To print this article, all you need to do is be registered or log in to Mondaq.com.
Bankruptcy in Italy: Filing formalities you need to know even if your company is foreign
Discipline regarding bankruptcy in Italy falls within the scope of Italian bankruptcy law, which has changed drastically over the years, starting with Royal Decree-Law No. 267, which saw the establishment of a system inspired by the graduation of creditors identified as follows:
- not guaranteed;
As well as the identification of two conditions to be subject to the bankruptcy procedure, which are:
- Subjective requirement (Article 1 of the Bankruptcy Law), which states that “entrepreneurs who carry out a commercial activity, excluding public entities, are subject to the provisions on bankruptcy and judicial composition”;
- Objective requirement (Article 5 of the Bankruptcy Act), according to which the insolvent entrepreneur is declared bankrupt.
The bankruptcy procedure takes place before the court, which has the task of noting the state of impotence of the entrepreneur to pay the debts and therefore of declaring him bankrupt, as well as having control and authorization tasks concerning the performance of acts by the trustee in bankruptcy and the committee of creditors. The court is the first person who has the power to administer and preserve the property of the defaulting entrepreneur.
Over time, the discipline of bankruptcy in Italy has changed, with the almost total abandonment of the punitive concept, in favor of the pursuit of entrepreneurial activity.
More specifically, the “composition with creditors” was born as an instrument intended to allow the entrepreneur not to declare bankruptcy and to be able to satisfy the creditors in a reduced form, compared to the initial credit, compatible with what had been agreed with creditors.
Today, the arrangement with creditors has also taken other forms, with the so-called “arrangement with creditors in reserve” and “arrangement with creditors with going concern”, based on the need to ensure business continuity and agreed agreements. credit satisfaction.
Bankruptcy in Italy: How to declare bankruptcy in Italy?
Bankruptcy in Italy is declared at the request of the debtor, one or more creditors or at the request of the Public Prosecutor (only in the cases indicated in Article 7 of the Bankruptcy Law).
Formalities for filing for bankruptcy in Italy are related to the person submitting the application.
If the entrepreneur himself applies for bankruptcy, he is obliged to file the application, providing the obligatory accounting and tax records of the last three previous years or of the entire existence of the company, the list of names of creditors with the indication of credits, the list of names of those who have real and personal rights to the things in his possession, indication of the title from which the right derives.
Bankruptcy proceedings in Italy begin with the filing of the bankruptcy petition.
The petition in bankruptcy is the act by which the bankruptcy procedure is articulated against the entrepreneur. The prerequisite is the state of insolvency of the latter, and therefore his financial inability to meet the credits assumed.
The request must be based on the most useful to prove the insolvency of the entrepreneur.
It belongs to the Court of the place of the registered office of the company, the instance taking place in chambers of the council and ending with the pronouncement of a final order (award) noting or not the bankruptcy.
In the first case, the delegated judge and the trustee are appointed, and the bankrupt company is ordered to file the required documents, indicate the place, day and time of the meeting for the examination of passivity, and assign to creditors and third parties a deadline for submitting bid requests.
The bankruptcy sentence is entered in the commercial register where the entrepreneur is registered and takes effect from the date of its publication and, with respect to third parties, from the date of registration in the same commercial register. .
Bankruptcy in Italy: Can a foreign company liquidate under Italian bankruptcy law?
In accordance with and for the purposes of Article 9 of the Bankruptcy Act, the declaration of bankruptcy falls within the jurisdiction of the court of the place where the entrepreneur has his registered office (or where the management and administration activity is exercised).
If the registered office of the company is abroad, the jurisdiction belongs to the court of the place of the secondary registered office.
The entrepreneur, who has the registered office of the company abroad, can be declared bankrupt in the Italian Republic even if a declaration of bankruptcy has been pronounced abroad.
International conventions and European Union legislation are reserved.
The transfer of the company’s headquarters abroad does not exclude the existence of Italian jurisdiction, if it took place after the filing of the appeal or the presentation of the request by the Public Prosecutor.
Bankruptcy in Italy: what is extraordinary administration?
This is a collective procedure dedicated to the insolvency of a large company.
Its function is to preserve the productive heritage, that is to say not to liquidate the assets and the liabilities but to continue, reactivate or reconvert the activity of the company.
The objective is therefore not to put large companies into bankruptcy, but to turn them around within certain time limits.
1) Through a business transfer program, for liquidation purposes, for a maximum period of 1 year;
2) Through a business restructuring programme, with a conservative aim, for a period of 2 years.
Often, the consequence of filing for bankruptcy is the crime of fraudulent bankruptcy.
This form of tort is governed by Article 216 of the Bankruptcy Act, according to which the entrepreneur who:
- has misappropriated, concealed, disguised, destroyed or dissipated all or part of its assets with the aim of harming its creditors, or has exposed or admitted non-existent liabilities;
- stole, destroyed, falsified in whole or in part the books or other accounting documents or kept them hidden in order to make impossible the reconstitution of the assets or the progress of the business, with the aim of obtaining an unjust profit for himself or for others or causing damage to creditors;
shall be punished by imprisonment from three to ten years.
The same penalty is provided for the entrepreneur who commits one of the aforementioned actions during the bankruptcy proceedings.
Otherwise, the bankrupt who, before or during the bankruptcy proceedings, makes payments or simulates pre-emptive rights to the detriment of creditors, is punished by one to five years.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.