The Italian Insolvency Code—A Work in Progress: Timing and News

The Italian government has postponed again the entry into force of Legislative Decree No. 14 dated 12 January 2019 (the "Insolvency Code"), taking into account the COVID-19 impact on the socio-economic scenario and the framework set forth by Directive (EU) 2019/1023.

By Law Decree No. 118 dated 24 August 2021 (the "Law Decree"), the Italian government has postponed the entry into force of the Insolvency Code, which provides for an in-depth reform of the Italian insolvency law.

In particular, the entry into force of the Insolvency Code, which was meant to become effective starting from 1 September 2021, has been postponed to 16 May 2022, and the early warning procedures for identifying and potentially remediating early-stage crises (i.e., Title II of Part I of the Insolvency Code) has been postponed to 31 December 2023. This postponement will allow the Insolvency Code to be better tailored to the new Italian socio-economic scenario, which has been severely impacted by the COVID-19 pandemic, as well as to be adapted to the framework set forth by Directive (EU) 2019/1023, which must be transposed before July 2022.

Furthermore, the Law Decree: (i) introduces in the Italian insolvency legal framework a procedure for the negotiated settlement of a business crisis (so-called "composizione negoziata per la soluzione della crisi d'impresa"), which is an out-of-court tool meant to facilitate the reorganization of business activities where the crisis is still potential and reversible; (ii) provides for certain amendments to Law No. 267 dated 16 March 1942 (the "Bankruptcy Law"), including the introduction with immediate effect of new articles 182-septies (restructuring agreements with extended effects), 182-octies (provisional standstill agreements) and 182-novies (facilitated restructuring agreements) aimed at widening access to debt restructuring agreements and anticipating certain measures included in the Insolvency Code; and (iii) introduces certain temporary measures to fight the impact of the COVID-19 pandemic.

Although the Law Decree became effective immediately, it is subject to a conversion-into-law procedure before the Italian Parliament, which could take up to 60 days after the Law Decree's effective date, and may conclude with the legislature's approval of the original text of the Law Decree (with or without amendments) or its rejection. In the latter case, the legislation would be deemed ineffective from its inception.

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