In our professional practice, we are increasingly called upon to assist companies and directors facing economic, financial or balance-sheet difficulties.
In this context, directors’ responsibilities have become particularly significant. The Italian Business Crisis and Insolvency Code (Legislative Decree No. 14/2019) does not merely regulate situations in which a company is already insolvent. It also places considerable emphasis on prevention and the early identification of financial distress.
Article 3 of the Code, together with Article 2086(2) of the Italian Civil Code, highlights the importance of implementing adequate organizational, administrative and accounting structures capable of identifying early warning signs and enabling directors to take appropriate and timely action.
Acting before a crisis becomes irreversible is essential. This requires assessing the company’s financial position, identifying potential risks and directors’ liabilities, and evaluating the restructuring options available under Italian law.
One of the most relevant mechanisms is the negotiated crisis settlement procedure (composizione negoziata della crisi), governed by Articles 12 et seq. of the Code. This procedure is available to businesses experiencing financial or economic imbalances where recovery remains reasonably achievable.
With the assistance of an independent expert, negotiations with creditors and other stakeholders may facilitate mutually acceptable solutions while preserving, where possible, business continuity and enterprise value.
The Code also provides other restructuring mechanisms, including debt restructuring agreements (Articles 57 et seq.), court-approved restructuring plans (Articles 64-bis et seq.) and preventive composition with creditors (Articles 84 et seq.). Each mechanism has specific requirements and implications, making a careful assessment of the company’s circumstances, continuity prospects and creditors’ interests essential.
Against this background, the role of corporate legal counsel extends beyond dispute resolution or assessing directors’ liability after the company’s financial position has significantly deteriorated.
It involves supporting entrepreneurs and directors at an early stage, assessing legal risks and responsibilities, and contributing to the development of a sustainable legal and financial strategy.
The ultimate objective is to prevent further deterioration, protect enterprise value and identify the most appropriate restructuring solution whenever realistic recovery prospects exist.
Giorgio Cherubini