EXTENSION OF THE RESTRUCTURING AGREEMENT TO A NON-ADHERENT SECURITISATION COMPANY: WHAT ARE THE REQUIREMENTS?
The Court of Bergamo recently approved a debt restructuring agreement between the plaintiff company and the majority of its creditors, providing for the extension of its effects pursuant to Article 182-septies of the Bankruptcy Law to a non-adhering creditor, which, in this case, was a bank loan securitisation company. The decision of the Court of Bergamo is interesting because it deals extensively with the requirements of Article 182-septies of the Bankruptcy Law for the approval of the restructuring agreement with extended effect (“accordo di ristrutturazione ad efficacia estesa”).
By a decree dated March 30, 2022, the Court of Bergamo approved a debt restructuring agreement proposed by a company operating in the real estate sector, which had filed an appeal for the approval of the agreement pursuant to Article 182-bis of the Bankruptcy Law reached with its creditors (including a tax settlement agreed with the tax authorities pursuant to Article 182-ter of the Bankruptcy Law), requesting the “forced” extension of the effects of the agreement pursuant to Article 182-septies of the Bankruptcy Law with regard to the credit of a securitisation company which was not a party to the agreement.
The decree is particularly interesting because, not only does it focus on the profile regarding the scope of the parties to which the extended restructuring agreement may be applied, but it also describes, in a very precise manner, all the prerequisites required by Article 182-septies of the Bankruptcy Law to allow the extension of the effects of the approved agreement to creditors who are not adherents.
First of all, it is worth mentioning that Article 182-septies of the Bankruptcy Law was amended by Law Decree no. 118 of 24 August 2021 containing urgent measures on the subject of business crises and company reorganisation, which confirmed the centrality and importance of the institution of restructuring agreements by providing for the early entry into force of the instrument of restructuring agreements with extended effect, together with the new institution of the crisis negotiated settlement (“composizione negoziata della crisi”).
Until now, this instrument was reserved only for financial intermediaries, but can now be used by all categories of creditors. Thus, the requirement that half of the debt must be towards banks and financial intermediaries has been removed.
The extended effectiveness provided for by Article182-septies of the Bankruptcy Law allows the derogation from Articles 1372 and 1411 of the Civil Code, i.e. from the principle of relativity of the effects of the contract. In fact, upon occurrence of certain conditions, the effectiveness of the restructuring agreements pursuant to Article 182-bis of the Bankruptcy Law is extended to non-adherent creditors belonging to the same categories based on the homogeneity of their legal position and economic interests.
The new wording of Article 182-septies of the Bankruptcy Law provides, as an essential condition to be met in order to extend the effects to non-adhering creditors belonging to the same category, that the plan must be in continuity, whether direct or indirect (see letter b paragraph 2 – introduced in the new version of the article).
The requirement of the continuity of the company is not necessary if the company has debts versus banks or financial intermediaries amounting to not less than 50% of the total indebtedness, in which case the restructuring agreements may have a winding up purpose.
In this latter case, a regulation similar to that of Article 182-septies of the pre-reform Bankruptcy Law applies, thus implying the extension of the effects of the agreement to creditors who are not adherents, provided that they belong to the category of financial intermediaries. In such case, however, the rights of non-adherent creditors other than financial intermediaries listed by Article 182-septies of the Bankruptcy Law remain unchanged. The Court of Bergamo dwells, first of all, on the reference contained in the article to bank creditors and financial intermediaries and states that, in the absence of a precise regulatory reference, in authorising the entrepreneur in a state of crisis to extend the agreement reached with the majority of creditors also to bank creditors and financial intermediaries not adhering, such reference to banking and financial intermediation would be deliberately broad and therefore capable of excluding from its scope only banks or unauthorised intermediaries.
The rule would therefore be applicable to all credit institutions registered in the register of Article 13 of Legislative Decree No. 385/1993 (Consolidated Law on Banking “TUB”) and to all financial intermediaries referred to in Articles 106 and 107 of the TUB (by reference to Article 18 of the Consolidated Law on Finance “TUF”), and therefore also to entities authorised to provide investment services.
Such entities include, for example, leasing companies, credit consortia, factoring companies, consumer credit companies and special purpose vehicles used in securitisations, such as the company to which, in the case dealt with by the Court, the agreement was actually extended.
Having defined the profile of the applicability of the rule to the securitisation company, the Court verified the existence, in the case in question, of the other requirements provided for by paragraphs 1, 2 and 4 of Article 182-septies of the Bankruptcy Law for the purposes of the “forced” extension of the restructuring agreement to the non-adhering company.
In particular, the Court verified the legitimacy of the procedure regarding the correct composition of the categories of creditors (i.e. the effective homogeneity of the legal and economic position of the creditors to whom the agreement is extended, pursuant to paragraph 1 of Article 182-septies), the respect for good faith and transparency of information and therefore the effective involvement of the securitisation company in the negotiations (see letters a-e, paragraph 2), the non-winding up nature of the plan underlying the agreement (see letter b, paragraph 2), the achievement of the 75% threshold of the credits of the creditors adhering to the same category (see letter c, paragraph 2), the convenience with regard to the creditor who will suffer the effects of an agreement he has not adhered to (see letter d, paragraph 2), as to the possibility of satisfying the same, on the basis of the agreement, to an extent not less than the alternatives concretely practicable (i.e. the bankruptcy scenario which inevitably also entails a lengthening of the time required to recover the claims).
Particularly interesting is the decree with reference to the requirement concerning the content of the agreement that can be extended to non-adherents. The Court confirmed that any agreement that is not expressly excluded by Article 182-septies of the Bankruptcy Law is allowed, so that the subject of the agreement can certainly be the rescheduling, write-off, the amendment and reduction in interest rates, conversion of credit into capital shares or participatory financial instruments. The provision specifies that the agreement may not impose on non-adherents: a) the performance of new services and in particular the provision of new financing; b) the granting of credit facilities or the maintenance of the possibility of using existing ones. The Court pointed out that the reason for this limitation is that the instrument may only be used to renegotiate credits that have already accrued, not to regulate credits that may accrue from contracts to be entered into at a later date, because in no way may the agreement with extended effect entail an increase in risk for the non-adherent bank or financial intermediary. As to the prohibition to include in the agreement the possibility of using existing credit lines, this must be interpretated as a reference to credit lines granted and not used, since the preservation of the financing facilities, whether relating to cash lines or self-liquidating lines, does not increase the bank’s risk.
In the agreement examined by the Court, the treatment of the category (which was considered admissible) only provided for the payment of 65% of the credit at the time of the sale of the property subject to the mortgage, with the onus on the creditor to consent to the simultaneous cancellation of the mortgage and to pay a further 10% resulting from the outcome of the plan following the distribution of the sum remaining after the execution of the other payments provided for in the plan.
s.rossi@macchi-gangemi.com
g.bonfante@macchi-gangemi.com
EU COMMISSION AT WORK ON GEOGRAPHICAL INDICATIONS FOR CRAFT AND INDUSTRIAL PRODUCTS.
On April 13th, 2022, the EU Commission has published a proposal for a Regulation on geographical indication (GI) protection for craft and industrial (CI) products. The proposal is linked to the ongoing reform of the GI system for agricultural products and builds on the consultation strategy put in place by the Commission since 2013, gathering views of all relevant stakeholders within the EU Member States.
EU law protects GIs for agricultural products and foodstuffs, wines and spirit drinks, in compliance with the Geneva Act of the Lisbon Agreement on Appellations of Origins and Geographical Indications, a treaty administered by the World Intellectual Property Organization (WIPO) which has been formally joined by the European Union via Council Decision no. 2019/1754.
However, there is no Community mechanism to protect the names of products such as, by way of example, Murano glass, Solingen cutlery, Donegal tweed, Halas lace or Gablonz jewellery. Due to the legal uncertainty stemming from a patchwork of divergent rules at national level which are not mutually recognised, producers face challenges protecting geographically linked CI products.
Against this background, the proposal of the Commission (the “Proposal”) aims at establishing a directly applicable GI protection for CI products at EU level, allowing for simplified procedures for registration, cancellation and amendments to the product specification to be carried out by the competent authority within each Member State along with the European Union Intellectual Property Office (“EUIPO” or the “Office”).
In particular, Member States should be responsible for the first stage, which consists of receiving the application from the applicants, assessing it, running the national opposition procedure, and, following the positive results of the assessment, submitting the application to the Office. EUIPO should be responsible for examining the applications in the second stage of the procedure, running the worldwide opposition procedure, and taking a decision on granting or refusing the protection to the proposed GI.
The Office should also carry out the corresponding procedures for GIs originating in third countries, without prejudice to the direct registration procedure envisioned by Article 15 of the Proposal, pursuant to which the Commission shall be empowered to exempt a Member State from the obligation to designate a competent authority and to handle the management of the CI GI applications at national level if the Member State, by 6 months from the date of entry into force of the Regulation, provides the Commission with evidence showing that (i) the Member State concerned does not have a national sui generis system in place for the management of GIs for CI products; and (ii) the Member State concerned submits a request for an opt-out accompanied by an assessment to the Commission demonstrating that the local interest for protecting CI products is low.
As explained by the memorandum attached to the Proposal, the specific CI GIs protection system envisioned by the Commission would incentivise investment in craftsmanship and could improve excellence in the production of niche products. This approach aims to help in particular micro, small or medium-sized enterprises (MSMEs) lacking resources for devising new product specifications.
To the extent that the CI GI system would allow for higher wages and job creation, younger workers would remain in their regions rather than be drawn to urban areas.
Finally, the establishment of a GI protection system for CI products would ultimately lead to the manufacturing of quality output which is more durable as compared to cheaper non-CI GI mass production alternatives and is more likely to be produced in the Union where environmental standards are more stringent, to the ultimate benefit of consumers at large.
m.baccarelli@macchi-gangemi.com
m.lonero@macchi-gangemi.com
BREXIT UPDATE ON UK IMPORTS.
On 1st January 2022, the UK government began implementing the first set of customs rules for imports of goods coming from the EU. The Public Accounts Committee of the UK Parliament has published a report on the state of implementation of the new customs regime and the likely effects on imports and exports between the UK and the EU. There are a number of problems, with SMEs experiencing the greatest inconvenience and substantial increased costs.
For the purpose of understanding the current commercial relations between the EU and the UK, it is necessary to recall that the latter is no longer part of the EU since 31st January 2020 as a direct consequence of the referendum held on 23rd June 2016. Moreover, as of 31st December 2020, the so-called “transition period” ended. During this phase, the UK, although no longer a member State, was allowed to remain within the European single market.
At present, the UK and the EU are no more than trading partners and their trade relations are regulated by the EU-UK Trade and Cooperation Agreement (TAC).
Regarding the implementation of the new customs rules, the UK government has set out the following timetable:
1) from 1st January 2022: it is no longer possible to make “deferring customs declarations” (declarations made after the goods have entered the UK with retroactive effect), but it is compulsory to submit all the required documentation on time. In addition, it is mandatory to declare the transport of animal products at least 4 hours before arrival in Great Britain, via the so-called IPAFFS system;
2) from 1st July 2022: “safety and security declarations” will have to be produced and inspections on live animals, animal products and plants will be carried out at designated centres (Border Control Points);
3) from 1st September 2022: inspections will also be carried out on all dairy products;
4) from 1st November 2022: controls will also be carried out on all fish products and all products of mixed origin (both animal and plant origin);
5) from June 2023: the “CHIEF customs” system will no longer be available and the use of the “Customs Declaration Service” (CDS) platform will be mandatory for customs declarations relating to the trade of goods to and from Great Britain.
On 9th February 2022, the Public Accounts Committee (“PA Committee”) of the British Parliament published a report on the state of application of the new customs regime and the expected effects on imports and exports between the UK and the EU.
What the report highlights is a sharp increase in costs, especially for SMEs, associated with new customs rules and the implementation of border controls by the EU. This new regime is imposing a series of expenses that did not exist before. Among these are those related to the compilation of customs declarations, to the correct application of the rules of origin, and to possible controls and inspections carried out by customs authorities at the border.
SMEs are the companies that have the greatest inconvenience and that experience a substantial increase in costs due to their need to seek external professional assistance to attain support in adapting to the new customs regime. According to a 2019 forecast by HM Revenue and Customs (HMRC), the cost to businesses caused by UK’s exit from the EU single market should be around £15 billion per year. The report confirms the just mentioned cost increase, but specifies that accurate and up-to-date figures will be made available by HMRC as soon as the UK has implemented and enforced new customs regulations.
An interesting case in point is the one provided by ADS (Aerospace, Defence, Security & Space), an association representing over 1100 UK businesses, 95% of which are small and medium-sized enterprises, active in the aviation, defence, security and space sectors. ADS told the PA Committee that its members have already experienced major difficulties related to the new customs controls, due to the costs incurred and the increased time needed to export goods to the EU. ADS points out that the main reason for this is directly related to the many new administrative duties placed upon individual companies. Such duties are expected to increase with the implementation of the new import restrictions.
An example of this is the ‘rules of origin’ requirement for all military defence companies. Indeed, this indirectly entails the purchase of expensive software capable of encoding and decoding information concerning the origin of products. ADS also notes that there is still no common agreement on the type of certification to be presented at the border to prove the origin of goods. The case of ‘rules of origin’ is just one of many, but it clearly shows the existence of new compliance costs for companies and of significant regulatory shortcomings, which lead to uncertainty for companies and delays.
Furthermore, the PA Committee highlights some critical issues regarding the state of British border infrastructures and the availability of qualified personnel in the UK. In this respect, the case of the British Port Authority is certainly a cause of concern. Indeed, the Authority has not adapted its facilities yet, as it is still waiting for the government to give guidance on the new loading and unloading regimes and on the number of controls that will have to be carried out by type of cargo and goods.
Another source of concern is the road haulage of goods from the EU to the UK landing in Dover. In fact, hauliers and their cargo will be checked at Ebbsfleet, which is about 60 miles from Dover. This forced relocation could not only create delays but also lead to the risk of illegal and uncontrolled unloading of goods en route.
Finally, the Department for Environment, Food and Rural Affairs (DEFRA) points out to the PA Committee the difficulty of moving competent personnel to the borders, in this case veterinarians, capable of carrying out inspections on animals and fresh products directly derived from them.
It is therefore clear that, at least in the first period of implementation of the new customs regulations by the UK, we will have to expect not only a certain increase in costs, but also many delays in shipments.
The picture that emerges is particularly alarming because all these difficulties have already emerged even though the UK has not implemented the new customs regime yet. Such delay was caused by the need of creating a suitable system able to ensure smooth trade flows. Indeed, at the end of the transition period, only the EU was able to implement the new customs regulations. However, as previously outlined, as of 1st January 2022, the UK government has begun a process that will lead to the full implementation of the new regime by the end of this year.
s.macchi@macchi-gangemi.com
p.marangoni@macchi-gangemi.com
THE CONTRACTING AUTHORITY MAY LEGITIMATELY EXERCISE THE POWER TO CANCEL THE CONTRACT EVEN AFTER THE FINAL AWARDING OF THE CONTRACT: AN INTERESTING RULING BY THE REGIONAL ADMINISTRATIVE COURT OF SARDINIA.
With an interesting ruling (Section II of March 4, 2022, no. 154), the Regional Administrative Court of Sardinia reiterates the principle according to which the Administration may act in self-protection, by removing a final and effective awarding measure ex officio, even after the stipulation of the contract, if the conditions for the removal are met; in this way the Contracting Authority is entitled to exercise the powers set forth in articles 21 quinquies and 21 nonies of Law no. 241/1990 both in the phase preceding the execution of the contract, which is fully subject to public rules and those following, subject as known to the rules of private law.
Art. 32, paragraph 8, of the Administrative Procedure Code expressly states “the exercise of powers of self-protection in the cases allowed by law” is allowed, even when the award has “become effective“.
The same Council of State, Section III, by judgment dated March 22, 2017 no. 1310, stated that “Such a power of annulment in self-protection, in the best public interest of the restoration of the legality of the administrative action first and foremost by the same proceeding Administration, shall be recognized to this latter even after the awarding of the tender and the stipulation of the contract (on this point, please see Council of State, Section V, June 26, 2015, 3237), with the consequent ineffectiveness of the contract, and finds solid regulatory grounds, after the recent reforms of law no. 124 of 2015, also in art. 21-nonies, paragraph 1, of law no. 241 of 1990, where it refers even to measures granting economic benefits, which cannot but be considered inclusive also of the award of a public contract“.
In this sense, therefore, once the admissibility of self-cancellation has been established (both before and after the final award), the problem raised in the appeal’s first motive in the dispute decided by the Regional Administrative Court of Sardinia that relates to the alleged “acquired effectiveness” of the award, following the positive verification of the general and special requirements (which the Public Administration had in any case appealed, deeming that the verifications were not yet completed but still in progress) – becomes irrelevant.
The profile concerning the possible effectiveness of the decision to award the contract to the winning company does not exclude that the decision taken could be subject to reassessment, should insufficiencies or anomalies of the offer be found during the review process, before the contract is signed.
In these cases, of course, the self-protection measures must be punctually motivated with regard to the reasons that prompted the contracting authority to make use of the powers in question.
Therefore, with this ruling the Administrative Judge clarified that the admissibility of exercising power in self-protection, given the necessary prerequisites and findings are met, should be affirmed, with the possibility of full implementation both in cases of an effective award or otherwise.
n.digiandomenico@macchi-gangemi.com
THE “EXTRAORDINARY SURCHARGE AGAINST TOO EXPENSIVE ENERGY BILLS” TO BE PAID BY COMPANIES OPERATING IN THE ENERGY SECTOR.
Article 37 of Law Decree 21/2022 (Urgent measures to tackle the economic and humanitarian effects of the Ukrainian crisis) introduces an extraordinary one-off surcharge for 2022 to be paid, in case certain conditions are met, by companies who, in the territory of the State: produce electricity for subsequent sale; produce methane gas or extract natural gas; resell electricity, methane gas and natural gas; produce, distribute and trade petroleum products; import, for subsequent resale, electricity, natural gas or methane gas, petroleum products or introduce such goods from other EU States. As for the Robin Hood Tax, the main issue, is that of its constitutionality.
The surcharge aims to provide the resources necessary to finance the various measures to support consumers and enterprises introduced by Law Decree 21/2022 as a result of the increase in the cost of energy for a total expected expenditure of about 4 billion euros.
The extraordinary surcharge is due if an enterprise shows an increase in the balance between output and input VAT – as declared in the periodic VAT tax returns – for the period October 1, 2021 and March 31, 2022 in the comparison with the balance for the period October 1, 2020 and March 31, 2021, provided that the increase itself is at least equal to 10% and in any case more than 5 million euros. If so, the extraordinary surcharge is due in the amount of 10% of the increase and is non-deductible for the purposes of income taxes and regional tax on productive activities and must be paid by 30 June 2022.
The extraordinary surcharge is defined as a “solidarity levy” without specifying whether it is a tax. However, the tax nature of the levy, as a tax with a specific purpose in the form of a VAT surcharge, seems undeniable.
The extraordinary surcharge has many points of contact with the so-called Robin Hood Tax, introduced as an income tax surcharge by Law Decree no. 112/2008 and declared unconstitutional in 2015. In particular, it shares both the aim of redistributing part of the higher profits deriving from the increase in prices and tariffs in the energy sector and the provision of mechanisms that prevent the transfer of the related burden to customers.
Compared to the 2008 one, this extraordinary surcharge has a one-off nature in a completely exceptional historical moment, which makes it in itself more suitable to pass the constitutional scrutiny.
The major doubts concern the retroactivity of the rule: the surcharge was enacted after almost all the relevant tax period had expired (the rule entered into force on March 22, 2022 and concerns the extra profit realized in the last quarter of 2021 and in the first quarter of 2022). The matter must also be evaluated in terms of the legitimate expectations of the taxpayer, which is also an EU principle, since a retroactive tax must at least be foreseeable in order to be legitimate. We can doubt the predictability of this surcharge.
A second delicate point is that of the ability of the surcharge to tax only the extra profit. In fact, as stated by the Constitutional Court in its ruling on the Robin Hood Tax in order to be compatible with the Constitution, a tax must be able to hit “only extra-profits”. Indeed, the simplistic mechanism adopted by the legislator, anchored to the VAT balance instead of to the higher IRES income (this probably to bring forward to 2022 the collection of the surcharge without waiting for the filing of the income tax return in the next year), is unsuitable to guarantee that the extraordinary surcharge affects exactly and only the extra profit deriving from the increase in energy prices.
Finally, the non-deductibility from income taxes and regional tax on productive activities seems to be in contrast with the ruling of the Constitutional Court on the deductibility of the IMU (municipal real estate tax) paid in relation to commercial real estate (see Constitutional Court 262/2020).
PHISHING, A REAL THREAT FOR COMPANIES.
Business operators carry out an increasing number of activities through online services, such as purchase and sale of goods and/or services, contacts with customers etc.
The company’s online presence means it is exposed to many risks, first and foremost phishing.
Phishing is an illicit technique that aims to obtain confidential information of a certain person or company. Among the data subject to phishing are usernames and passwords, bank account numbers and payment details. The purpose of phishing is the use of this data to carry out illegal activities.
The most common tools to implement this illicit activity are e-mails, sms, and in general social media.
The person who carries out phishing activities can be defined as an “identity thief”, who will pretend to be an important leading player (credit card manager, director of a public body) and with this pretense will ask the victim to provide personal data to solve a particular technical problem (that doesn’t exist), access certain promotions (that also are inexistent) or click on a link that will lead to a form that needs to be filled in.
Of course, the ways that phishing is carried out are continuously evolving and can appear in different ways from those mentioned above which represent mere examples.
The consequences of phishing are loss of control over one’s own data, financial losses resulting from unlawful withdrawals from a bank account, or authorization for fraudulent transactions.
To prevent phishing activities, companies should take into consideration:
i) training company personnel and raising awareness;
ii) establish internal procedures, policies and/or models that draw the attention of recipients to the precautions to be taken, including, in particular, the prohibition of clicking on suspicious links or filling in forms unless certain of the origin; if in doubt, the preliminary verifications to be performed (e.g. position the mouse pointer on the link before clicking in order to verify the real address to which you will be connected, beware of grammatical errors in messages and be wary of messages from Italian operators that are not sent in Italian, beware of messages that contain intimidation and threats if you do not cooperate in following indications (such as providing your information or clicking on a given link);
iii) the adoption of complex and strong passwords (alphanumeric) that are different for each online service;
iv) the installation and adoption of an up-to-date antivirus program;
v) an active spam filters on company email accounts.
Therefore, do not forget to adopt appropriate prevention measures in your company.
r.demarco@macchi-gangemi.com
f.montanari@macchi-gangemi.com
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
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