Decree to provide liquidity to businesses (D.L. no. 23 of 8 April 2020)
The Law Decree to provide liquidity to businesses has been published in the Official Gazette; the Law Decree provides further and important measures which have been adopted by the Government in order to support the economy and businesses, in addition to some updates and amendments to some of the measures previously adopted to contain the spreading of the Coronavirus.
Amongst the many aspects contained in the Law Decree, we would highlight the following, as they are of particular interest for our areas of activity:
Extension of the suspension on procedural time limits and court hearings:
The suspension of procedural time limits and hearings pursuant to the Law Decree “Cura Italia” (art. 83, paragraphs (1) and (2)) had provided (such suspension) until 15 April 2020; this has been extended until 11 May 2020.
Therefore, the procedural time periods which would have begun to run during the period of suspension shall begin to run as of 12 May 2020.
The postponement of the (new) law on businesses in crisis and insolvency:
Article 5 of the new Law Decree postpones the entry into force of the law on businesses in crisis and insolvency to the 1 September 2021, which, according to Article 389 of said new law, was due to come into force in August 2020. The postponement is intended to ensure that all parties involved in company crisis procedures continue to work according to the practices which are already established as well as to allow the most acute phase of the epidemic to pass, thereby giving the entire economic system time to get back to normal.
Provisions in relation to arrangements with creditors and of restructuring agreements:
As regards arrangements with creditors and restructuring agreements, the new regulations are intended to safeguard those procedures which prior to the pandemic presented some concrete chances of success, but which today, in the full of the crisis, could turn out to be irreparably impaired with obvious negative impacts on the preservation of businesses.
Thus article 9 provides a six-month extension to fulfil arrangements with creditors and approved restructuring agreements which had expiry dates between 23 February 2020 and 31 December 2021.
With reference to agreements not however approved, the debtor shall be entitled to submit a request for the granting of a time period of not more than 90 days to file a new plan for an arrangement or a new restructuring agreement in which the economic factors due to the epidemiological crisis should be taken into account.
Solely with respect to arrangements which have not been approved and to restructuring agreements, the debtor shall be permitted to unilaterally modify the time period for fulfilment originally provided by a maximum of six months provided that it demonstrates the need for the modification of such time periods, by filing a statement before the hearing scheduled for the approval/homologation.
In relation to so-called composition agreements “agreed with terms in blank” pursuant to the former paragraph (6) of Art. 161 of Bankruptcy Law, the debtor may request an extension of 90 days, again underlining the elements that render such extension necessary with special reference to supervening events as a result of the COVID-19 emergency.
Inadmissibility of claims for bankruptcy:
The Law Decree provides for the inadmissibility of claims for bankruptcy that are submitted by creditors or businesses themselves from 9 March to 30 June 2020 with the exception of the application for issuance of interim or precautionary measures submitted by the public prosecutor.
As regards the time limits for bringing avoidance actions within the meaning of Articles 10 and 69 bis of the Bankruptcy Law, the Law Decree provides such suspension period will not be counted for the purposes of calculating the time limit.
Provisions for capital reduction and funding of companies:
With a view to avoiding that loss of share capital due to the epidemiological crisis puts the directors in a position whereby they have to order the immediate liquidation of their companies – with the consequent loss of the prospect of even performing businesses being able to as well as the risk of exposing themselves to liability for non-conservative management – the new Law Decree provides, in Art. 6, that with effect from 9 April 2020 until 31 December 2020, rules (Articles 2446, paragraphs (2) and (3); 2447, 2448 bis, paragraphs (4), (5), (6); and Art. 2482 ter) in relation to capital reduction for loss and reduction of share capital below the statutory limit shall not apply. Within the same period of time the cause for dissolution of companies as a result of capital reduction or loss of share capital as per Articles 2484, n. 4, and 2545 duodecies c.c., shall equally not apply.
As regards financing provided by shareholders in favour of companies, Art. 8 of the Law Decree provides that from 9 April 2020 until 31 December 2020, Articles 2467 and 2497 quinquies c.c. will not apply with regard to the repayment of shareholders’ loans, and the mechanisms for subordinate status of loans.