5.1. General information
On the basis of elements required by law, insolvency proceedings can be started in the court nearest to the head office of the debtor, following a request filed by the debtor, the debtor’s creditors, or a public prosecutor (“ex officio”).
The main types of insolvency proceedings in Italy are bankruptcy (“fallimento”) and judicial compositions with creditors (“concordato preventivo”).
We can analyse in detail the two main types of insolvency proceedings:
In Italy, not all debtors can be declared bankrupt. According to Italian law, small debtors such as individual shops and small-scale farmers cannot be declared bankrupt. Neither can small owner-manager firms be declared bankrupt where the personal work outweighs the value of the goods involved.
You can ask for the bankruptcy of your debtor if your credit is more than EUR 30,000 and the debtor has a minimum turnover of EUR 200,000. The debtor should also not have been removed from the Chamber of Commerce for more than one year. After all the petitions filed in the court within the term fixed are checked, the debt situation will be fixed with a judge’s sentence, and a very long procedure of liquidation of the bankrupt debtor’s assets can take place.
Compensation with creditors
To avoid bankruptcy, the debtor can ask the court directly to be admitted to insolvency proceedings. The debtor’s petition must include how much they can pay their creditors with respective percentages of their debts. On the basis of D.L. n. 83/2015, in the case of a composition with creditors (“non in continuità aziendale”), it is provided that the debtor has to offer at least 20% to the unsecured creditors. This offer has to be approved by the majority of the creditors (considering the amount of each creditor’s credit) and should then be validated by the court. After that, the insolvency practitioner starts to liquidate the assets according to the payment plan.
5.3. Required documents
In order to lodge a bankruptcy claim, we need:
- Readable copies of the unpaid invoices
- Readable copies of the transport documents signed by the debtor (CMR)
- If there are no CMR documents signed by the debtor, then an abstract of your books of accounts authenticated by a notary is required
For a composition with creditors, we have to communicate to the insolvency practitioner the amount of credit and file the copies of any documents that prove the credit (e.g. invoices).
5.4. Expected time frame
For a bankruptcy procedure, a petition for lodging claims can be:
- On time (“tempestiva”): It’s filed in the court at least 30 days before the first hearing fixed by the court, and it’s checked during this hearing
- Late (“tardiva”): It’s filed in the court after the first fixed term but still within 12 months since the filing of the enforcement decree of the statement of liability
The average duration of a bankruptcy procedure is from six to seven years.
Regarding a composition with creditors, it’s necessary to first communicate the amount of credit to the insolvency practitioner. Before a hearing is fixed for all the creditors, each creditor has to vote (positive or negative) on the proposal after their hearing. After the validation by the court, the insolvency practitioner can start with liquidation that will usually take from two to three years.
5.5. Limited companies
A declaration of bankruptcy of a limited company has an effect only on the company and not on the individual persons, as they are not liable with their own goods and real estate.
5.6. Unlimited companies / individuals
Regarding an unlimited company, the partners are declared bankrupt by the judgment that declares the bankruptcy of the company. The court proceeds to appoint one judge and one trustee. On the basis of the criteria provided by article n. 1 L.F., a minor entrepreneur cannot be declared bankrupt.
5.7. Pools of creditors
A pool of creditors is appointed by the judge within 30 days after the declaration of bankruptcy. The pool is composed of three to five creditors, who have to represent the quality and quantity of the credit in a balanced way. The pool has to check the activities of the trustee, authorise actions, and give advice on the case provided by law or at the request of the court or judge. The pool’s decision has to be agreed to by the majority within 15 days since each request.
On the basis of article 67 L.F., there are two groups of payment that can be disputed by the trustee:
- Payment made by the debtor to a creditor within one year prior to the declaration of bankruptcy where the creditor has to prove that they did not know the insolvency status of the debtor
- Other payment made by the debtor to a creditor within six months prior to the declaration of bankruptcy. For these cases, the trustee has to prove that the creditor knew the insolvency status of the debtor
If the trustee disputes a payment, and it's one of the payments mentioned by law, it has to be refunded by the creditor.
(End of chapter 5 - Insolvency proceedings)