"Crisis and Controls: the Italian model"

The main aim of Italian bankruptcy and business recovery used to be the protection of creditors, while now the goal is claiming priority to safeguard companies and reduce their difficulties. The success of any Restructuring Technique is related to the quality of operations that the company has planned to implement. This is the reason why, no matter which of the recovery strategy the company choses, the law requires that more than one Independent Auditor should analyze the prospective financial data produced by the company and coming as a result of the planned restructuring operations. In recovery and resolution planning (art. 67 lf) and in restructuring agreement (art. 182 bis lf) these are expressed by an Independent Expert pointed out by the company, while in pre-insolvency agreements with creditors (art. 160 lf) a second opinion is needed from the Trustee pointed out by the Court. In addition the situation is continuously monitored by the Supervisory Board (Collegio Sindacale), sometimes called Statutory Supervisory Board, the specific watchdog distinguishing the Italian corporate governance system (Stiglitz, 2009) and - depending on the company’s size - by the Auditor. In crisis context timing represents a critical variable to be carefully considered and managed. To get the best results for the company, a good flow of information should be created among the Controllers involved in the process. Being able to walk through the documentation of the Corporate Controllers would be in fact of great help for the Independent Expert exam of the fairness of the figures, and can reduce the timing of his audit work. Unfortunately in the Italian context this is not always possible as our empirical research points out. Data from the empirical analysis conducted on a sample of 284 pre-insolvency agreement procedures (which are all the procedures application at Milano Court in 2011 and 2012) show that first application results are not satisfactory as the number of successful procedure is not adequate. Much has to be done by professionals to build adequate agreements and by standard boards and academia to help professionals and companies reaching their goals. All Actors involved in the process with a Control role need to behave rigorously to be able to test the quality of the operations planned. Each professional involved is committed to face his own responsibilities. The analysis show that this demand for serious engagement seems to have been frequently interpreted as a reason to ban professional exchanging of information and sharing of relevant documents among different Controllers. This happens especially in the first delicate period when time is a precious resource as the strategy is being defined and the application is being composed. Only in a minor percentage of the procedures analyzed the Independent Expert has found support and has had access to the work of the Supervisory Board and of the Auditor. Results seem hence to show a possible path useful to improve efficiency, but also efficacy, in managing successfully the Restructuring Techniques newly introduced in the Italian model.