Business Crisis Code

The Business Crisis and Insolvency Code provides companies with tools for diagnosing the state of difficulty, with the aim of guaranteeing business continuity. It was issued with Legislative Decree no. 14/2019. Its entry into force was initially scheduled for 15 August 2020, except for the part that revised the civil code which has already been in force since 16 March 2019. Due to the Covid-19 emergency, the entry into force was deferred to 1 September 2021 by the so-called “Liquidity” Decree.

However, the Corrective Decree of the Business Crisis and Insolvency Code was published on 5 November 2020 in the Official Gazette (Official Gazette no. 276) and has already significantly reformed both the so-called corporate law of the crisis both on the definition of crisis and its indicators, as well as on institutions such as tax settlement.

What is a business crisis?

By business crisis we mean “the state of economic-financial difficulty which makes the insolvency of the debtor probable, and which for companies manifests itself as the inadequacy of prospective cash flows to regularly meet planned obligations”. Simplifying, we mean the moment following the decline of a company, which involves serious deficiencies in terms of financial flows in the form of a liquidity crisis, difficulty in accessing credit and loss of trust among company stakeholders.

Purpose of the Business Crisis Code

The purposes of the Business Crisis Code are essentially two:

  • facilitate an early diagnosis of the state of difficulty of companies through alert procedures, to avoid a state of irreversible crisis;
  • protect the entrepreneurial ability of those who face business failure by safeguarding business continuity.

The timeliness in detecting the state of corporate crisis is one of the main prerequisites for the success of corporate restructuring. Warning indicators such as income, asset or financial imbalances, or repeated and significant delays in payments, are of fundamental importance for intercepting the state of crisis in time.

Pleased to meet you

In Partnership with