Debt Restructuring Agreement (Accordi di ristrutturazione del debito)

Debt restructuring agreements (DRA) are governed by Article 182bis of the Bankruptcy Law (Legge Fallimentare).

DRA is aimed at allowing a debtor experiencing financial difficulties to restructure its debts and obtain protection against creditors, through the validation by the court of an agreement made with a number of creditors.

Topic

Summary
What is the nature of the procedure?

It is a procedure aimed at acknowledging protection to debtors who enter into agreements with at least 60 per cent of their creditors. It is largely a private negotiation between the debtor and the creditors, and the court is involved only at the end of the negotiation process.

Who can commence the procedure?

A debtor in a situation of crisis who has reached an agreement with creditors representing at least 60 per cent of the debts, can apply the court to obtain validation of the restructuring agreement entered into with such creditors.

 

The application for the validation must include a fairness opinion executed by an independent expert regarding, among others, the reasonableness of the restructuring agreement to ensure full payment of any creditor who is not party to the agreement.

 

The restructuring agreement executed with the creditors must be registered with the register of companies.

Are there any corporate thresholds?

It is applicable in principle to both companies and individual entrepreneurs.

Is there a moratorium?

From the day the restructuring agreement is registered with the register of companies, creditors are prohibited from taking individual enforcement or interim actions during the following 60 days.

 

The debtor can also obtain a moratorium before the restructuring agreement is signed, if it files an application with the court, including the proposal of restructuring agreement, together with an affidavit certifying that negotiations of the proposal with creditors are pending and a fairness opinion by an independent expert confirming the suitability of the proposed agreement. The application must be registered with the register of companies. From the day of registration, creditors are prohibited from taking individual enforcement or interim actions, or from obtaining priority rights that have not been agreed.

 

The court fixes a hearing within 30 days of the date of filing the application. If the application is regarded as grounded, the court issues an order, confirming the moratorium and providing a term of up to 60 days for filing the executed restructuring agreement and the ancillary documentation. The moratorium expires if the restructuring agreement is not filed within that term .

 

Both the court order confirming the moratorium and the court order validating the restructuring agreement can be challenged within 30 days of the registration with the register of companies.

Who is in charge?

The debtor remains in charge of the company and its business during the entire procedure.

How are they selected, including voting thresholds?

 N/A

Is there a plan? Who votes and what are the thresholds?

The restructuring agreement is usually based on a restructuring plan.

 

The only requirement in terms of majority is that the restructuring agreement must be signed by creditors representing at least 60 per cent of the debts.

 What can the plan do?

There are no detailed requirements. The law provides that the restructuring agreement must be achievable and allow the payment of the creditors who do not enter into the agreement itself.

If not approved by the necessary majorities, can the plan still be approved?

If the restructuring agreement is not executed by the minimum number of creditors, it cannot be validated by the court and cannot come into force.

What is the exit route?

If the court validates the restructuring agreement, the agreement becomes final and binds the debtor and the creditors who executed it. The creditors who were not party to it must be promptly paid.

 

In case of subsequent bankruptcy, actions, security and payment made in compliance with the validated restructuring agreement benefit from an exemption from some bankruptcy rimes.

What is the priority of payments?

Creditors who have not executed the restructuring agreement must be paid after the validation. The others are paid in accordance with the provisions of the signed restructuring agreement.

Is there a creditors committee?

N/A

How involved is the court?

As explained above, the court decides in relation to:

 

- the application for a 60 day moratorium during the negotiation of the restructuring agreement;

- the validation of the restructuring agreement signed;

- the objections raised in connection to the restructuring agreement.

How is the liquidator paid?

N/A

Are there any general comments on the use of this procedure?

Any acts and payments made by the company, as well as any security granted on its assets, being performed in execution of a DRA, are not subject to claw back action in the event of subsequent bankruptcy of the company and also benefit from an exemption from some bankruptcy crimes.

 

In addition, the DRA grants super priority rights to the loans made by banks or lending institutions, if they comply with the plan validated by the court or are instrumental for the application with the court; super priority rights are also granted to shareholders loans disbursed to the same extent, up to 80 per cent of their amount.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.