Pre-liquidation composition procedure: the issue of offsetting external financing

Within the framework of a pre-liquidation composition procedure, the Reggio Emilia Court addressed the issue of offsetting between the contribution of external financing by the shareholder of the petitioner Company and the increased credit resulting from the shareholder's potential subrogation rights within the banking sector.

It concerns a Company that had filed a proposal for a liquidation composition, which included, among other things, the contribution of external financing by the sole shareholder to satisfy the creditors, as per Article 84, paragraph 4, of the Insolvency Law.

In compliance with the proposal, the shareholder had made a partial payment of the stipulated amount as external financing, committing to pay the balance within one year from the finality of the approval order.

Additionally, being jointly liable with the Company for the debts accrued to the banking sector, the shareholder aimed to settle these debts by subsequently subrogating into the rights of the banks towards the procedure.

Thus, the shareholder undertook 'to constitute the sum resulting from the allocation in its favor, as a result of the payments in subrogation made as a third-party guarantor, as additional security for the payment of the external financing, postponing its collection until the complete payment of the balance.'

The Court found that the aforementioned provision conflicted with what is established by Article 84, paragraph 4, of the Insolvency Law, which states that 'resources contributed by shareholders, without the obligation of restitution or with a postulation constraint, are considered external resources, directly destined, according to the plan, for the benefit of the concurrent creditors.'

According to this rule, the contribution from the third-party financier should aim to increase the assets to be allocated to the creditors and not to decrease the liabilities. Therefore, the obligation to pay the external financing cannot be fulfilled by offsetting it with the increased credit resulting from the potential subrogation of the shareholder within the banking sector. This is also due to the deferred nature of the shareholder's claims, which become due only when all higher-ranking credits are fully satisfied.