Composition with creditors’ discipline: recent clarification
| Insights
With ruling no. 734 of January 15, 2020, the Italian Court of Cassation intervened on the rules applicable to composition with creditors that combines the partial continuation of the company’s business together with the atomistic liquidation of part of its assets.
This is the so-called “concordato misto”, which identify an arrangement with creditors the proposal of which envisages, alongside the continuation of the company’s activities, a dismissal of the assets not functional to the business continuation itself.
With respect to this tertium genus, and in particular with reference to the discipline applicable to it, the case law reached different outcomes in the recent past, sometimes considering applicable the discipline provided for composition with creditors based on business continuity only when the majority of the resources destined to satisfy the creditors originated from the business continuation (the so-called prevalence theory, or absorption theory), sometimes considering that discipline (section 186-bis of Italian Bankruptcy Law) always applicable, regardless of the consistency of the resources coming from the business continuity and destined to the creditors’ satisfaction.
Other scholars had then proposed a selective application of the discipline of one type of composition or the other (composition with creditors by assignment of assets vs composition with creditors based on business continuity), depending on the different content of the composition proposal.
After analysing the current regulatory context, the Supreme Court stated – overcoming the various interpretations mentioned above – that the provisions of section 186-bis of the Italian Bankruptcy Law “in the last period of the first paragraph, expressly includes in the category regulated by the special discipline the case in which the proposal provides “also the liquidation of assets not functional to the business continuity”. The co-presence in the proposal of liquidation accompanied by the continuation of the company business is therefore expressly contemplated by the legislator, within the norm, special and derogating from the general criteria, pursuant to Bankruptcy Law, Art. 186-bis. This leaves no room for misunderstandings regarding the fact that this legislation governs the case (i.e. that the composition arrangement traditionally defined as mixed is, in the intentions of the legislator, an arrangement based on business continuity which provides for the disposal of assets). The norm’s text does not evoke any prevalence ratio of one part of the goods with respect to the other to which a different fate is reserved to, but refers to the liquidation of the assets “not functional to the running of the business”, implying that the functional ones are instead intended for the continuation of the business activity […] this rule does not provide for a prevalence judgment between the portions of goods to which a different destination is assigned, but an assessment of the suitability of the assets withdrawn from liquidation to be organized according to the continuation, total or partial, of the previous business activity and to ensure, through such an organization, the best satisfaction of creditors“.