Debt Restructuring: Here’s How To Act

The debt restructuring agreement, recently amended by article 57 of Legislative Decree 14/2019, is a means of reorganizing a company with many debts. The entrepreneur of the company in crisis uses it to ease the company’s debt situation and rebalance the company’s financial situation.

 

What does it mean to restructure the debt

This is an agreement subject to approval by the Court. With this agreement, the entrepreneur himself continues to manage his own business and, to allow him to carry out the recovery, his assets are protected by certain protections, such as the blocking of executive and precautionary actions .

 

How it is applied

debt loans

Debt restructuring agreements can be proposed to an entrepreneur who carries out a commercial, agricultural or artisan activity, even if not for profit, but does not apply to the minor enterprise . The “minor” company has all the following requirements:

  • Asset assets not exceeding 300 thousand in the three financial years preceding the filing date of the request for the opening of the judicial liquidation. Or from the beginning of his activity, if this beginning is more recent, and therefore does not cover three exercises.
  • Total revenues not exceeding a total of 200 thousand dollars in the three financial years preceding the filing date of the request for the opening of the judicial liquidation. Or from the beginning of his activity, if this beginning is more recent, and therefore does not cover the three exercises.
  • A total amount of debt not exceeding 500 thousand dollars.

The values ‚Äč‚Äčlisted above can be reviewed every 3 years, by means of a specific decree of the Minister of Justice.

 

Debt restructuring: conditions and duties

Debt restructuring: conditions and duties

The entrepreneur must be in a state of crisis or insolvency to apply for the restructuring agreement. The debtor and creditors must behave according to the principles of fairness and good faith . Creditors have an obligation to cooperate loyally with the debtor, the other persons in charge, and with the bodies that are appointed by the judicial authority. They must also comply with the obligation of confidentiality regarding the debtor’s situation, the initiatives it takes and the information it acquires.

 

The stages of the procedure

The stages of the procedure

The procedure for initiating the debt restructuring agreement is divided into three main phases:

  1. Filing of the application for access;
  2. Homologation by the Court;
  3. Execution of the agreement.

Possible stages may also occur, such as:

  • The appeal against the approval of the agreements
  • The suspension of the agreement
  • Revocation of approval of this agreement.

 

The filing of the application for access

debt loan

Filing the application for debt restructuring can be done in two different ways:

  • With agreement already concluded : the application is proposed with an appeal by the debtor. The appeal must also indicate the reasons for the application and the recovery plan.
  • With agreement still to be found : in this case, the debtor will have to provide a different initial documentation. However, it has up to 30-60 days (possibly extendable for an additional 60 days if there are justified reasons) to submit the debt restructuring agreement and related related documentation.

The recovery plan must be carried out by independent professionals (such as, for example, SavePower’s consultants), who certify the truthfulness of the company data and the feasibility of debt restructuring.

It should also be noted that creditors and any interested party can file an opposition to the debt restructuring application , within 30 days from the request for access and its registration in the Company Register. This opposition can also be made against the moratorium conventions, that is, the ways in which the agreement was reached to restructure the debt. On the objections, the Tribunal decides in the Council Chamber with a sentence , against which a complaint can possibly be lodged with the Court of Appeal.

 

The homologation phase

debt problem

The Court can decide to accept or reject the application for approval . In the case of acceptance, a sentence is issued which is notified and then entered in the Register of Companies. It produces its effects from the date of publication.

If the Court does not approve the restructuring agreements, it declares with a judgment the opening of the judicial liquidation upon appeal by one of the subjects who are entitled to present it. The opening of the liquidation never occurs ex officio, but only if the interested parties present an application.

 

The execution of the agreement

debt agreement

Both in the course of negotiations to find an agreement and in the execution of such agreements, the debtor and his creditors must respect the principles of good faith and fairness .

During the execution of the agreement, the main problems may report to a possible default by the debtor.

Depending on the category of creditors involved, non-payment can have certain consequences:

  • In the case of creditors participating in the agreement, they can request an end to the debt restructuring agreement. In doing so, if the request is accepted, the agreement no longer applies and the debtor must return to pay according to the original agreements. If necessary, they can also present the request for the opening of the judicial liquidation.
  • If they are creditors who are not party to the agreement, the failure to fulfill obligations does not authorize them to request the termination of the agreement because they are not contracting parties. However, they can adopt the classic remedies, such as the monitoring procedure, or the precautionary procedure. In addition, they can submit the request for the opening of judicial liquidation.
  • If, on the other hand, these are “tax” creditors, such as the Revenue Agency, social security bodies and the like, if the debtor does not make payments within 90 days of the due dates, there is a legal resolution of the restructuring agreements. That is, an automatic conclusion, without the intervention of the judge.

It’s never too late

If you’ve read this debt restructuring guide, chances are you are experiencing financial difficulties and are looking for help. Get in touch with one of our consultants immediately, by calling the toll-free number or by filling out the following form: SavePower can help you.

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