New warning tools for businesses to prevent bankruptcy

Giuseppe Bernoni was interviewed, together with other professionals, by Corriere della Sera on the novelties on bankruptcy introduced by Legislative Decree published on 30 October.

Legislative Decree dated 30 October 2017 (enforcement decrees still to be issued) redefines the concept of bankruptcy introducing a two-step approach: from the one side, the negative tags of “bankruptcy” and “bankrupt” will no longer apply to the entrepreneur, “judicial liquidation” will be used instead, from the other hand the concept of business monitoring will be introduced with a new warning tool.

In short, entrepreneurs will be in a position to foresee critical situations. The objective is to supersede the current law regulating bankruptcy procedure and dating back to 1942. This will also result in a reduction in the number of litigations originating from bankruptcies.

According to Giuseppe Bernoni “avoiding the intervention of the Court means guaranteeing the business going concern and, of course, also safeguarding jobs. This is a rewarding system for all those entrepreneurs who comply with the procedures and want to do business correctly and a safeguard for those who, although complying with the regulation, are in a difficult situation”.

This warning tool for businesses implies having a monitoring and prevention system in place, mainly for small and medium sized enterprises, that usually have a less tight control system. This cultural limitation often leads to underestimate factors that, if well analysed and understood on time, would allow to avoid critical situation, such as composition with creditors.

The new regulation provides for a control system aimed at classifying each business in a risk class, to be enforced by the board of statutory auditors or legal auditor. Businesses for which the law did not provide for the obligation to have these professional figures, will have to introduce them (specifically limited liability companies with a revenues exceeding 2 mln Euros and 10 employees).