Temporary regulation of loss and reduction of capital caused by Covid-19: the first case law’s

The time frame provided for by Article no. 6 of Decree Law 23/2019, the so-called “Liquidity Decree”, which temporarily disapplied regulation of loss and reduction of capital for the financial years ending in the period from 9 April 2020 to 31 December 2020, defines both the period in which the company law are neutralised and the period in which the “cases in point” indicated must occur.

This is the position of the Court of Catania, in the ruling issued on 28th May, which represents the first case law’s on the meaning given to a controversial regulatory provision.

As a matter of fact, the law provision was the subject of different explanations about “events that occurred” in above-mentioned time range.

The Court of Catania supported the restrictive interpretation of Article no. 6. This explanation is based on the identification of the losses caused by the pandemic, produced since the entry into force of the Decree, and not the previous ones.

Consequently, the losses should not only occurred, but also be positively ascertained, according to the provisions of Article no. 2447 of Civil Code, which attributes importance to losses when the board of directors ascertains those.

The Court of Catania also endorsed that Decree Law did not depart from Article no. 2086 of the Civil Code, which provides, inter alia, that the entrepreneur has to implemented without delay one of the instruments provided to overcoming the crisis and restoring the going concern principle.

Therefore, the chosen instrument would be placed in alternative to exceptions provided by Article no. 6, which would lose their relevance.

Please do not hesitate to reach out to our Professionals in case you need further clarifications on the above.

The time frame provided for by Article no. 6 of Decree Law 23/2019, the so-called “Liquidity Decree”, which temporarily disapplied regulation of loss and reduction of capital for the financial years ending in the period from 9 April 2020 to 31 December 2020, defines both the period in which the company law are neutralised and the period in which the “cases in point” indicated must occur.

This is the position of the Court of Catania, in the ruling issued on 28th May, which represents the first case law’s on the meaning given to a controversial regulatory provision.

As a matter of fact, the law provision was the subject of different explanations about “events that occurred” in above-mentioned time range.

The Court of Catania supported the restrictive interpretation of Article no. 6. This explanation is based on the identification of the losses caused by the pandemic, produced since the entry into force of the Decree, and not the previous ones.

Consequently, the losses should not only occurred, but also be positively ascertained, according to the provisions of Article no. 2447 of Civil Code, which attributes importance to losses when the board of directors ascertains those.

The Court of Catania also endorsed that Decree Law did not depart from Article no. 2086 of the Civil Code, which provides, inter alia, that the entrepreneur has to implemented without delay one of the instruments provided to overcoming the crisis and restoring the going concern principle.

Therefore, the chosen instrument would be placed in alternative to exceptions provided by Article no. 6, which would lose their relevance.

 

Please do not hesitate to reach out to our Professionals in case you need further clarifications on the above.

Marta Pasqui