THE FUNCTIONING OF THE NEGOTIATED CRISIS SETTLEMENT

THE OPERATION OF THE NEGOTIATED SETTLEMENT OF THE ENTERPRISE CRISIS

A relevant novelty introduced by Decree Law No. 118/2021 is definitely the procedure of "Negotiated Settlement of Business Crisis," aimed at supporting companies in crisis for the purpose of business rehabilitation.


NORMATIVE

It can be accessed on a voluntary basis by commercial and agricultural entrepreneurs registered in the Register of Companies who are in such a condition of asset, economic and financial imbalance that a crisis or insolvency is likely.

Entrepreneurs will be able to apply to the Chamber of Commerce, in whose territorial area the registered office of the company is located, for the appointment of an independent expert whose task is to facilitate negotiations with creditors and any other interested parties, in order to identify a solution for overcoming the state of crisis, including through the use of the transfer of the company or branches of it: the existence of the prerequisites for the submission of the application must be reported in writing to the administrative body by the corporate control body, as described in the previous article https://bit.ly/3Wsalqa.

Consequently, as the procedure is extra-judicial, it is necessary for interested entrepreneurs to apply through the national telematic platform made available on the institutional website of each Chamber of Commerce: the platform is managed by the system of Chambers of Commerce through Unioncamere, under the supervision of the Ministry of Justice and the Ministry of Economic Development. Available on the platform are:

  • a checklist, also tailored to the needs of micro, small and medium-sized enterprises, which contains operational guidance for drafting the recovery plan;
  • a practical test for verifying the reasonable pursuit of reorganization, which can be accessed by the entrepreneur and the professionals appointed by him;
  • the protocol for conducting the Negotiated Settlement.

THE FIGURE OF THE EXPERT

The expert is chosen from a special list formed at the Chamber of Commerce of each capital city within which may be included:

  • those enrolled for at least 5 years in the Register of Chartered Accountants and Lawyers who document previous experience in the field of corporate restructuring and business crisis;
  • those enrolled for at least 5 years in the Register of Labor Consultants who document that they have participated, at least in 3 cases, in the conclusion of approved debt restructuring agreements or agreements underlying attested plans or have participated in the presentation of approved agreements with business continuity;
  • those who, although not registered in professional registers, document that they have carried out functions of administration, management and control in companies involved in restructuring operations concluded with attested reorganization plans, debt restructuring agreements and approved arrangements with business continuity, in respect of which a judgment declaring bankruptcy or a judgment establishing the state of insolvency has not subsequently been pronounced.

Registration on the list of experts is subject to possession of the specific training provided for by executive decree of the Ministry of Justice, as well as the procedures for submitting the application for registration on the list of experts and related checks.

The appointment of the expert is made by a commission established at the Chambers of Commerce of the relevant capitals; the commission is composed of:

  • a magistrate;
  • one member appointed by the President of the Chamber of Commerce;
  • one member designated by the Prefect,
  • is coordinated by the most senior member and decides by majority vote.

In light of the particular delicacy of the task entrusted to the expert, the regulations stipulate that the requirement of independence must be met and that the expert cannot simultaneously accumulate more than 2 assignments related to the Negotiated Settlement; furthermore, the person who has carried out the expert assignment cannot have professional relations with the entrepreneur unless at least 2 years have elapsed since the filing of the Negotiated Settlement: the regulation specifies that the expert must not only operate in a professional, confidential, impartial and independent manner, but also be third party to all parties. 

In the course of carrying out the assignment, the expert may use individuals with specific expertise: these must be individuals who are not linked to the company or other parties involved in the reorganization transaction by personal or professional relationships.


NATURE OF THE ASSIGNMENT

A specific time limit is provided with respect to the duration of the expert's appointment: the rule stipulates that the appointment is to be considered terminated when, after 180 days from the acceptance of the appointment, the parties have not identified, even following his proposal, an adequate solution to overcome the conditions of crisis or insolvency; also, the rule sets 180 days as the time limit for the continuation of the appointment when a request is made by all parties and there is consent of the expert.

The law introduces preclusion for the entrepreneur to file a new petition for the appointment of the expert before 1 year has elapsed since the filing of the petition.

Until the conclusion of negotiations or the filing of the application for negotiated settlement:

  • Art. 2446, paragraphs 2 and 3, Civil Code, Art. 2447 Civil Code, Art. 2482- bis paragraphs 5 and 6, Civil Code and Art. 2482-ter Civil Code (capital reduction rules for losses or reduction below the legal minimum) do not apply to the applicant entrepreneur;
  • the cause of dissolution of the company due to reduction or loss of share capital does not occur as per Article 2484, paragraph 1, No. 4, Civil Code and Article 2545-duodecies Civil Code.

With regard to the management of the enterprise during the pendency of the negotiations, the entrepreneur retains its ordinary and extraordinary management: in the event of a state of crisis, the entrepreneur is required to manage the enterprise in such a way as to avoid prejudice to the economic and financial sustainability of the business.

If it turns out during the course of the Negotiated Settlement procedure that the entrepreneur is insolvent but there are still concrete prospects for reorganization, he is required to manage the enterprise in the overriding interest of the creditors, his responsibilities remaining in any case.

The court may authorize the entrepreneur to transfer the business or one or more of its branches in any form without the effects referred to in Art. 2560, paragraph 2, Civil Code (Art. 2112 Civil Code remains unaffected), or, exceptionally, the purchaser will not be liable for the debts of the transferor when such debts appear on the books, without prejudice to the discipline of labor relations and workers' claims.

Finally, the application for access to the negotiated settlement procedure cannot be filed by the entrepreneur of the proceedings introduced by:

  • application for approval of a restructuring agreement;
  • appeal for admission to the arrangement with creditors;
  • appeal for access to the procedures for debt restructuring agreement or liquidation of assets.

See the insights presented above on facilitative measures for the entrepreneur, https://bit.ly/3UzQLXF, and the possible resolution outcomes of the Negotiated Settlement, https://bit.ly/3SCa2q2.

 

Edited by: Luigi Alfredo Carunchio, Chartered Accountant and Statutory Auditor

You can download the article in PDF here

For more information:

luigicarunchio@valoreassociati.it

Archive

THE INTEGRATION OF SUSTAINABILITY INTO MANAGEMENT REPORTS
30/04/2024
GOING CONCERN IN THE FINANCIAL STATEMENTS OF 2023
25/03/2024
WHISTLEBLOWING: COMPLIANCE AND THE ROLE OF THE PROFESSIONAL
30/01/2024
POSTCARDS FROM THE U.S.A.
05/12/2023
THE DIFFERENT TYPES OF TAX ASSESSMENT
19/11/2023
THE TAX ASSESSMENT: INTRODUCTORY CONCEPTS
31/10/2023
VAT TAXATION PREREQUISITES: DEROGATION CASES AND FURTHER INFORMATION
04/10/2023
TAXATION PREREQUISITES FOR VAT PURPOSES: OBJECTIVE, SUBJECTIVE, TERRITORIAL REQUIREMENT
11/09/2023
THE CRIME OF ILLEGAL INTERMEDIATION AND EXPLOITATION OF LABOR UNDER ART. 603 BIS OF THE CRIMINAL CODE AND THE APPLICATION OF JUDICIAL ADMINISTRATION UNDER ART. 34 D. LGS. 159/2011
09/08/2023
THE COMPLEX CAPITAL METHOD FOR DETERMINING ECONOMIC CAPITAL FOR BUSINESS VALUATION PURPOSES
26/07/2023
THE SIMPLE CAPITAL METHOD FOR DETERMINING ECONOMIC CAPITAL FOR BUSINESS VALUATION PURPOSES
13/07/2023
CIRCULAR "MANDATORY REGISTRATION ON ICCAT PORTAL FOR ALL OPERATORS IN THE BLUEFIN TUNA CATCHING CHAIN"
03/07/2023
THE INCOME METHOD OF DETERMINING ECONOMIC CAPITAL FOR BUSINESS VALUATION PURPOSES
21/06/2023
THE FUNCTIONING OF THE NEGOTIATED CRISIS SETTLEMENT
30/05/2023
REPORTS FOR THE EARLY EMERGENCE OF BUSINESS CRISIS
23/05/2023
ADEQUATE ORGANIZATIONAL, ADMINISTRATIVE AND ACCOUNTING ARRANGEMENTS
03/05/2023
THE EFFECT OF EURO/DOLLAR EXCHANGE RATE DEPRECIATION ON EXPORTS
20/04/2023
VALORE ASSOCIATI IN THE DRAFTING OF THE BUSINESS PLAN OF TE.AM. TERAMO AMBIENTE S.P.A.
24/03/2023
ASSOCIATED VALUE IN THE APPROVAL OF APS S.P.A. TO THE ARRANGEMENT WITH CREDITORS
16/03/2023
THE HIGH COST OF ENERGY: CONSEQUENCES AND INTERVENTIONS OF THE 2023 BUDGET LAW
22/02/2023
THE IMPORTANCE OF BUSINESS PLANNING FOR ACCESS TO CREDIT
02/02/2023
FOCUS INTERNATIONALIZATION COUNTRY: SINGAPORE
12/01/2023
POSTCARDS FROM SINGAPORE
12/12/2022
PHILLIPS CURVE: LINK BETWEEN INFLATION AND UNEMPLOYMENT, CURRENT CONSIDERATIONS
26/10/2022
NEGOTIATED SETTLEMENT FOR THE SOLUTION OF ENTERPRISE CRISIS: POSSIBLE RESOLUTION OUTCOMES
04/10/2022
NEGOTIATED SETTLEMENT FOR THE RESOLUTION OF ENTERPRISE CRISIS: FACILITATIVE MEASURES FOR THE ENTREPRENEUR
23/09/2022
BLOCKCHAIN, CRYPTOCURRENCIES AND NFT
12/09/2022
THE ROLE OF TECHNOLOGY IN THE ACCOUNTING INDUSTRY
09/08/2022
COUNTRY INTERNATIONALIZATION FOCUS: THE UAE
21/07/2022
TRANSFER PRICING IN BUSINESS INTERNATIONALIZATION
07/07/2022
DISCOUNT RATES IN APPRAISAL WORK: THE WACC
23/06/2022
ABOUT MINIMUM WAGE
13/06/2022
DISCOUNT RATES IN APPRAISAL WORK: THE CAPM
09/06/2022
HEDGING PURPOSES OF DERIVATIVE INSTRUMENTS
26/05/2022
GENERAL INTRODUCTION DERIVATIVE INSTRUMENTS
12/05/2022
PROFESSIONAL SOCCER CLUBS: PLAYERS' REGISTRATION RIGHTS
28/04/2022
THE FINANCIAL STATEMENTS OF PROFESSIONAL SOCCER COMPANIES
14/04/2022
THE IMPACT OF INFLATION ON TFR
01/04/2022
SUSTAINABILITY REPORT
30/03/2022
GENERAL INTRODUCTION ESG THEM
24/03/2022