The Arrangement with Creditors


The arrangement with creditors is an insolvency procedure , regulated by the Bankruptcy Law ( ie Royal Decree No. 267 of 16 March 1942 and subsequent amendments ), which can be used by a debtor who is in a state of crisis or insolvency , to attempt the reorganization of the company thus avoiding bankruptcy.

This paper offers a brief overview of the establishment of the agreement with creditors also in light of recent legislative interventions.


First of all, it should be said that the debtor can request admission to the arrangement with creditors if three conditions are met :

  • must exercise a commercial activity ;
  • must be in a state of crisis or insolvency ;
  • must exceed at least one of the fallibility thresholds .

Article. 1 of the Bankruptcy Law establishes that entrepreneurs who carry out a commercial activity, excluding public bodies, are subject to the provisions on the arrangement with creditors.

The arrangement with creditors can then access :

i) the entrepreneur natural person who carries on business;

ii) commercial companies , both capital and people;

iii) the irregular and de facto commercial enterprise ;

iv) associations that carry out a commercial activity;

v) groups of companies .

Second prerequisite is the existence of a state of crisis , understood as a situation of economic or financial difficulty including also insolvency.

The concepts of a state of crisis and a state of insolvency are placed in relation to each other in relation to gender, re-entering into the former both the actual insolvency ( understood as a manifest inability to meet one’s obligations ) and situations prodromal to it or finitime , destined to stand out in terms of their possible overcoming, albeit through extraordinary measures of reorganization and debt restructuring.

Third and final requirement is that the debtor has , in at least one of three years prior to the filing date of the appeal, passed at least one of the following requirements :

  • have had an asset portfolio of a total annual amount exceeding € 300,000.00;
  • have achieved gross revenues for a total annual amount exceeding € 200,000.00;
  • have an amount of debts , even if not past due, exceeding € 500,000.00.


The debtor who wants to have access to the procedure of arrangement with creditors must submit the application to the court of the place where the company has its head office .

The application is proposed with an appeal to which the following documents must be attached ( art. 161 Bankruptcy Law ):

  • an updated report on the balance sheet , income statement and financial position of the company ;
  • an analytical and estimative status of the activities ;
  • the list of names of creditors , with the indication of the respective credits and the causes of pre-emption;
  • the list of the holders of the real or personal rights on the assets owned or in possession of the debtor;
  • the value of the assets and the particular creditors of any unlimitedly liable shareholders;
  • a plan containing the analytical description of the methods and times for fulfilling the proposal , which must indicate the specifically identified and economically assessable utility that the proposer undertakes to provide to each creditor;
  • the report of an independent professional , designated by the debtor, which certifies the truthfulness of the company data and the feasibility of the composition plan.

The content of the plan is left to the debtor’s free determination.

The law , in fact, indicates and regulates only some possible contents of the plan such as :

i) the debtor’s continuing business activity ;

ii) the restructuring of payables and receivables satisfaction through any form, including through the sale of assets, assumption, or other extraordinary transactions, including the award to companies from these investments from shares, or bonds convertible into shares , or other financial instruments and debt securities;

iii) the subdivision of creditors into classes ;

iv) the management of the company by an underwriter.

From the date of publication of the appeal in the register of companies and until the moment the decree of approval becomes final, creditors cannot initiate or continue enforcement and precautionary actions on the debtor’s assets .

Upon receipt of the application for composition and all the attached documentation , the court examines it verifying the existence of the conditions for accessing the procedure and the correctness of the documentation prepared, without entering into the merits of the proposal.

If all the checks give a positive result , the court declares the procedure of arrangement with creditors open and thus opens the phase in which the creditors must vote whether to accept the composition proposal .

According to the general rule, the arrangement with creditors is approved by the creditors who represent the majority of the credits admitted to the vote ; where different classes of creditors are envisaged, the arrangement is approved if this majority also occurs in the greater number of classes.

Once the concordat has been approved, the delegated judge reports to the court which fixes the hearing in the council chamber for the appearance of the parties and the judicial commissioner.

The debtor, the judicial commissioner, any dissenting creditors and any interested party must be appointed at least ten days before the scheduled hearing.

In the absence of opposition, the court, having verified the regularity of the procedure and the outcome of the vote, homologates with a decree justifying the preventive agreement .

As a result of this decree the arrangement with creditors is closed and the execution phase opens , during which the debtor is required to make all payments and other measures indicated in the plan , according to the procedures and rules provided therein .

The arrangement with creditors


Article. 161 , paragraph VI , Bankruptcy Law allows the debtor to obtain the anticipation of the protection of his assets ( essentially constituted by the block of executive and precautionary actions ) by simply filing an appeal , with which he asks the court to access the procedure of arrangement with creditors , accompanied by a limited number of documents, reserving the right to present the plan and the composition proposal.

In particular, the debtor must attach the following documents to the appeal :

  • the balance sheets of the last three years;
  • the list of names of creditors with their respective credits;
  • an updated Chamber of Commerce registration ;
  • the herbal certificate of the corporate body which decides to present the application drawn up with the intervention of a notary.

Once the request for a composition with credit agreement has been received, the court decides whether to accept it or not, verifying, in particular, that the debtor:

i) possess the requisites to access the procedure;

ii) has filed the documentation required by the art. 161, paragraph VI, Bankruptcy Law;

iii) has not already submitted , in the two previous years, a similar application which has not been followed by admission to the arrangement with creditors.

If the court considers the application admissible , by decree, it opens the arrangement with reservation indicating to the debtor a term ( not less than sixty days and not more than one hundred and twenty days ) for the filing of the plan, the proposal and the requested documentation.

The term can be extended for justified reasons only once and for no more than sixty days.

If the debtor has applied for a composition with creditors subject to a pending pre-bankruptcy procedure, the court must grant a term of sixty days, which may be extended for justified reasons of not more than sixty days.

With the decree that declares the opening of the arrangement with reservation , the court must also arrange for the periodic disclosure obligations, related also to the financial management of the company and to the activity carried out for the purpose of preparing the plan and the proposal, which the debtor must acquiring, at least monthly and under the supervision of the judicial commissioner ( if appointed ), up to the expiry of the fixed term.

Furthermore, the debtor must deposit , on a monthly basis, a financial situation of the company that must be published within the next day in the business register.

In the event of non-compliance with the disclosure obligations, the court declares the application inadmissible and, if the conditions exist and there is a creditor’s request or the PM’s request, declares the debtor’s bankruptcy.

From the time of filing the appeal and up to the decree of admission to the procedure of arrangement with creditors, the debtor can carry out autonomously only the acts of ordinary administration , while the urgent acts of extraordinary administration can be performed only with the authorization of the court , which can assume summary information and must obtain the opinion of the judicial commissioner, if appointed.

Once the plan and the composition proposal have been filed within the indicated period, the court will examine them and decide whether to open the procedure or declare the proposal inadmissible .

In the event that the debtor is admitted to the procedure, the rules established for the ordinary so-called preventive arrangement apply .

If, however, at the end of the term the plan and the composition proposal are not filed, the court, having heard the debtor in the council chamber, declares the proposal by inadmissible decree, and, in the presence of a creditor’s request or the request of the PM, declares bankruptcy.

The arrangement with creditors


Article. 186-bis Bankruptcy Law allows the debtor to present an arrangement with creditors that provides for the continuation of the company’s activity.

The discipline of the arrangement with business continuity is applied when the debtor presents a plan that envisages one of the following activities :

  • the continuation of business activity ;
  • the sale of the company in operation;
  • i the transfer of the company into operation in one or more companies , including new ones.

In this case, the plan must also contain an analytical indication of the costs and revenues attested by the continuation of the business activity envisaged in the composition plan, of the necessary financial resources and of the related hedging methods.

The debtor who applies for admission to an arrangement with business continuity can ask the court to be authorized, if summarily summarized, to pay previous credits for the supply of goods or services.

To do this, the debtor must assign the professional who draws up the report on the truthfulness and reliability of the plan so that in his report he inserts a certificate stating that the services for which he requires to make payments are essential for the continuation of the business and functional activities to ensure the best satisfaction of creditors.

Furthermore, if on the filing date of the appeal there are contracts in progress, the law provides that they continue due to the opening of the procedure ( art. 186-bis, paragraph III, Bankruptcy Law ).

However, the debtor is allowed to ask the court for authorization to dissolve them or for suspension for a period not exceeding sixty days.

Finally, if during the procedure the business activity ceases or is manifestly harmful to creditors , the court may revoke the arrangement and, at the request of a creditor or at the request of the PM, may declare bankruptcy. In any case, the debtor has the right to modify the proposal ( Article 186-bis, last paragraph, Bankruptcy Law ).

The arrangement with creditors


On August 20, 2015 , the text of the decree law n. 83/2015 ( coordinated with the conversion law of August 6th No. 132 ), which brought important changes in the matter of the arrangement with creditors .

The main changes concern :

  • the minimum percentage of payment ( equal to 20% ) to be guaranteed to unsecured creditors in the event of a settlement agreement ( article 160, paragraph IV, LF );
  • the possibility for creditors who represent at least 10% of the loans to present a proposal for an arrangement with creditors concurrent with respect to that of the debtor (Article 163, paragraph IV, LF);
  • the faculty for third parties to formulate competing offers for the purchase of the company , of one or more branches of the same or of specific assets owned by the debtor (art. 163-bis, LF);
  • the elimination of the silent assent when voting on the composition proposal;
  • the possibility for the debtor even in the event of an agreement with reservation to obtain from the court, as a matter of urgency and without the certification of a professional, the authorization to negotiate pre-deductible interim loans functional to urgent needs relating to the exercise of the business company ( Article 182-quinquies, paragraph III, LF ).

The intention of the Legislator is to significantly reduce the liquidative settlement agreements, favoring instead those that, through the preservation of the company and the maintenance of employment levels, guarantee business continuity.

In fact, in the event of an agreement with business continuity, the debtor is not obliged to insure any minimum percentage of payment for unsecured creditors whose satisfaction may also take place through forms other than the payment of a cash amount.

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