The recovery after Covid-19: shall we (re)start from the new insolvency act?
Before the diffusion of Covid-19 one of the most discussed topics among the Italian entrepreneurs and professionals was the entering into force of the New Insolvency Act (Legislative Decree n. 14 of 12 January 2019). A common request was the postponement of the original date, 15th August 2020, in which the law should have become effective, also in consideration of the difficulties found by the Chartered Accounts National Organization to draft the ratios and the alert indexes which shall give raise to the insolvency red flags in relation to a company facing a status of crisis.
The Law Decree n. 23 of 8 April 2020 has indeed provided for the postponement of the entering into force of the New Insolvency Act from 15th August 2020 to 1st September 2021. This decision was very welcome by the Italian companies: indeed, they see the new rules provided by the New Insolvency Act as costly bureaucratic fulfillments that shall not be useful for the management and the development of the business.
This approach is, in our opinion, incorrect.
Some provisions of the New Insolvency Act are already effective, including the duties of the company to equip themselves with an organizational, administrative and accounting structure in line with the size and nature of the company which allows the managers to promptly detect a condition of crisis of the company, so that they can immediately adopt one of the measures provided by the New Insolvency Code in order to mitigate or avoid the status of crisis.
The alert indexes mentioned above, which are going to be issued, represent an essential tool for the correct preparation of the organizational model of the company structure and, as consequence, for the identification of the amendments to be made in the current business structure in order to detect the possible causes of the company crisis.
Most of the Italian companies are small and medium enterprises which have not an organizational model and which are managed, in substance, on the basis of the valuable business intuition of the owner. This structure is today insufficient to deal with and manage the complex economic system, made more complicated by the spread of Covid-19 and by the subsequent decline of revenues. Italian companies, especially the ones having small and medium dimensions, need a “due diligence” in order to identify their strength and weakness so that they can increase the profitability and make the indebtedness level more sustainable in a long-term perspective.
This analysis shall involve the legal issues (for instance the standard contracts used by the company) but also the economic, financial and management profiles at 360 degrees and shall imply, in substance, the drafting of a company model the content of which depends on the size of and on the business activity performed by the company.
The Government could introduce some fiscal benefits or economic contributions in order to help the companies to find the resources necessary to prepare the company model: this contribution will help the companies to find the way to restart in a proper way the post Covid-19 time (so called “step 3”) and to have a solid business and organizational plan in the medium term; on the other hand it will allow Italian lawyers and financial consultants to increase their revenues after the interruption of their activity during the lockdown.
In this way the New Insolvency Act represents not only a “treatment” but also a “vaccine” that will enable the Italian economic system to go over the Coronavirus.