Creditors' treatment under the new Italian “Concordato Preventivo” and directive (EU) 2019/1023: A comparison with chapter 11

Abstract

This article compares the treatment of creditors in Italy under the “new” judicial composition with creditors (CWC) (“concordato preventivo”) procedure (as recently amended by the new Italian Business Crisis and Insolvency Code of 2022) with Chapter 11 of the US Bankruptcy Code, focusing on two main issues. The first issue analyses the impact of the Directive (EU) 2019/1023, which aims to remove barriers to fundamental freedoms and promote market efficiency by introducing, among others, preventive restructuring frameworks (PRFs). The Directive's guidelines on the treatment of creditors, including the requirement to allocate restructuring proceeds on the basis of the “relative priority rule (RPR)”, are examined. The second issue discusses Italy's new Business Crisis and Insolvency Code of 2022, which introduces several innovations to judicial CWC proceedings. These include facilitations for CWC on a going concern basis, a mandatory division of creditors into classes, a new voting and cramdown system, and significant changes to the distribution of restructuring proceeds, also to comply with Directive (EU) 2019/1023.