Newsletter Immobiliare - 1/2010 - EN

On 31 May 2010, a law decree was issued (the “Decree”), and published on the same date in Gazzetta Ufficiale no. 125. Such Decree sets out the economic and financial measures for 2011-2012, measures which entered into force on 1 June 2010 (with the exception of certain provisions which are due to enter into force at a later date).
Without purporting to provide a complete and exhaustive analysis of the provisions of the Decree, which are in large part sector-specific and therefore of interest to a rather limited audience, we have set out below certain preliminary considerations with a view to illustrating four specific issues addressed under the Decree, and namely:

1. The new framework (tax, regulatory and civil law) governing mutual investment funds;
2. The new rules on formal requisites applicable to deeds concerning the transfer, establishment or dissolution of joint ownership, with respect to property rights over real estate assets;
3. The new rules governing deeds for the sale of real estate assets belonging to social security and insurance entities/agencies;
4. Amendments to the rules on pre-deduction of receivables and suspension of enforcement actions in certain insolvency procedure scenarios.

For each of the above issues, set out below is the text of the new provisions together with certain preliminary remarks on each.

1. The new framework (tax, regulatory and civil law) governing mutual investment funds.
Article 32 of the Decree in question reads as follows: “Re-organization of the tax regime applicable to closed-end real estate funds” and provides:
“1. The following amendments are made […] to legislative decree 24 February 1998, no. 58 (Uniform code of provisions on financial brokerage):
a) article 1, paragraph 1, letter j) is replaced by the following: «j) 'mutual investment fund': the independent pool of assets gathered, through one or more issues of units, from multiple investors for the purpose of investing the same in accordance with a pre-established investment policy; sub-divided into units belonging to multiple unitholders; managed on a centralized basis, in the interest of the unitholders and independently from the same;»;
b) in article 36, paragraph 6, after the wording: «as well as from all other assets managed by the same company», the following wording is inserted: «; of obligations undertaken on its behalf, the mutual investment fund may be held liable solely to the extent of its own assets.»;
c) to article 37, paragraph 2, letter b-bis), after the wording: «to the investors’ professional experience;» the following wording is inserted: «articles 36, paragraph 3, last sentence and paragraph 7, and article 39, paragraph 3 do not apply to such funds.»
2. The Minister of the Economy and Finance shall issue, pursuant to article 37 of legislative decree no. 58 of 24 February 1998, the provisions implementing paragraph 1 within thirty days of the date of entry into force of the law converting this decree.
3. Asset management companies which have established mutual real estate investment funds which, as of the date of entry into force of this decree, do not meet the requisites set out in article 1, paragraph 1, letter j) of above-mentioned legislative decree no. 58 del 1998, as amended by paragraph 1, letter a), shall adopt the consequent adaptation resolutions within thirty days from the date of issuance of the decree referred to under paragraph 2.

4. At the time of issuance of the adaptation resolutions, the asset management company shall withdraw, as a substitutive tax in lieu of income taxes, an amount equal to 5 percent of the average of the net amounts of the fund set out in the six month reports prepared over the tax years 2007, 2008 and 2009. The tax is paid by the asset management company in the amount of 40 percent by 31 March 2011 and the balance in two equal instalments to be paid by 31 March 2012 and 31 March 2013, respectively.
5. Those asset management companies which do not intend to issue the adaptation resolutions envisaged under paragraph 3 must resolve, within thirty days of the issuance of the decree referred to under paragraph 2, to liquidate the mutual investment fund, pursuant to an exemption from all other provisions set out in legislative decree no. 58 of 24 February 1998, and in the implementing provisions. In such case, the substitutive tax referred to under paragraph 4 is due at the rate of 7 percent, in accordance with the terms and modalities set out therein.
[…]
7. Paragraph 3 of article 7 of law decree no. 351 of 25 September 2001, converted, with amendments by law no. 410 of 23 November 2001, is abrogated.
8. Paragraphs 17 – 20 of article 82 of law-decree no. 112 of 25 June 2008, converted, with amendments, by law no. 133 of 6 August 2008, are abrogated.
[…]”

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1.1 Amendment to the definition of mutual investment fund
Generally speaking, as confirmed by the explanatory report on the Decree (the “Explanatory Report”), the amendments to the provisions on mutual investment funds are “aimed at restricting the phenomenon of so-called “vehicle” real estate funds, to combat the instrumental use of real estate investment funds having a restricted unitholder base aimed at reaping the tax benefits afforded under the current legal framework”. Despite this purported goal, which may be relevant for purposes of interpreting the relevant provisions, it should be noted that the amendments apply, from a civil law and regulatory standpoint, to all mutual investment and even impacts upon the very definition of “fund”.
With regard to the amendment to the definition of mutual investment fund set out under art. 1, paragraph 1, j) of Legislative Decree no. 58/1998 (“TUF”), the main novelties with respect to the former definition are the following1 :
a)The fund assets are “gathered” from multiple investors;
b)The purpose of the fund is to make investments in accordance with a pre-established investment policy;
c)The management of the fund must be conducted autonomously from the investors and in their interest.
The Minister of the Economy and Finance is delegated the task of specifying, through a special regulation, the “provisions implementing paragraph 1” (which sets out the above-mentioned definition). Hopefully, the implementing provisions will allow for a better understanding of the above-mentioned requisites.
Pending the publication of such implementing provisions, we may envisage that, for purposes of ensuring that the autonomy requisite is met (i.e. autonomy from the unitholders), the detailed provisions will likely impose governance rules aimed at reducing the powers of consultative committees, in line with the principle already indicated by the Bank of Italy in its consultative document for review of the secondary provisions on asset management dated 16 March 2010.
Again, in order to ensure that the requisite on the protection of the unitholders’ interest is met, the detailed provisions could provide for more rigorous conflicts of interest rules than the current ones, and possibly reinforce the safeguards to be adopted by the asset management company (società di gestione del risparmio or “SGR”) in such regard.
As for the reinforcement of the requisite on the multiple number of unitholders, it is not easy to predict future developments in the implementing regulations; nor would it appear that the Explanatory Report on the Decree effectively assists in clarifying the rules, as such Explanatory Report simply specifies that the current (advantageous) tax regime should be limited to funds “which manage broadly held savings and those aimed at conducting activities in the public interest”. On the basis of such wording, it is difficult to discern what kind of concrete indications on the concept of plurality (whether “substantive”, “formal” or with indication of an exact number of unitholders or a precise percentage) may be imposed under the implementing provisions. That said, the reference to the funds that manage “broadly held savings” would appear particularly meaningful, since it would appear to refer to situations in which the units are held by a significant number of persons.
Finally, it should be highlighted that the detailed provisions to be adopted by the Minister and the new definition of fund already set out in the Decree will have repercussions not only with regard to taxation, but also (and first and foremost) with regard to civil law/regulatory matters, since they amend the very definition (and therefore the concept) of mutual investment fund, thus impacting upon the structure of relationships and equilibriums in place between the SGR and the unitholders of the fund.
The consequences caused by a change in the concept of mutual investment fund could theoretically amount to a requalification, including from a civil law/regulatory standpoint, of funds that are already existing and operating, which could potentially result in liabilities and responsibilities to be attributable to the SGRs.
It should be noted that the Explanatory Report states that “existing funds are allowed to adapt to the new civil law provisions” through the payment of the taxes better described in paragraph 1.5 below. We would hope that the provisions implementing the Decree will set the conditions, modalities and effects of such an “adaptation”, which could allow for the potential civil law and regulatory consequences mentioned in the preceding paragraph to be significantly reduced for any existing funds which elect to validly “adapt” to the new legal framework.

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1.2 Asset segregation
Through the amendment of art. 36, paragraph 6 of the TUF, it is specified that the solely fund itself, to the extent of its own assets, may be held liable for the obligations undertaken by the SGR on behalf of the fund. This is consistent with the asset segregation requirement which constitutes a distinguishing feature of the notion of the mutual investment fund, meaning an autonomous set of assets.
This was a principle that had already been included the provisions in force prior to the Decree’s entry into force, but which is now governed more clearly, for purposes of safeguarding both unitholders and fund management companies.

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1.3 The procedure for approving rules
The amendment to art. 37, paragraph 2 letter b-bis) cancels the rule which previously called for the prior approval by the Bank of Italy of fund management rules for funds reserved to qualified investors and amendments to the same.
This amendment would appear to be based upon an assumption that with regard to this type of funds there is less of a need to safeguard unitholders, who should belong to categories of persons/entities that are particularly active on the financial markets or at the very least persons/entities that have specific skills and experience in financial instruments.
This provision of the Decree should, we would hope, be implemented through specific implementing provisions aimed at defining the concrete application aspects concerning the same and the implications for SGRs and investors. Such implementing provisions could be helpful in assessing the possible consequences concerning the practice and rulings and decisions of regulatory authorities, both in terms of prior and subsequent reporting required of SGRs, and their potential responsibilities and liabilities.
We may from the outset expect to see a beneficial simplification and acceleration of the processes necessary for the establishment of new funds, benefit which will be countered by the loss of the albeit limited reassurance on the lawfulness of the fund rules and the provisions on the SGR’s autonomy and independence from the unitholders, which in the past could be gleaned from the Bank of Italy’s approval of the rules. This loss will be even more important in light of what is stated under paragraph 1.1 on uncertainties concerning the new requisites imposed under the Decree for purposes of attaining the “status” of mutual investment fund.

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1.4 The obligation to adapt
In addition, existing mutual investment funds which do not fall under the concept of “fund” within the meaning set out under the definition amended by the Decree (which shall hopefully be better specified under the implementing provisions), will be under an obligation:
(a)To adapt, by passing the necessary resolutions aimed at ensuring that the fund conforms to the legal requirements, and by paying the substitutive tax in lieu of income taxes; or
(b)To liquidate the fund under an exemption from any other provision of the TUF, by paying a different (and higher) substitutive tax in lieu of income taxes.
On this point, the modalities to be followed in order to adapt to the new provisions are yet to be clarified.
It may be necessary to hold a special meeting of the unitholders in order to approve the amendments to the fund rules that will be necessary in order to align the rules to the new legal framework. In such case, if the resolution of the unitholders’ meeting on the amendment to the rules is not approved, due to an unfavourable vote by the unitholders or failure to achieve the relevant quorums, the SGR would presumably be required to proceed with the liquidation of the fund under an exemption to the applicable laws in force.
Such obligations imposed upon SGR give the important responsibility of assessing whether or not the fund complies with the new legislative definition. The SGR would appear to be responsible for assessing whether or not each fund complies with the new legal framework, and to pass the relevant resolutions or, as the case may be, commence the liquidation of the same. It is possible to envisage, even right now, scenarios in which, for example, the SGR and the unitholders (or certain unitholders) may not agree on whether the fund meets the plurality, autonomy and independence requisites set by the Decree and, therefore whether the adaptation or liquidation requirements apply to the individual fund2. . This could give rise to situations of conflict, which in turn could considerably complicate the compliance with the new legal obligations.
It is not even clear how a situation might be handled where, upon the approval of amendments adopted to a fund that is not reserved to qualified investors, the Bank of Italy is of the view that such amendments cannot be approved or are not sufficient for purposes of adaptation. Again, in the case of funds reserved to qualified investors, the elimination of the prior approval by the Bank of Italy essentially exposes the SGR to the risk that the amendments adopted may be later deemed insufficient for purposes of achieving the envisaged purpose, thus triggering a breach of the provisions of the Decree, and prolonging the period of uncertainty on the fund’s status and the regime to which it is subject.
Moreover, again on the matter of adaptation to the provisions, the requirement to be met by SGRs on the reinforced plurality requisite should be clarified, especially for existing funds: in other words, it is not clear what actual mechanisms are available to the SGR for purposes of ensuring that this requisite is met, except perhaps the re-opening of the subscription period of the fund.

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1.5 The substitutive tax due by real estate funds that do not comply with the new civil law framework
As mentioned above, on the occasion of the adoption of possible resolutions for the adaptation of real estate funds to the new requisites, the SGR must pass resolutions to achieve the adaptation and apply a substitutive tax in lieu of income taxes. Such substitutive tax would apply in the amount of 5% of the average net asset values of the fund as set out in the half yearly reports prepared for the financial years 2007, 2008 and 2009. The tax must be paid in three annual instalments, the first of which must be paid in the amount of 40% by 31 March 2011 and the following ones, of 30% each, respectively, by 31 March 2012 and 31 March 2013.
If the fund fails to meet the requisites set out under the new civil law definition, the asset management company must proceed with the liquidation of the fund and pay, in accordance with the same modalities described above, a higher substitutive tax of 7%.
This provision is not immediately applicable in light of the fact that in order to identify the modalities for the implementation of the provision in question, the Decree states that a Ruling by the Director of the Revenues Agency will be issued within 30 days of the date of issuance of the provisions by the Minister of the Economy and Finance, which are in turn expected to be issued within 30 days of the date of conversion of the Decree.
Based upon a literal reading of the provision, it would appear that the substitutive tax in question would not apply to funds established following the Decree’s entry into force. The tax consequences for a fund established after the Decree’s entry into force, which is not deemed to comply with the new civil law definition, would still remain to be clarified.
Finally, the new rule (see its paragraph 8) has imposed the elimination of the estate tax (imposta patrimoniale) for reserved funds and family funds, introduced by article 82 of Legislative Decree no. 112 of 25 June 2008.

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1.6 The new tax regime applicable to foreign unitholders
Article 32 of the Decree further provides for (see paragraph 7) the abrogation of the non-taxable status currently applicable to proceeds distributed by the fund and received, inter alia:
(a)By persons with tax residence in countries which allow for an adequate exchange of information, as listed in the list to be issued in accordance with article 168-bis, paragraph 1 of the D.P.R. 917/1986 (known as the “white list”); and
(b)By international entities or bodies established in accordance with International agreements ratified in Italy, foreign institution investors, even if lacking individual tax status, established in countries included in the white list referred to under letter (a) above, and central banks and entities that also manage official reserves of the state.
Therefore, given the above-mentioned abrogations, in the case of investors who are not resident in Italy (and do not have a permanent establishment in Italy to which the holding of the fund unit its effectively related), a 20% tax withholding will always be due on proceeds deriving from the real estate fund unit, or in other words (a) proceeds classified as capital income pursuant to article 44, paragraph 1, letter g of D.P.R. 917/1986, distributed during the period the unit is held, and (b) the difference between the redemption or liquidation value of the unites and the subscription or purchase price (documented by the unitholder or, in the absence, by substitutive declaration). The implications arising from the possible application in this respect of the treaties on double taxation are currently under evaluation.
The new provisions do not change the regime currently applicable to capital gains (and capital losses) and therefore in the case of investors who are resident or established in white list countries and do not have a permanent establishment in Italy to which the fund unit is effectively related, the same shall continue to not be counted as income, pursuant to article 5, paragraph 5 of Legislative Decree 461/1997.

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2. The new rules governing formal requisites for deeds concerning the transfer, establishment or dissolution of joint property rights concerning real estate assets
Article 19, paragraph 14, of the Decree under review provides as follows:“In article 29 of law no. 52 of 27 February 1985, the following paragraph is added: «1-bis. Inter vivos public deeds and private authenticated deeds that concern the transfer, establishment or dissolution of joint property rights in existing buildings must contain, with respect to urban real estate assets, in addition to the cadaster identification, the reference to the maps filed with the cadastre and a declaration by the owners, that the cadaster cadastre maps and information reflect the actual state of the property. In absence of such declaration the deeds are null and void. Prior to the execution of the above-mentioned deeds, the notary must identify the owners registered in the cadaster and verify that such registration matches with the actual owners.».”
It would appear reasonable to conclude that the rule may be to some extent related to paragraphs 8 and 9 of the above-mentioned article, which impose an obligation to register in the cadaster (the tax real estate registry) so-called “ghost” real estate assets (in other words those which are not registered in the cadaster) and to update cadaster registration on real estate assets which have undergone construction works (a) of such a nature as to change the size or use of the real estate asset and (b) not registered in the real estate registry.
The new rule appears to be somewhat similar to the rule contained in law 47/1985 and the subsequent D.p.r. 380/2001, which provide that inter vivos deeds, whether public or private, concerning property rights in real estate assets are be null and void if such deeds do not contain, through a declaration by the seller, an indication of the details on building permits/rulings pursuant to which the real estate assets were constructed.
The rule set out in the Decree, which has been approved through a ruling aimed at imposing the cadastral registration of real estate assets, provides that the failure to declare that the actual state of the real estate asset conforms to that set out in the cadaster would give rise to the nullity of such deeds. In a nutshell, this would appear to amount to an attempt to provide for indirect incentives for registering real estate assets in the cadaster, by imposing sanctions upon those who fail to perform such registration in the form of nullity of subsequent deeds concerning buildings that are not properly registered.
In this regard, it is nonetheless worth noting that, as already occurred with law 47/1985 and D.p.r. 380/2001- this “improper” use of the sanction of nullity of deeds risks considerably complicating real estate transactions, and this may well have an impact, and possibly a significant impact, on this market.
Indeed, following the entry into force of the rule (expected to take place on 1 July 2010), prior to entering into any public deed or private authenticated deed concerning urban buildings, it will be necessary:
(i)To verify (such verification to be conducted by the notary) that the owners registered in the cadaster correspond with the actual holders of rights over the building (as set out in the “registri immobiliari”, i.e., the public real estate registry, which is different from the cadaster as the latter has mostly a tax purpose), and where appropriate make any opportune updates to the cadaster. This verification and updating, while they complicate the execution process, may be conducted fairly easily (including electronically), and therefore, although they could cause a potential delay in real estate transactions and possibly a higher cost, should not constitute an insurmountable obstacle to the execution of the related deeds;
(ii)To verify the “conformity” of the cadaster data and maps to the actual state of the property and, where appropriate, make any opportune updates. This conformity must be certified in a special declaration made by the owner in the deed. This additional verification, unlike the one referred to under point i), could turn out to be particularly complex since it may require a technical inspection of the real estate asset. Certainly, at present, notaries are not in a position to verify the actual state of the building, and therefore where the owner of the building does not have in depth knowledge of its actual state, in order to allow the owner to be certain that his declaration is accurate, a special technical verification will be required, which is apt to result in inevitable costs and delays.
As for the verification referred to under point (ii), it should also be noted that the concept of “conformity of the cadaster data and maps to the actual state of the property” is not entirely univocal. Under a systematic interpretation of the rule, we could conclude that the above-mentioned verification should be limited to the cases referred to under paragraphs 8 and 9 of the article 19 of the Decree which impose the cadaster registration of the building (in cases where buildings are not registered) or the updating of the cadaster data (in cases where works have been carried out on the building of such a nature as to change the consistency or use of the same). This initial interpretation appears relatively liberal, since it would allow to limit cases in which the deed would be null and void (and the related verifications) to only those cases in which the cadaster data show particularly serious gaps. On the other hand, under a literal reading of the rule, it could be concluded that the term “conformity” means the absence of any discrepancy (no matter how slight) between the actual state of the real estate asset and the cadaster data (just consider, as an example, internal renovations). This second interpretation (which is to some extent supported by the Explanatory Report, which justifies the rule by stating the need to allow for an updating of the cadaster, without distinguishing between cases that are more or less relevant) would inevitably lead to the need to make in-depth verifications from time to time on the actual state of buildings, which verifications could turn out to be highly complex in certain cases, such as in the case of a transfer of significant real estate assets that are highly sub-divided and/or leased to third parties.
Finally, it should be noted that the rule applies only to deeds that are drafted in the form of a public or private authenticated deed. Therefore, in cases where cadaster irregularities are not easily remedied, it may be possible to execute a deed in the form of a “simple” private deed (which apparently, under the rule, would not require the above-mentioned verifications of the land registry status), and then later repeat the deed in public (or authenticated) form once the cadaster data have been updated. However, the execution of a “simple” private deed would not allow for the immediate annotation on the real estate registries, and therefore would not be enforceable against third parties, which presumably in most cases would render this solution infeasible.

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3. The new rules governing deeds for the sale/transfer of real estate assets belonging to pension or assistance entities (“enti di assistenza o di previdenza”)
Article 8, paragraph 15, of the Decree provides as follows:
“Transactions involving the purchase and sale of real estate assets by public and private entities which manage mandatory forms of assistance or pensions, , as well as transactions by such entities involving use of the proceeds deriving from the sale of the real estate assets or units of real estate funds, are subject to verification of compliance with the structural balance of public finance, verification to be implemented by a non-regulatory decree of the Minister of Labour and social policies, in concert with the Minister of the Economy and Finance.”.
This is clearly a rule that is particularly important for transactions involving the sale (or purchase) of real estate assets by pension or assistance entities (whether public or private). Under the rule, prior to conclude such transactions, and prior to use proceeds generated from the sale of real estate assets or units in real estate funds, the entities must obtain a decree from the Minister of Labour and Social Policies which verifies “compliance with structural balances of public finance”.
It should be noted that on the basis of a reading of the text of the rule, the following matters are not clear, inter alia:
(i)What is meant by the reference to “structural balances”, and in particular whether the verification should be limited to the balances of the single entity (and in such case, for what reference period?) or if a broader perimeter must be taken into account, as could possibly be gleaned from the general reference to “public finance”;
(ii)Whether or not, in the case that the outcome of the verification is negative, the entity may proceed with the transaction, for example by proving that the transaction is aimed at improving the above-mentioned structural balances;
(iii)Whether the rule also applies to proceeds generated by transactions that have already been concluded previously to the entry into force of the rule; and
(iv)Precisely at which point the verifications and decrees in question must be requested, and namely whether this should be done once the transaction has been completed or rather in advance, for example at the beginning of the year, in order to take into account all of the transactions planned over a given period of time.
The market practice which will evolve when the rule is actually applied in practice (as well as any secondary provisions aimed at clarifying, inter alia, the above points and the procedure to be followed, which would certainly be helpful) will allow us to gain a better understanding of the scope of application, the consequences and the procedures which will have to be followed in order to obtain the above-mentioned decrees.
What is certain from the outset is that real estate transactions which involve social security entities will from now one require an additional formality to be performed by the Minister of Labour and Social Policies, which is likely to cause inevitable delays in timeframes for such transactions and to add an additional element of uncertainty to the transaction, uncertainty which may be resolved from time to time only through the issuance of the relevant decree.
Moreover, an “indirect” effect may not be ruled out, caused by the breach of the rule on subsequent transfers of a real estate asset that had been originally owned by a social security entity. Take, as an example, a case where Person A purchases a real estate asset from a pension entity in breach of the above provision of the Decree (for example due to the fact that the social security entity failed to request the decree from the Minister), and at a later time, Person A sells the real estate asset to Person B. Based upon a literal reading of the rule, we might envisage that the sale by the pension entity to Person A may be null and void, which could have potential consequences upon the sale by Person A to Person B. In order to avoid the risk of a similar effect, it would be necessary to verify, any time one intends to purchase a real estate asset, that the same has never been owned by a pension or assistance entity during a period following the entry into force of the rule or, where the real estate asset has been owned by a pension or assistance entity during such period, to verify that on such occasion the Minister’s decree was obtained. Even in cases where the notary who stipulated the sale by the pension or assistance entity was diligent and attached the decree to the deed of sale, the verification will lead to delays and costs, and this situation will be rendered more complicated where the decree has not been attached to the deed, since in such case it would theoretically be necessary to request a copy of the same from the Ministry.

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4. Amendments to the regime governing the pre-deduction of receivables/claims and the stay on enforcement actions in certain insolvency scenarios
Article 48 of the Decree which reads “Provisions on insolvency proceedings”, provides, inter alia, as follows in paragraphs 1 and 2:
“1. After article 182-ter of Royal Decree no. 267 of 16 March, as subsequently amended, the following wording is inserted:
«Art. 182-quater (provisions on the matter of pre-deductibility of receivables/claims in the pre-bankruptcy creditors’ composition, and in debt restructuring agreements).
The receivables arising under financings made in any form by banks and financial intermediaries registered in the lists referred to under articles 106 and 107 of legislative decree no. 385 of 1st September 1993, under a pre-bankruptcy creditors’ composition within the meaning set out in articles 160 et seq. or a ratified debt restructuring agreement within the meaning set out in article 182-bis) are pre-deductible pursuant to and for purposes of article 111.
The receivables arising under loans made by the persons/entities indicated under the preceding paragraph in connection with the presentation of a request for admission to a pre-bankruptcy creditors’ composition or request for ratification of a debt restructuring agreement are also pre-deductible pursuant to and for purposes of article 111, if the loans are envisaged under the plan referred to under article 160 or under the restructuring agreement and provided the pre-bankruptcy creditors’ composition or agreement are ratified.
Under an exemption from articles 2467 and 2497-quinquies of the Italian Civil Code, the first paragraph also applies to loans made by shareholders, up to an amount equal to eighty percent of their amounts.
[…]
2. After the fifth paragraph of article 182-bis of Royal Decree no. 267 of 16 March 1942, as subsequently amended, the following paragraphs are added:
«The stay on commencing or continuing precautionary measures or enforcement actions referred to under the third paragraph may also be requested by the businessperson during negotiations and prior to the perfection of the agreement referred to under this article, by filing with the court the documentation referred to under article 161, first and second paragraphs, and a draft agreement accompanied by a declaration by the businessperson, which amounts to a self-declaration, certifying that negotiations are in progress on the proposal with creditors representing at least sixty percent of the receivables and a declaration by a professional meeting the requisites set out under article 67, third paragraph, letter d), on the satisfaction of conditions to ensure the regular payment of creditors with whom negotiations are not in progress or who have otherwise expressed their unwillingness to negotiate. The request for suspension referred to under this paragraph is published in the companies’ register.
The court, once the documentation filed has been found to be complete, schedules the hearing by way of a decree/court order, within thirty days from the filing of the request referred to under the sixth paragraph, ordering the delivery of the documentation to the creditors. Over the course of the hearing, once it has been found that the conditions have been met in order to reach a debt restructuring agreement with the majorities provided under the first paragraph and the conditions for the regular payment of creditors with whom negotiations are not in progress or who have expressed their unwillingness to negotiate, orders, by way of a reasoned court order/decree, a stay on commencing or continuing precautionary measures or enforcement actions, imposing a deadline of not more than sixty days for the filing of the restructuring agreement and the report drafted by the professional in accordance with the first paragraph. The court order referred to under the previous sentence is subject to challenge/appeal pursuant to the fifth paragraph to the extent applicable.
Following the filing of the debt restructuring agreement by the deadline assigned by the court, the provisions of the second, third, fourth and fifth paragraphs apply.».”
The foregoing provisions appear to be aimed at favouring and facilitating the resolution of financial crises faced by businesses. In particular, with a view to promoting, inducing and facilitating the conclusion of pre-bankruptcy creditors’ compositions in accordance with art. 160 of the bankruptcy law and the conclusion of debt restructuring agreements in accordance with art. 182 bis of such law, the rule provides:
(i)That receivables arising under financings made by banks or financial intermediaries or even by shareholders (with regard to shareholders subject to a limit of 80%), in accordance with (or in connection with the submission) of a pre-bankruptcy creditors’ composition or debt restructuring agreement that is ratified (including at a later time) in accordance with the bankruptcy law are “pre-deductible” under art. 111 of the bankruptcy law (and therefore enjoy favourable treatment with respect to other receivables); and
(ii)The possibility of anticipating the stay on precautionary measures and enforcement actions to a moment prior to the publication (and execution) of an agreement with creditors
pursuant to article 182 bis of the bankruptcy law, and therefore also over the course of the related negotiations.
The amendment referred to under point (i) could facilitate the attainment of financial resources by businesses in financial difficulty, allowing persons who are willing to provide such resources to receive a significant privilege as compared with other creditors (and therefore a higher likelihood of obtaining repayment of the loans granted). The possibility for shareholders of companies in financial difficulty to obtain a privilege for the repayment of shareholders’ loans is particularly incisive, and goes against the trend of other rules recently introduced to the legal system (arts. 2467 and 2497 quinquies of the Italian Civil Code), which tend to subordinate the reimbursement of the shareholders’ loans to the reimbursement of “third party” creditors.


The amendment referred to under point (ii) could, on the other hand, provide a business in financial difficulty a window of opportunity during which to conclude negotiations with creditors, without having to fear the possibility that one or more creditors could unilaterally commence enforcement actions or precautionary measures, even merely for purposes of causing “disruption”. The actual usefulness of this rule will likely depend upon the timeframe of the reaction on the part of the courts in setting the hearings envisaged under the rule and in issuing the ruling and the type of documentation and verifications that the courts will request in order to verify that the conditions for reaching a restructuring agreement have been met. Indeed, longer timeframes or in-depth verification procedures would presumably facilitate the prior execution of a restructuring agreement.

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We are fully available to provide further clarifications with respect to the above.

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