The impact of the Italian insolvency law reform (by means of D.LGS. 12 January 2019, N. 14)

The amendments to Article 2257 of the Italian Civil Code

Article 377 of D. Lgs. 12th January 2019, n. 14 (Insolvency Law) has amended article 2257 of the Italian Civil Code regarding the administration of the partnership. The regulation previously in effect assigned the management of the partnerships to the partners. The current formulation instead specifies that the management of the partnership shall be under the exclusive responsibility of the managers, who have to carry out the operations functional to the fulfillment of partnership’s scope.
Such a provision entails significant interpretative problems. Firstly, it is unclear whether it permits the assignment of the management of a partnership to managers who are not also partners. Secondly, the provision causes a considerable confusion with regard to the relationships between partners who are managers, and partners who are not.

Article 377 is already in force.


The impact on the insolvency regulation

The new regulation retains the provision according to which the insolvency of the partnership automatically results in the insolvency of its general partners. The Italian legislator has therefore decided not to adopt the solutions proposed in other legal systems, such as in Germany or Spain, in which the problem concerning the protection of creditor is resolved by means of the partners’ civil liability and not by means of the automatic extension of the insolvency of the partnership to the partners.
Nevertheless, the provisions have been significantly amended.

Firstly, the new regulation (Article 256, paragraph 4) provides for the increase of the number of persons entitled to ask for a declaration of the bankruptcy against the hidden partners (or the hidden partnership): under the new Insolvency law, the public prosecutor and the creditors of the partners can now apply for such a declaration, in addition to the official receiver, the creditors of the partnership and another bankrupt partner.

Secondly, the reform (Article 256, paragraph 5) has confirmed the case law regarding the so-called super-società di fatto. The courts can declare the insolvency of a private company and its shareholders considered as a whole to be a ‘hidden partnership’ between them and the company. However, the lawmaker has not taken into account the criticisms raised by scholars (such as Guerrera, ‘Considerazioni sistematiche sulla c.d. supersocietà di fatto’, in Rivista di diritto societario, 2017, 975 and following), according to whom the proper instrument would have been the civil and criminal liability of the directors and shareholders (and not the insolvency regulation).

These provisions will be applicable from August 2020.


The impact on the over-indebtedness procedures

Article 65 of the new Insolvency Law expressly states where a partnership cannot be declared bankrupt because it does not meet the subjective and objective requirements provided by law, it is subject to another kind of insolvency procedure, the so called over-indebtedness procedure, which also applies to its general partners. These include debt relief and the possibility of a fresh start (i.e. a new start after debt discharging) for the general partners and the partnership itself. The reform has further taken into account the case of a partner of a partnership who also has the status of consumer; for such cases, the reform has provided for the possibility for a partner who is a consumer to apply for a personal debt-restructuring plan in all cases in which the situation of over-indebtedness derives from his personal debts (and not from partnership’s ones), even if the partnership is already subject to another kind of insolvency procedure.

These provisions will be applicable from August 2020.

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Second Annual Conference of the Partnership, LLP and LLC Law Forum 10 January 2019

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