishment” defined in Article 2, point 10, of the same regulation.

In particular, the assumption that, in the case of a natural person who carries out a business or professional activity, it is presumed, unless proven otherwise, that he/she habitually manages interests at the place where the main place of business is located, since there is a strong likelihood that this place corresponds to the COMI, can be overcome following an assessment that takes into account a set of objective and third-party verifiable elements relating to the debtor’s economic situation (such as, in particular, those that make it possible to identify the place where that person manages their economic interests and where most of their income is received and spent).

There are no known analyses that allow us to state which country has in the Italian jurisdiction the most cross-border problems with (see § 18 as to Brexit impacts).

The Italian legal system has ultimately introduced a specific regulatory framework for groups of companies in restructuring and insolvency proceedings, specifically under Title VI of CIC.

Nevertheless, the national regulatory framework on group insolvency has not fully addressed the demands raised at the European level under Directive (EU) 2019/1023, particularly with respect to the costs arising from the lack of harmonization among the insolvency laws of the various Member States.

As already said in §17, Italy – like most EU countries – has never transposed the UNCITRAL legislation on Model Law (nor on Enterprise Group Insolvency).

CIC has been amended several times after its entrance into force in July 2022; the most recent reform has been introduced by Legislative Decree No. 136/2024, whose aim was to enhance the effectiveness of the procedures established under CIC.

The Council of Ministers approved on March 28, 2025 the draft law on the reform of extraordinary administrations and cooperative and mutual entities, with the aim to (i) simplify the rules governing extraordinary administration and make its management more efficient and (ii) update the legislative framework for cooperative and mutual entities, adapting it to the new dynamics of the current economic and social context. Moreover, specific measures are envisaged in the context of the CNC, including the information that the expert must constantly provide to the Ministry of Enterprise and Made in Italy on its progress.

Proposal for a Directive of the European Parliament and of the Council COM/2022/702 – “Insolvency Directive III” will very soon introduce changes to the restructuring / insolvency regime in Italy, as well as, in the other Member States. The target is to harmonize certain aspects of insolvency law with the aim of (i) reducing the differences between national laws that are perceived as a significant obstacle to the further development of the market, including through the movement of capital, and (ii) encouraging cross-border investment, given that lengthy insolvency proceedings, with low recovery rates and high costs, also have an impact on the assessments of creditors and investors in determining the level of risk premium; the less efficient the insolvency regime, the higher the premium that investors will charge. Three aspects of particular interest stand out: (i) the timing and methods of recovery of assets; (ii) the efficiency of procedures (“pre-pack”); and (iii) the distribution of proceeds.

The brief overview given with this survey can be summarized in the aphorism “Business continuity: Whatever it takes” referring to the ultimate goal of modern insolvency law, not only in Italy.

In particular, Italy is undergoing a “cultural shift,” which can be seen in the transition:

→  from bankruptcy law, which for 80 years placed at the centre of the system (i) the insolvent entrepreneur, to be expelled from the market with force and “disapproval,” (ii) a procedure focused on the mere liquidation of assets with the aim of repaying creditors, and (iii) its tendentially public governance (court and judicial bodies);

→  to CIC, which places the company and its business continuity at the centre of the insolvency universe, opening up possibilities for second chances and fresh starts, favouring private settlement and intervening only where necessary to limit the application of certain civil law rules in order to erect an effective ring fence around the debtor who is preparing a recovery plan (think of the derogations from key principles of private law, such as Articles 1372 and 1411 of the Civil Code in cases of ‘special’ or ‘extended effectiveness’ AdRs, and commercial law, such as Articles 2446, 2447, 2482-bis/ter of the Civil Code, in derogation from the ‘recapitalize or liquidate’ obligation).

Sociopolitical factors can significantly influence restructuring and insolvency proceedings in Italy, often amplifying the influence of certain stakeholders. In particular, the protection of employees frequently attract institutional and media attention, especially in cases where large enterprises or companies with a strategic presence in specific regions are involved.

In such scenarios, trade unions and local political actors may exert substantial pressure to safeguard employment, thereby influencing both negotiations and, to some extent, judicial proceedings.

Starting from the CNC one of the aim of negotiations between the entrepreneur, creditors, and any other interested parties, it to identify a solution to overcome crisis situation, including through the transfer of the company or parts thereof and preserving, as far as possible, jobs.

The State plays an active role in cases of corporate distress, especially when they involve enterprises of national relevance or strategic sectors. Legislative Decree No. 270 of 8 July 1999 introduced specific measures for managing the insolvency of companies with a large number of employees or a significant impact on the national economy (“Amministrazione Straordinaria delle grandi imprese in stato di insolvenza”), allowing the State to intervene with exceptional powers aimed at preserving corporate assets, protecting employment, and ensuring the continuity of business operations. The Ministry of Enterprises and Made in Italy plays an important role, as it authorizes and supervises the special commissioners responsible for the management and restructuring of the business.

It should also be mentioned that, in response to the health emergency caused by the spread of Covid-19, at a first stage, and to enable Member States to support the economy in the context of Russia’s invasion of Ukraine, at a later stage, the European Commission issued a “Temporary Framework for State Aid Measures to Support the Economy,” the duration of which has been extended several times.

The Italian legislator has therefore implemented various measures to support businesses, including, inter alia, certain public guarantees on loans granted mainly through:

• The “Fondo di Garanzia” for micro, small, and medium-sized enterprises managed by Mediocredito Centrale – Banca del Mezzogiorno S.p.A. (“MCC”), meant as a public finance instrument aimed at facilitating access to bank credit for SMEs through the granting of a public guarantee to partially cover the financing granted by credit institutions, leasing companies, and other financial intermediaries;
• The “Istituto per i Servizi Assicurativi del Commercio Estero” (“SACE”), authorizing it to issue guarantees and insure the political, catastrophic, economic, commercial, and exchange risks to which national operators are directly or indirectly exposed.

It is worth to mention that scholars and case law have debated the nature of the credit arising from the provision of the above said guarantees and the possible scenarios for satisfying the claims of SACE and MCC in the context of restructuring projects and insolvency proceedings; in the end, the Italian Supreme Court has ruled that such claims benefit of a super priority right which prevails over any other pre-emption right, regardless of the cause, except for the privilege for legal expenses and those provided for in Article 2751-bis of the Italian Civil Code (workers), without prejudice to any prior preemption rights belonging to third parties.

The presence of these “state” guarantees is having a significant impact on debt restructuring operations as it risks making the secured creditor (typically a bank or financial intermediary) indifferent to the negotiation and outcome of the transaction.

Nonetheless, it is highly advisable that decisions be made by secured creditors in a careful manner, adequately justified and justifiable ex post in the management of secured loans, also to protect the position of the guarantor; in this regard, it is always recommended that secured creditors carefully evaluate proposal from the debtor, in order to take well ground decisions. An uncooperative attitude that relies exclusively on the prospects of recovery guaranteed by the solidity of the public guarantor could in fact lead to disputes regarding the validity and effectiveness of the State guarantees.

The already mentioned “cultural shift” that Italy has undergone with the new legal framework requires a corresponding profound change in the mindset of debtors (especially when entrepreneurs), creditors (in particular, banks) and stakeholders in general.

CIC seeks to guide this uneasy mental change by imposing specific behavioural obligations on the parties to be observed during negotiations in restructuring proceedings and insolvency procedures, as well.

CIC expressly states that in CNC, during negotiations and proceedings for access to crisis and insolvency resolution tools, debtor, creditors, and any other interested parties must act in good faith and fairness.

Specifically, debtor has the duty to:

1. explain the situation in a complete, truthful, and transparent manner, providing all information necessary and appropriate to the negotiations initiated, and to the crisis and insolvency resolution instrument chosen;
2. promptly take appropriate steps to identify solutions to overcome pre-crisis, crisis or insolvency, also in order to not prejudice the rights of creditors;
3. manage the assets or the business during the proceedings in the priority interest of creditors.

On the other hand, creditors and all parties involved in the settlement of the crisis and insolvency have a duty to cooperate loyally with the debtor, with the expert in CNC and with the bodies appointed by the judicial and administrative authorities, and to respect the obligation of confidentiality regarding the debtor’s situation, the initiatives taken by the debtor and the information acquired during negotiations.