Composition with creditors and bankruptcy procedure

With ruling n. 17532/2020, the Italian Court of Cassation reiterated that the filing of the application for a composition with creditors prevents the declaration of bankruptcy up until the events indicated in articles 162, 173, 179 and 180 of the Bankruptcy Law occur, but does not determine the inadmissibility of the pending insolvency proceedings commenced by the debtor’s creditors or the public prosecutor: actually the two proceedings are unified.
Therefore, where bankruptcy proceedings are already pending, the declaration of inadmissibility of the pre-bankruptcy composition’s petition filed by the debtor can lead to the declaration of bankruptcy.

The Court of Cassation, while confirming the obligation to hear the debtor who has filed an application for composition with creditors, in order to allow the former to clarify the composition proposal, also specified that this obligation is fulfilled where the debtor has been heard, in relation to the application filed, at the hearing schedule for the pending bankruptcy procedure, commenced by the debtor’s creditors.
The Court also confirmed the case law principles according to which it is inadmissible, because abusive, the pre-bankruptcy application for a composition with creditors filed not to regulate the company’s crisis but to delay the declaration of bankruptcy. In this cases, once the existence of abusive intents has been ascertained, the court can proceed with the declaration of inadmissibility of the composition’s proposal as a direct consequence of the abusive conduct, and, if bankruptcy proceedings are already pending, upon creditors requests, the debtor can also be declared bankrupt.

Sara Cancian