Negotiated settlement: business transfer and the principle of competitiveness in the selection of the buyer

Brescia Court, November 7, 2024

The principle of competitiveness in the selection of the buyer, although it should be interpreted in a non-formalistic manner, as established by case law since the early applications of Article 22 of the Bankruptcy Code, represents an independent and additional requirement to the functionality and consistency of the business transfer with respect to the restructuring plan.

In the context of a negotiated settlement, the petitioner, pursuant to Article 22, first paragraph, of the Insolvency Code (CCII), with particular reference to letter (d), has the right to request the Court’s authorization for the transfer of the business or one or more of its branches to a previously identified entity, in any form, without the effects provided for under Article 2560, second paragraph, of the Civil Code. However, in this case, the law requires that a competitive procedure, albeit in a simplified form, be mandatorily activated, with prior publicity, in order to avoid the risk of decisions that could harm creditors.

In this regard, the Brescia Court issued a ruling in the context of the negotiated settlement of a crisis following a petition under Article 22, first paragraph, letter (d), of the Insolvency Code. The Court clarified that this competitive procedure is an independent requirement expressly requested by the legislation, in addition to the necessary functionality and consistency of the transfer in relation to the restructuring plan.

In the case at hand, the Brescia Court rejected the petition filed by the petitioner, as the principle of competitiveness had not been respected, as recognized by case law since the early applications of Article 22 CCII. It was found that neither the entrepreneur nor the expert in their (positive) opinion had applied this principle.

Specifically, it was deemed irrelevant that the expert had emphasized that, following the transfer, all creditors would be satisfied 100%, and that the plan only provided for payment deferrals post-homologation of the proposed debt restructuring agreement. Furthermore, the assumption that no other entrepreneur would be able to submit an equally advantageous offer was considered unfounded, as no market search had been conducted.

However, the Court, noting the lack of conditions for granting the requested authorization, clarified that the petitioner retains the right to resubmit the request under Article 22 CCII, provided it is accompanied by a reliable valuation of the branches of the business to be transferred, on the basis of which offers will be evaluated. Additionally, the petitioner must provide evidence of the activation of publicity procedures, the collection of expressions of interest, and, if necessary, provisional "tenders" carried out within the negotiated settlement by the expert.

Therefore, for the reasons outlined above, the Court rejected the petition filed by the petitioner.