SOMMARIO:

1. Introduction - 2. Regulation 2015/848 of the European Parliament and of the Council on insolvency proceedings - 3. The UNCITRAL Model Law on cross-border insolvency - 4. Proposal for a Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU - 5. The Italian regulatory framework on bankruptcy - NOTE

1. Introduction

The financial and economic crisis that occurred in the past years inevitably undermined the ability of businesses operating in the western economies to create wealth for their stakeholders. The result was a long period of worldwide recession that caused the increase of the number of insolvent companies forced to file for bankruptcy because unable to solve their financial difficulties. In that context, what influenced the relevance of cross-border insolvency was that many companies going bankrupt were multinational companies: that was due to the fact that business operates beyond national borders and when companies fail, assets and creditors are likely to be located in different jurisdictions. [1] Consequently, the relevance of cross-border insolvency has become a paramount matter upon which many States have focused. Nevertheless, not only multinational companies fail. The amount of private individuals that go bankrupt in the European Member States has also increased. Such numbers led to a deep reorganization of the insolvency law both at each Member State level and at the EU level. What is more, it is the bankruptcy law to be the most subject to economic and financial changes that cyclically occur to our economic system. It means that we cannot understand its legal provisions without deeply understand the historical context in which a law is issued. And also, the subsequent judicial interpretation at which insolvency law has always been subject to depends on economic and political justification. [2] However, there are many reasons causing the entrepreneur to go bankrupt. Going bankrupt, indeed, may be a matter of well-balanced equilibrium between adversity, mismanagement and dishonest behaviour: an improper management of assets, debts and credits leaves the business susceptible of financial difficulties whereas mismanagement deals with improper managerial choices such as over-borrowing, too many employees, inadequate control of costs and financial resources, imprudent acquisitions and investments. Then, adversity beyond the control of businesses can be a further hurdle: the uncontrolled increase of interest rates, inflation and financial crisis may finally destroy a company. [3] Certainly, the 2007 subprime mortgage crisis affecting the banking sector played a relevant role in triggering a worldwide recession. Hence, the nowadays economic, financial and social crisis affecting the western economies has influenced the strategies [continua ..]

2. Regulation 2015/848 of the European Parliament and of the Council on insolvency proceedings

The complex context previously described required the issuance of a new regulation which could extend its scope of application to anyone was the debtor, both a legal entity, natural person and merchant with the purpose of granting them a second chance of recovery. That role is currently played by Regulation 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings, which repeals previous EC Regulation 1346/2000. In the international scenario previously explained, it is undeniable the influence of the cross-border insolvency. For this reason, it is paramount that the international institutions guarantee a bankruptcy legislative framework which is in line with the changes of the commercial world and that they provide proper legislative tools to safeguard the interests of creditors and protection of debtors by preventing the mere liquidation of their assets. Consequently, the European Union moved toward that direction with the approval, on 20th May 2015, of Regulation 2015/848 on insolvency proceedings. This legislative instrument meets the need of implementing a tool to ensure the cooperation among two or more courts involved in cross-border insolvency, as well as the need of cooperation among different national bankruptcy laws. Such a cooperation is necessary in order to reduce the risk that the opening of insolvency proceedings in two countries may not always lead to the same result. E.g. is the case in which the goal pursued by two different national laws may be, in the first situation, the mere liquidation of the entrepreneur’s assets and the close of its business while, in the latter case, the willingness of granting a second chance of recovery. Obviously, that circumstance may hinder the cooperation between the courts. What is more, even if supposing the same objective is pursued, provisions and instruments to reach the full cooperation may be differently established by two national insolvency laws. [6] 2.1. Objectives and scope of application of EU Regulation 2015/848 The EU Regulation 2015/848 of the European Parliament and of the Council on insolvency proceedings was published on the Official Journal of the European Union No. L.141 on 5th June 2015 and it entered into force on 25th June 2015. [7] It was meant to repeal CE Regulation 1346/2000 of 29th May 2000 and replace it from 26th June 2017 [8] apart from Articles [continua ..]

3. The UNCITRAL Model Law on cross-border insolvency

3.1. Background and implementation of the Model Law The Model Law was adopted on 30th May 1997 by the United Nations Commission on International Trade Law (UNCITRAL) by consensus, during its thirtieth session in Vienna occurred for the final negotiations on the draft text. The preparatory project was commenced in 1995 when UNCITRAL decided to provide States with a legislative tool to be used with the purpose of facilitating the management of insolvency cases in which an insolvent debtor has assets or debts situated in more than one State. The drawing up of the text took two years and UNCITRAL entrusted the Working Group V [79] on Insolvency Law to prepare the draft of the Model Law. Eventually, in December 1997 the United Nations’ General Assembly endorsed and adopted the final edition of the Model Law. [80] Comparing the EU Regulation 2015/848 and the UNICTRAL Model Law, it is evident that the European Institutions adopted the Insolvency Regulation 2015/848 in order to provide for a supranational and useful legislative instrument in order to guarantee the cooperation among national insolvency laws and courts involved in cross-border proceedings. However, the scope of application of such a legislative tool encompasses solely the Member States of the Union; it means that the Regulation it is applicable in each Member State without any further action of transposition at national level but it has no legal force among States outside the European Union. For this reason, in order to grant a supranational instrument that is applicable by the European Member States as well as third countries all around the world, the United Nations Commission on International Trade Law provided a Model Law on Cross-border Insolvency. Despite of the different territorial scopes of application, both the EU Regulation and the UNCITRAL Model Law pursue similar objectives. Indeed the Model Law does not provide a unique law on insolvency but it is aimed at respecting differences among national insolvency procedures. As a consequence, it provides a framework for cooperation among jurisdictions in so far as it envisages potential solutions to be applied in cases of cross-border insolvency proceedings. [81] Indeed, the UNCITRAL has designed the Model Law with the purpose of encouraging enacting [82] States to use it by making useful additions and improvements to their national insolvency regimes, without imposing that the Model Law [continua ..]

4. Proposal for a Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU

4.1. Objectives of the Directive’s proposal and scope of application The proposal for a Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU was drawn up by the European Commission and addressed to the European Parliament and to the Council in 2016. [111] The proposal highlights the need to draft a Directive that focuses on the relevance of creating a harmonized insolvency regulatory framework within the whole territory of the European Union. It is no more enough having an Insolvency Regulation aimed at building up bridges among national insolvency proceedings; it is necessary, indeed, to create a strong and interconnected insolvency regime which is more efficient in terms of practical implementation and which may face more efficiently the issue of business restructuring and second chance to entrepreneurs. The creation of a harmonized insolvency framework has direct consequences on the market of the European Union and on the ability of attracting investors. Indeed, the aforementioned Directive will lead to a higher degree of legal certainty in the field of cross-border insolvency and business restructuring and it will make investors interested in increasing their investments in Europe and in the European businesses. Consequently, the proposal for the European Directive focuses on three main areas: A) Preventive restructuring frameworks; B) Second chance to entrepreneurs; C) Measures to increase efficiency of restructuring, insolvency and discharge procedures. A) 2, subparagraph 2, of the Directive’s proposal describes “restructuring” as: “changing the composition, conditions, or structure of a debtor’s assets and liabilities or any other part of the debtor’s capital structure, including share capital, or a combination of those elements, including sales of assets or parts of the business, with the objective of enabling the enterprise to continue in whole or in part”. Therefore, preventive restructuring frameworks refer to procedures or measures that Member States shall grant to those entrepreneurs who are in cases of financial troubles in which there is only the likelihood of insolvency. To that end, the Directive’s proposal pursues the objective of binding Member States to create the most favourable circumstances so that above-mentioned [continua ..]

5. The Italian regulatory framework on bankruptcy

5.1. Current status quo of the Italian Bankruptcy Law and reforms undertaken The Italian insolvency regime is governed by the Royal Decree of 16th March 1942 no. 267, known as Legge Fallimentare. The Decree, which was issued before the birth of the Italian Republic, has undergone a process of several reforms only during recent years. The very first comprehensive and systematic reform, indeed, was in 2006 when the Italian Government adopted the Legislative Decree of 9th January 2006 no. 5. The reform occurred in 2006 received a widespread consensus from professionals and scholars because it was the result of many years of attempts and negotiations aimed to adapt the Italian insolvency regulatory framework to the European and international standards. The main success of the reform was that, for the first time, it inserted in the Italian insolvency regime the concepts of the debtor’s rescue and of the maximisation of the entrepreneurs’ assets; therefore, the reform sought to introduce new procedures as alternative to the filing for bankruptcy, which was till then the common procedure to undertake as solution to the debtor’s financial distress. [132] To that end, the following areas are just some of the most relevant changes introduced by the reform of 2006 to previous Italian insolvency regime: [133] the modification of the threshold established by Art. 1 of the Legge Fallimentare, that are required in order to subject the debtor to the procedure of bankruptcy; the increase in relevance of the role played by the official receiver (the Italian Curatore Fallimentare) and by the creditors’ committee; the insertion of debt discharge procedures that allow the insolvent debtor to discharge its outstanding debts – provided that he/she is compliant with certain strict requirements; the insertion of provisions governing assets and financing intended for a specific business (to that end, the reform provides that the official receiver may handle such assets and financing through a separate management from the insolvency proceeding) and the reform of the preventive composition with creditors and its speeding up. Subsequently to the reform of 2006, a further reform occurred the following year. On 12th September 2007 the Legislative Decree no. 169 was issued, which included supplementary and corrective provisions aimed at partly modifying and clarifying those aspects introduced [continua ..]

NOTE