Being involved with a company which is experiencing financial difficulties is clearly a stressful experience for directors. As well as having to deal with the operational consequences of the company’s distress, directors must ensure that they comply with their duties and obligations under the Companies Act 2006 (CA2006) and the Insolvency Act 1986 (IA1986). Directors of listed entities are in a particularly difficult position, as in addition to those duties they must comply with their obligations to the markets.

Directors’ duties

Amid all the usual politics of the Government’s Budget this week, one seemingly low-key change might be of considerable interest to lenders and insolvency practitioners. The Chancellor announced that from 6 April 2020 HMRC will once again benefit from a Crown preference.

The Government has announced that it will legislate to prohibit the enforcement of certain contractual termination clauses ('ipso facto clauses').

As with other aspects of the response to recent insolvency and corporate governance consultations, this has given us pause for thought.

With two decisions (No. 1895/2018 and No. 1896/2018), both filed on 25 January 2018, the Court of Cassation reached opposite conclusions in the two different situations

The case

The Constitutional Court (6 December 2017) confirmed that Art. 147, para. 5, of the Italian Bankruptcy Law does not violate the Constitution as long as it is interpreted in a broad sense

The case

With the decision No. 1195 of 18 January 2018, the Court of Cassation ruled on the powers of the extraordinary commissioner to require performance of pending contracts and on the treatment of the relevant claims of the suppliers

The case

The Court of Cassation with a decision of 25 September 2017, No. 22274 confirms that Art. 74 of the Italian Bankruptcy Law provides a special rule, which does not apply to cases to which it is not explicitly extended

The case

With the decision No. 1649 of 19 September 2017 the Court of Appeals of Catania followed the interpretation according to which a spin-off is not subject to the avoiding powers of a bankruptcy receiver

The case

Applicable law

The Italian Government has been delegated to enact a comprehensive restatement of the whole set of rules of insolvency procedures, with specific innovative addresses regarding (to mention only the most important) the concordato preventivo procedure, venue rules, an out-of-court mediation alert process to timely address a risk of insolvency, new forms of security and a streamlined set of priorities among creditors

Introduction