Can judicial decisions opening insolvency proceedings be registered in the Land registry in accordance with your legislation?
If affirmative, what effects do these registrations produce?
In Italy the competent Registry for the registration of opening insolvency proceedings is not the Land Registry but the Business Registry which is kept by the Chambers of Commerce in each Province . The Italian Business Register can be defined as the register of company details: it contains information (incorporation, amendments, cessation of trading) for all companies with any legal status and within any sector of economic activity, with headquarters or local branches within the country, as well as any other subjects as required by law.
The Italian Business Register provides a complete picture of the legal position of each company and is a key archive for drawing up indicators of economic and business development in each area to which it belongs.
Nevertheless some judicial decision opening insolvency procedures are to be registered in the L.R. according to the law. More in detail, the following decisions are to be registered in the Land Registry if there are immovable properties in the bankrupt’s asset:
Decree admitting the controlled administration (Article 188 L.F.) Decreto di ammissione all’amministrazione controllata (art. 188 L.F.)
Decree admitting the Composition with creditors (Decreto di ammissione concordato preventivo )
Declaration of bankruptcy (art.88 L.F.) Sentenza dichiarativa di fallimento (art.88L.F.)
Decree homologating the bankruptcy agreement (Decreto di omologazione del concordato fallimentare)
The rules governing the insolvency status of an entrepreneur are essentially set forth in the Royal Decree No. 267, of 16th March, 1942 (hereinafter “Bankruptcy Decree”), which has been amended over the years by several sets of rules, the most recent and significant of which in the period 2012-2013.
The debtor may enter into a bankruptcy procedure when:
- he/she is considered an entrepreneur (either a company or an individual), whose main activity consists in the production or trade of goods and/or services.
(Agricultural entrepreneurs and public bodies are exempted.)
- he/she becomes insolvent. According to Section 5 of the Bankruptcy Decree, the debtor is insolvent when the same is unable to regularly pay his/her debts by ordinary means.
The declaration of bankruptcy (in the meaning of “fallimento”) can be requested, alternatively, by the debtor, by one or more creditors or by the Public Prosecutor and will be stated by an order of the Court which has jurisdiction over the debtor’s main place of business. The prerogatives vested upon the Court are, inter alia:
- the appointment of the Bankruptcy Judge (i.e.: Giudice Delegato), who will have the responsibility to supervise the bankruptcy procedure;
- the appointment of the Official Receiver (i.e.: Curatore Fallimentare), who shall be responsible for managing the bankruptcy procedure and the debtor’sassets, including liquidation of the same ; the Official Receiver is subject to the supervision of both the Bankruptcy Judge and the Creditors’ Committee (i.e.: Comitato dei Creditori). This committee, composed of 3 or 5 members, has the duty to supervise the activity carried out by the Official Receiver as well as to authorize several actions and/or express its opinion when required by law or otherwise requested by the Court or the Bankruptcy Judge.
Upon the declaration of bankruptcy the debtor loses his right to freely manage or dispose of his assets (although they are still under the ownership of the bankrupt debtor). Similarly, all payments made or received by the bankrupt entrepreneur following the declaration of bankruptcy shall not produce any effect. In any case, the debtor can still dispose of personal commodities such as alimonies, wages and pensions, and any bankrupt income within the limit of what is necessary for his/her own maintenance and for the maintenance of his/her family, and for those assets that according to law may not be seized.
After issuing the bankruptcy declaration and pursuant to the general principle of the so-called par condicio creditorum (all creditors have to be treated in the same manner), creditors are not permitted, throughout the entire procedure, to obtain satisfaction of their outstanding credits by means of private individual enforcement procedures.
According to Art. 17 of the Bunkruptcy Law, within the day after its deposit , the declaration of bankruptcy is notified to the debtor, to the public prosecutor, to the public receiver and to the bankruptcy applicant. Furthermore, the decision is to be registered in competent Business Register where the company was headquartered.
According to art. 88 of the Bankruptcy Decree, if the debtor owns immovable properties subject to public registration, the Official Receiver notifies an excerpt of the judgement declaring the Bankruptcy to the competent offices for the annotation in the public Register. The Registrar performs ex oficio the transcription in favor of the mass of creditors and against the bankruptcy. Being the decision a declarative one, the related transcription doesn’t have opposability effects but only a mere notice effect. In fact, the declaration of bankruptcy produces its effects from the date of the publication (art. 133 C.P.C.): it take effects towards third parties from the date of its inscription in the business Register, as provided for art. 17, par. 2, of the Law No. 580/93.
2. The the Bankruptcy agreement (in the meaning of “concordato fallimentare”) regulated under Section 124 and following of the Bankruptcy Decree, is an agreement between the bankrupt entrepreneur and the creditors, which is not only aimed at bringing the bankruptcy procedure to a close, but it is also intended to reorganize and recover the undertaking, without the need to initiate the liquidation of the existing assets. It will also attempt to respect the general principle of “par condicio creditorum.
In other words, the procedure tends to limit the time and cost inconveniences for the creditors with respect to the bankruptcy procedure and to favour the entrepreneur, who can demonstrate their reliability and diligence, relieving the same from a part of their liabilities and leaving them with the availability of their assets.
The above-mentioned proposal can be filed before the Bankruptcy Judge (i.e.: Giudice Delegato) by:
- the bankrupt entrepreneur (but not before 12 months from the declaration of bankruptcy and on the condition that a two-year period has not elapsed since the statement of liabilities has been enforced; and by
- one or several creditors or by third parties.
As a matter of fact, the creditors are divided into different classes and their claims’satisfaction can take place by any means, including the transfer of assets, the assumption of liabilities and the use of financial instruments, such as the allocation to creditors of shares, quotas or bonds, even convertible.
The proposal for adjustment shall be filed with the Bankruptcy Judge (i.e.: Giudice Delegato), who shall preventively request the opinion of the Official Receiver (i.e.: Curatore Fallimentare) and the Creditors’ Committee (i.e.: Comitato dei Creditori).
With regards to the latter, the proposal for adjustment must be accepted/approved by those creditors representing the majority of the credits admitted to vote or, in case there are different classes of creditors, by the majority of the credits admitted to vote in the classes themselves.
Once the plan has been voted and approved by the creditors, the Bankruptcy Judge orders its communication to the who filed the proposal, to the bankrupt entrepreneur and to those creditors who did not agree to the plan itself. Such communication also establishes the term within which claims can be filed. If no claims are filed, the competent Court approves the adjustment of the creditors’claims.
3. Agreement before bankruptcy (in the meaning of “concordato preventivo”)
The entrepreneur facing the crisis (also if already insolvent) may ask the creditors to enter into an arrangement with creditors, regulated by Section 161 and following of the Bankruptcy Decree, which provides that the entrepreneur may restructure the existing debts. Such arrangement with creditors may provide for:
- debt restructuring and satisfaction of creditors’ claims by any means, also through the transfer of assets, assumption of liabilities, or other transactions, including the allocation to creditors or to companies controlled by creditors of the shares, quotas or debentures (even convertible into shares) issued by that company, or other financial instruments;
- the transfer of some or all of the activities of the company involved in the proposal of adjustment before bankruptcy to a contractor;
- the division of the creditors into classes based on their homogenous legal status and economic interests;
- different repayment schemes for creditors belonging to different classes.
The entrepreneur willing to enter into the arrangement with creditors is required to file a motion with the competent Court (where the company has its main place of business). The Court, after verifying the documentation filed, shall delegate a Judge for the management of the said procedure, appoint a specific Commissioner (so-called Commissario Giudiziale) and, moreover, shall call a meeting of creditors to be held within the following 30 days, so as to vote for the restructuring proposal and to set a term within which the entrepreneur shall file before the competent Court the amount that is deemed sufficient for the whole procedure.
The arrangement with creditors must be approved by those creditors representing the majority, in terms of value, of the claims admitted to vote. Should the creditors be divided in more than one class, each single class shall vote separately and the arrangement shall be approved, when such majority, in terms of value, is reached in the most relevant number of classes.
The arrangement must also be certified by an expert (such as lawyers or chartered accountants) with regard to its feasibility and to the correctness of the data and information stated in the same.
Should the arrangement with creditors be approved by the Court, it will become binding on all creditors, regardless of their acceptance or not. On the contrary, should the arrangement proposal be rejected, the Court shall declare the bankruptcy of the entrepreneur (if he/she is insolvent), who will, consequently, undergo ordinary bankruptcy dissolution proceedings.
4. So-called “blank” petition
Further to the amendments of the Bankruptcy Decree implemented in the period 2012 – 2013, it is now possible for the debtor to file a so-called “blank” petition for adjustment before bankruptcy together with other minor documents (mainly consisting of the company’s financial statements of the last 3 years and a list of the creditors with indication of the relevant credits) and reserve the right to file the adjustment plan and proposal together with the additional documents required, within a specific term determined by the Court from 60 up to 120 days (that may be postponed for justified reasons for a further 60 days only).
Within the term above mentioned, the debtor may file the following main requests:
- an adjustment plan / proposal providing for the liquidation of the company’s assets;
- an adjustment plan / proposal providing for the continuity of the business either by the debtor or by a third party acquiring the company’s business or quota within the adjustment procedure;
- a debt restructuring agreement
During the adjustment before bankruptcy procedure (it including the period between a so-called “blank” petition and the filing of the final adjustment proposal and plan) the enterprise is managed by the debtor under the supervision of the Commissioner. However, any action or activity exceeding the ordinary administration, in order to be valid and effective shall be performed upon specific authorisation of the Bankruptcy Judge.
The main conditions to be met in order to proceed with a debt restructuring agreement procedure are:
The entrepreneur facing the crisis (also if already insolvent) may ask to the Court the homologation of a debt restructuring agreement (in the meaning of “accord di ristrutturazione dei debiti” ) regulated under Section 182-bis of the Bankruptcy Decree, executed with creditors representing at least 60% of the credits. The agreement may have a variable content and may also be different with respect to different creditors. Upon execution of the agreement/s by creditors representing at least 60% of the credits, any creditors that have not signed the same shall be paid in full by the debtor within:
- 120 days from the date of homologation for debts already expired prior to
- 120 days from expiry date for debts not yet expired at homologation.
The agreement / agreements must also be certified by an expert (such as lawyers or chartered accountants) with regard to its/their feasibility and to the correctness of the data and information stated therein. In particular, the expert’s certification shall include the verification of the appropriateness of the agreement/s to ensure the payment of those creditors that have not executed a debt restructuring agreement within the above mentioned terms.
Together with the agreement and the expert’s certification, the debtor shall file with the Court the same documentation required for the adjustment before bankruptcy procedure (i.e. financial statements of the last 3 years, list of creditors withspecification of relevant credit, etc.).
The debt restructuring agreement shall be filed with the competent Register of Companies and shall be effective starting from the date of its registration. Starting from such date and up to the following 60 days, the creditors shall not begin or continue any enforcement action against the debtors’ assets. Any act or deed carried out in execution of a debt restructuring agreement homologated by the Court is not subject to revocation.
5. Debts’ recovery
Pursuant to Section 67, paragraph 3, letter d)of the Bankruptcy Decree, the entrepreneur facing the crisis may draft a specific plan which should ensure the recovery of the company’s debts as well as the balance of its financial situation, according to provisions included under Section 67, paragraph 3, letter d) of theBankruptcy Decree.
On the basis of such plan, an agreement is usually reached together with major creditors though, according to law, the same may also be drafted unilaterally by the debtor. This kind of plan / agreement does not imply the involvement of the Court but shall in any case be certified by an expert (such as lawyers or chartered accountants) with regard to its feasibility and to the correctness of the data and information thereto contained. In addition, any action or deed carried out in execution of the mentioned plan and/or connected agreement is not subject to revocation.
6. Extraordinary Administration of major enterprises (“amministrazione straordinaria grandi imprese”)
This procedure, regulated by Legislative Decree No. 270, of 8thJuly, 1999, is only available to major enterprises, which are temporarily insolvent and it is aimed to preserve the wealth of their business by means of continuation, reactivation and reorganization of the industrial activities. The admission to such procedure requires the following conditions to be met by the entrepreneur:
- there must be at least 200 employees, as of at least one year prior to the procedure;
- the amount of debts must not be lower than 2/3 of the value of the assets and the income of the earnings deriving from sales and services provided in the past year;
- the company is an entity subject to bankruptcy procedures;
- the company is insolvent;
- the company must be in a position to be able to recover its business.
The bodies who manage the procedure are:
- the Court, which declared the insolvency;
- the Bankruptcy Judge (i.e.:Giudice Delegato ), appointed by the Court;
- one or three Extraordinary Commissioners (i.e.:Commissario Straordinario).
Within 30 days from the declaration of insolvency, the Commissioner shall draft a report stating the reasons of the insolvency and if the company is in a position to be rescued and shall present the same to the Ministry of Economic Development. The entrepreneur usually continues to manage the company under the supervision of the Commissioner, unless otherwise stated by the Court.
Recovery of the company may be obtained either by means of an economic and financial plan (having a maximum duration of 2 years) or through a maximum 1 year plan providing for the transfer of the assets. Should the Court consider that the extraordinary administration cannot be effectively carried out due to the impossibility, within the given term, to pay off the creditors regularly or to sell the assets of the company, the same will convert the extraordinary administration into a bankruptcy procedure. Similarly, such procedure can also be concluded if no claims for credits are filed within the term provided for by the declaration of insolvency or if the entrepreneur recovers his/her capacity to regularly pay off their obligations.
7. Restructuring of major enterprises (“Ristrutturazione di grandi imprese”)
This procedure, regulated by Law Decree No. 347, of 23rdDecember, 2003, is only available to those enterprises which are larger than those indicated under the extraordinary administration procedure.
More precisely, the admission to this procedure requires the following conditions to be met by the entrepreneur:
- there are a minimum of 500 employees as of at least one year preceding the procedure (taking into account the sole company requesting the procedure or the entire group of the same);
- the amount of debts must amount to at least €300 million;
- the company is an entity subject to bankruptcy procedures;
- the company is insolvent;
- the company must be in a position to be able to recover its business.
Despite differences in the procedural aspects to be followed, the reorganisation of major enterprises is, in general, very similar to the extraordinary administration of major enterprises. The aim of this procedure is, also, the recovery of the company that may be obtained either by means of an economic and financial plan (having a maximum duration of 2 years) or through a maximum 1 year plan providing for the transfer of assets.
8. The Law No. 3, of 27rd January 2012 provides three types of proceedings to solve the over-indebtedness crisis. Only debtors not subject nor amenable to other insolvency procedures can access these procedeengs: the agreement of the debtor, related to the restructuring of debts and the satisfaction of claims under the conditions contained in the debtor’s proposal approved by creditors and approved by the court; the plan of the consumer, which relates to the restructuring of debts and credit-satisfaction, but reserved for persons qualified as «consumers» and independent from an agreement with creditors; the liquidation of the assets, which referred to the liquidation of the debtor’s assets by a liquidator through competitive procedures and without an agreement with the creditors.
In those proceedings, the law n. 3 of 2012 provides for the transcription in the Land Registry of the following acts:
– The decree fixing the hearing for the homologation of the agreement of the debtor (Article 10, paragraph 1). This is the decree by which the judge if the proposed agreement formulated by the debtor meets the requirements, schedules a hearing and ordered the notice to creditors of the proposal and of the decree. The decree is equated at the seizure (Article 10, paragraph 5) and its transcription must be made where the proposal of the debtor provides for the transfer or assignment to third parties of immovable properties.
– The decree of homologation of the agreement of the debtor (Article 12, paragraph 2). This is the decree by which the court approving the agreement and making it mandatory, under Article 12, paragraph 3, for all creditors prior to the time when the publicity provided for in Article 10, paragraph 2 was performed.
– The decree of homologation of consumers plan (Article 12-bis, paragraph 3). This is the decree by which the court shall approve the plan proposed by the consumer. The decree is equated at the seizure (article 12-bis, paragraph 7) and its transcription must be made where the plan provides for the sale or assignment to third parties of immovable properties.
– The decree opening the liquidation of asset procedure (Article 14-d, paragraph 1). This is the decree by which the judge, if the application meets the requirements and verified the absence of acts in fraud of creditors over the past five years, opened the liquidation procedure. The decree is equated at the seizure (Article 14-d, paragraph 3) and its transcription must be made when the debtor’s assets include immovable properties.
The Italian Business Register is a public register which, as already provided for within the Civil Code, has been fully implemented since 1996, by the Law in relation to the reorganisation of the Chambers of Commerce and with the subsequent Implementing Regulation.
The aforementioned Law established an Italian Business Register Office at each Chamber of Commerce, which has the following features:
- it has provincial jurisdiction;
- it is managed using computerised techniques;
- it is managed by the local Chamber of Commerce, under the supervision of a Judge, appointed by the Presiding Judge of the Court of the provincial capital, who is the Register Judge;
- it is governed by a curator appointed by the board duly represented by the Secretary General or a director of the Chamber of Commerce who will ensure the correct management of the Italian Business Register in accordance with any provisions on the subject and any decisions made by the Register Judge.
See: Art. 2188 et seq. of the Civil Code; Art. 8 of Law 580/1993 on the reorganisation of the Chambers of Commerce, Industry, Craftsmanship and Agriculture; Presidential Decree 581/95 – Regulation for the implementation of Art. 8 of Law 580/93 on the incorporation of the Italian Business Register.