On September 27, 2024, Legislative Decree No. 136 of September 13, 2024 (the “Correttivo-ter”) was published in the Official Gazette. This is the third – and currently the final – Corrective Decree to the Corporate Crisis and Insolvency Code.
The new corrective decree has made substantial changes to numerous provisions of the Corporate Crisis Code. Aside from some stylistic and minor adjustments, the Correttivo-ter, on the one hand, adopts certain practices or resolves interpretative doubts, and on the other hand, introduces some highly anticipated innovations by practitioners.
This contribution aims to provide an overview of the major changes introduced by the Correttivo to the Restructuring Plans Subject to Approval (“PRO”) and Certified Recovery Plans.
THE RESTRUCTURING PLAN SUBJECT TO APPROVAL
The Restructuring Plan Subject to Approval (PRO) (Article 64-bis) is a tool for crisis management introduced with the Second Corrective Decree to the Corporate Crisis Code, aimed at supporting the continuity (direct or indirect) of the activities of businesses facing a state of crisis or insolvency. Compared to restructuring agreements, the approval procedure is less formalized and subject to fewer controls, and seeks to satisfy creditors in derogation of Articles 2740 and 2741 of the Civil Code, i.e., the principle of par condicio creditorum, provided that creditors are divided into classes based on their legal position and homogeneous economic interests.
In exchange for these significant advantages, the approval of the PRO requires the plan and the proposal to be approved by all creditor classes.
Despite its recent introduction in the Code, the legislator, through the new Corrective Decree, aimed to „clarify and specify the regulation and certain procedural steps of the PRO in light of the initial application issues that have arisen due to the newness and peculiarities of the instrument. Changes have therefore been made, as described below,“ as stated in the Illustrative Report.
With the Correttivo-ter, paragraph 1-bis was added to the regulation under Article 64-bis to allow the entrepreneur to propose a tax settlement to public creditors, without the application of cram-down, as it is incompatible with the requirement for unanimous approval from all creditor classes.
In addition to the previous paragraph, a new paragraph 9-bis was added, which, in order to facilitate the effectiveness of the instrument as well as business continuity, introduces a regulation for the transfer of business assets before the approval of the plan. This had already been provided for other crisis and insolvency resolution tools. Such a transfer requires prior approval by the Court, as the functionality of the transaction in relation to business continuity and the best satisfaction of creditors must be assessed, with all appropriate measures to protect the interests of any other parties involved.
CERTIFIED RECOVERY PLANS
The agreements executed under Certified Recovery Plans have been the most significantly modified institution, not so much in terms of innovative contributions but rather in the rewording of Article 56 of the Corporate Crisis and Insolvency Code (C.C.I.I.).
The first change is in paragraph 1, where a stylistic modification has been made, changing the previous wording („the rebalancing of the economic-financial situation“) to the new phrasing, „the rebalancing of the equity and economic-financial situation.“ The rationale behind this integration is aligned with the goal of harmonizing the terms used throughout the Code, as specified in the Illustrative Report.
Following this approach, paragraph 2 has also been largely revised, which provides a detailed listing of the characteristics of the plan and the supporting documentation to be produced. Specifically, the law now requires the following as necessary contents of the plan:
- The requirement for a certain date pursuant to Article 2704 of the Civil Code;
- The identification of the proposer’s details, as well as any affiliated parties, with specific reference to the assets and liabilities existing at the time of the plan’s submission and the description of the company’s economic-financial situation and the status of the employees;
- A description of the causes and the extent of the crisis or insolvency the company is facing, as well as the intervention strategies;
- Attachment of a list of creditors, with a specific indication of the amount of debt proposed for renegotiation and the status of any negotiations, as well as a list of unrelated creditors, detailing the resources allocated to fully satisfy their claims;
- Information on any new financial contributions proposed and the reasons why these are necessary to implement the plan;
- The indication of timelines for the completion of actions that allow for the verification of the plan’s execution, as well as the initiatives to be taken if deviations from the planned objectives occur;
- The implementation of the industrial plan and its impact on the financial plan, including the necessary timeline to ensure the rebalancing of the economic-financial situation;
- A detailed breakdown of the expected costs and revenues, the financial needs, and the related methods of coverage, taking into account also the costs necessary to ensure compliance with workplace safety and environmental protection regulations.
The Illustrative Report notes that these changes were adopted „in order to align the provisions with those governing the content of the plans for other crisis and insolvency resolution tools.“
Finally, the legislator opted for a modification of paragraph 4, replacing the word “creditors” with the more suitable term “interested parties,” so as to include in the agreements all those who, although not holding claims against the company, are affected by the recovery process and play a significant role in its implementation.
