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The Court of Parma, in the context of a negotiated crisis
resolution procedure, recently authorised a sale of business
branches, exempting the purchaser from liability for the debts
related to the business prior to the sale. The order dwells in
detail on the requirements for the granting of the authorisation
measure and the extent of the Court’s assessments.
By order dated 4 November 2022, the Court of Parma granted the
request (made by a company that had previously commenced a
negotiated crisis resolution procedure pursuant to Law Decree
118/2021 converted by Law 147/2021) for the authorisation to sell
– with the benefit for the transferee of the exception to
Article 2560 paragraph 2 of the Italian Civil Code – two
business branches and inventories to the party with whom a lease
agreement was entered into and who had already formulated a binding
purchase proposal.
The order is of particular interest because it provides an
overview of the prerequisites that must be met in order for a judge
to grant the authorisation measure requested by a company in
crisis, wishing to sell its business under the negotiated crisis
resolution procedure.
It is useful to recall that, first of all, during the negotiated
crisis resolution procedure, when the entrepreneur has the
opportunity or need to transfer his business or branches thereof to
a third party in order to overcome the crisis, in principle it
could be done: this is an act of extraordinary administration which
the entrepreneur may proceed with autonomously after informing the
Expert, pursuant to Article 9 of the aforementioned Decree-Law
118/2021 (now Article 21 of the Code for Business Crisis and
Insolvency in force as of July 15th, 2022). In such a
case, the transfer takes place according to ordinary rules and the
purchaser will be jointly and severally liable with the transferor
for all prior debts pursuant to Article 2560 of the Italian Civil
Code.
In this regard, it is well known that the regime of joint and
several liability of the purchaser for the company’s debts
has long represented a ‘disincentive’ for the transfer
of businesses of entrepreneurs in difficulty outside the protected
framework of the sale in bankruptcy or in execution of an approved
arrangement (areas in which it is possible to benefit from the
effect of the derogation to Article 2560 of the Civil Code). Today,
as a result of Article 22 of the Crisis Code (formerly Article 10
of the cited Decree-Law 118/2021), entrepreneurs even immediately,
can sell the business or branches thereof within the negotiated
crisis resolution procedure by obtaining, under certain conditions,
the Court’s authorisation for the sale without the effect,
for the purchaser, of the liability for the debts prior to the
transfer related to it.
The authorisation measure requires a verification by the Judge
as to the functionality of the transfer to safeguard the continuity
of the business and the correspondence of the transfer operation to
the best satisfaction of the creditors. With respect to Article 10
of Decree-Law No. 118/2021, Article 22 of the Code of the Crisis
has moreover codified the Court’s further obligation to
“verify the respect of the principle of competitiveness
in the selection of the purchaser“. The Court’s
authorisation, once granted, will retain its effects and the
transfer, including the ‘derogatory’ effect that
distinguishes it, will be considered as released under Article 24
of the Crisis Code (formerly Article 12 of the cited Decree-Law
118/2021), irrespective of the outcome of the negotiated crisis
resolution procedure.
In the case submitted to the Court of Parma, the plaintiff had
requested authorisation to sell the business branches without the
effects of Article 2560 of the Italian Civil Code under the
conditions set forth in the binding expression of interest in the
purchase and in the lease agreement previously executed within the
parties, with the preservation of the effects of the definitive
sale. The Judge was therefore called upon to assess the existence
of the requirements for the granting of the requested
authorisation.
It is important to highlight that, from the opinions requested,
it emerged that the Expert
had: (i) verified the existence of the
conditions for overcoming, at the end of the procedure, the
economic-financial imbalance of the plaintiff through the
conclusion of a restructuring agreement with extended effect
pursuant to Article 61 of the Crisis
Code; (ii) assessed the functionality of
the sale with respect to business continuity and the best
satisfaction of creditors by comparing the higher realisable value
of the business branches in continuity, the business property and
the movable assets included in the business with the value that
could be obtained in the event of an atomistic sale of the assets
in a ‘pure’ liquidation
scenario; (iii) carried out a comparison
between the transaction planned under the extended restructuring
agreement and the results of the sale in the liquidation
scenario; (iv) concluded by stating that
the sale of the business units was consistent with the recovery
plan outlined to overcome the conditions of asset
imbalance; (v) confirmed that the
plaintiff had tried to collect several expressions of interest in
the purchase on the market.
In light of these opinions together with the documentation
filed, and following the outcome of the discussion with the
creditors, the Court of Parma eventually held that there were the
prerequisites to grant, pursuant to Article 10 of Law Decree
118/2021 and Article 22 of the Code of Crisis, the authorisation
for the sale of the business branches without the effects of
Article 2560 of the Italian Civil Code for the purchaser.
The Judge, considering that he had to enter into the merits of
the entrepreneur’s managerial choice (e.g. the sale) in the
perspective of the reorganisation project in which the same is
placed, specified that he considered that the functionality of the
deed with respect to the business continuity and the best
satisfaction of creditors is subsistent only if, on the basis of a
prognostic judgement, the assignment meets the interests of the
creditors through a comparison with the foreseeable satisfaction of
the same creditors in the liquidation scenario and in the event of
the assignment of the company as a going concern in the negotiation
resolution crisis procedure (a comparison that also implies a
verification of the creditor satisfaction modalities with respect
to the project or the reorganisation path that the debtor intends
to concretely undertake).
In this regard, in the light of the Expert’s opinions, the
Court held that in the case at hand the requirement of
functionality was indeed met with respect to the business
continuity (the sale made it possible to avoid the definitive
dissipation of the values linked to the continuation of the
business and the accrual of further losses) and the best
satisfaction of creditors (there was a reorganisation project,
structured and developed through the negotiation, which was
reasonably suitable for overcoming the company’s situation of
economic-financial imbalance).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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