ADEQUATE ORGANIZATIONAL, ADMINISTRATIVE AND ACCOUNTING ARRANGEMENTS

ADEQUATE ORGANIZATIONAL, ADMINISTRATIVE AND ACCOUNTING ARRANGEMENTS

APPROPRIATE ORGANIZATIONAL, ADMINISTRATIVE AND ACCOUNTING ARRANGEMENTS

On July 15, 2022, the new "Code of Corporate Crisis and Insolvency," also known as CCII, Legislative Decree No. 14/2019, finally came into force.

Here we want to elaborate on the transposition of the legislation in view of the introduction of the second paragraph of Article 2086 of the Civil Code: "... The entrepreneur, whether operating in corporate or collective form, has a duty to set up an organizational, administrative and accounting structure appropriate to the nature and size of the enterprise, including the timely detection of the crisis of the enterprise and the loss of business continuity, as well as to take action without delay for the adoption and implementation of one of the instruments provided by the law for overcoming the crisis and the recovery of business continuity."

DEFINITIONS AND CONCEPT OF CRISIS

From the above definition, it can be seen that the legislator has first of all shifted the focus from the management of the corporate crisis to its prevention: in fact, it is an obligation for the entrepreneur to have an adequate organizational, administrative and accounting structure in place for the purpose of the timely detection of the state of corporate crisis and the possible implementation of profitable initiatives for its resolution.

Moreover, what has been said also innovates the founding philosophy of insolvency law, which moves from a static conception, aimed at the protection of the par conditio creditorum and maximal satisfaction of creditors, to a dynamic conception more directed toward the preservation and continuation of the business activity, sometimes even reducing the rights of creditors as long as the solution put forward is equally more advantageous for them than a possible liquidation alternative.

It follows that, it is also crucial to correctly frame the new definition of crisis with regard to the time horizon introduced by the legislator in this new perspective: in fact, crisis means the debtor's transitory state that makes insolvency likely, manifesting itself through an inadequacy of prospective business cash flows, such as to make it difficult to fulfill obligations for a time horizon of the next 12 months.

ORGANIZATIONAL ARRANGEMENTS

The CCII takes the content of Art. 2086 of the Civil Code and deepens its practical declination: the obligations incumbent on the entrepreneur are differentiated in consideration of its nature, whether individual or collective; indeed, in order not to overburden the individual entrepreneur, Art. 3 of the CCII has presupposed that it take "suitable measures," unlike the collective one, which is instead called upon to establish "adequate arrangements," although they are both measures aimed at detecting the state of business crisis in a timely manner and putting in place suitable consequent initiatives.

Likewise, adequate arrangements must, according to paragraph 2 of Article 3 CCII:

make it possible to detect possible financial-economic imbalances of the company,
offer the possibility of verifying the sustainability of indebtedness in view of business flows, to ensure business continuity over a period of at least 12 months,
generate an information system, both internally and externally, aimed at putting in place practical and active control and monitoring of business continuity, as well as, where necessary, put in place corrective decisions with a view to the pursuit of recovery;

in addition, the implementation of appropriate arrangements must be proportionate in view of the:

nature of the enterprise, understood in terms of its corporate purpose,
company size, conceived in terms of corporate complexity and aggregate balance sheet values.

The following constitute alarm bells to be monitored primarily, pursuant to paragraph 3 of Article 3 CCII:

the existence of payroll debts overdue for at least 30 days, with an amount equal to more than half of the total monthly value of payroll,
the existence of overdue payables to suppliers for at least 90 days, with the amount exceeding the amount of overdue payables,
the existence of exposures past due to credit institutions and other financial intermediaries for more than 60 days or that have exceeded the limit of credit facilities obtained for at least 60 days, with total amount equal to at least 5 percent of the total exposures.

LIABILITY

Observing what has been said so far is necessary in order to avoid liability arising on the part of the director, pursuant to Article 2475 of the Civil Code, "The establishment of the arrangements referred to in Article 2086, second paragraph, is the exclusive responsibility of the directors..." and Article 2476 of the Civil Code, "The directors are jointly and severally liable to the company for damages arising from failure to comply with the duties imposed on them by law and the articles of incorporation for the administration of the company... The directors shall be liable to the company's creditors for failure to comply with the duties inherent in the preservation of the integrity of the company's assets."

It follows that, failure to comply with the obligation to establish such adequate arrangements is accompanied by the personal and pecuniary liability of the directors to the company, as well as to third parties harmed by the relevant failure.

For this reason, it is incumbent to comply with the regulations and adopt adequate organizational, administrative and accounting arrangements, which are essential to ensure and monitor business continuity, based on financial equilibrium and the preservation of corporate assets.

The above also generates relevant implications for the Control Bodies, which, pursuant to Article 2381 of the Civil Code, are required to verify the adequacy of the organizational, administrative and accounting structure with respect to the nature and size of the company: these members, in the event of insolvency, would be jointly and severally liable if they did not promptly report the need to adjust its composition and structure.

Finally, in light of the above, it is specified that the responsibility regarding the formalization of arrangements and the duty of directors to take appropriate organizational measures should therefore rest solely with the collective and not the individual director.

THE ROLE OF THE PROFESSIONAL
Therefore, because of the many consequences that the legislation has generated and will continue to generate, the professional understood as a Certified Public Accountant is called upon to offer support for the fulfillment of what is necessary in terms of the planning requirements that the entrepreneur must now place at the basis of the management of his or her business.
The monitoring of appropriate arrangements is a process that presupposes:

Archive