PAC (PREVENTIVE ARRANGEMENT WITH CREDITORS): A TOOL TO SAFEGUARD THE ENTERPRISE VALUE.

Italian Insolvency Law has been widely reformed since 2005 in order to introduce new legal procedures aimed at preserving troubled companies, discerning viable from irredeemable businesses, and increasing productivity through a more efficient management of insolvency proceedings. The excessive duration of bankruptcy cases was repeatedly brought to the attention of the European Court of Human Rights, relating to the right to a fair trial in terms of reasonable duration. After the reform, the Preventive Arrangement with Creditors (Concordato Preventivo) became Italy’s equivalent of US’s Chapter 11 and can be considered the main instrument used by small and medium-sized companies (and sometimes large ones) to manage insolvency by avoiding bankruptcy. This paper provides an empirical analysis on filing of Preventive Arrangements with Creditors in the Court of Milan, one of the largest courts in Italy, in the 2005-2014 period. Through the exam of 835 cases, 70% of the total number, the research shows the different features of the procedure, analyzes the characteristics of companies that resort to it and its diverse purposes of liquidation or restructuring. Due largely to the newness of the legislation, along with the complexity of the Italian system, it is rather difficult to generalize conclusions. Nevertheless, the paper shows how Preventive Arrangements with Creditors can be considered a more efficient instrument than the alternative bankruptcy, both in terms of timeframe as well as with creditors‘ satisfaction. As part of the overall European reform process of insolvency proceedings, following the 2014 Recommendation issued by the European Commission, Italy seems to provide useful insights for other countries in Europe. The article was appreciated: 1) both at a national level because: 1.a) on the one hand Cespec, that is the Center for Studies for Executive and Bankruptcy Procedures of the Italian insolvency specialized Judges expressed interest in the research resultes and supported a second level survey with the different methodology of questionnaires (obtaining replies relating to 3,000 PAC cases presented in most of the districts of Italian courts); the results of this further research were published in the Bank of Italy Publication "Negotiating tools for the solution of crises of company: the arrangement with creditors "; 2.b) on the other hand, the authors Riva and Danovi were heard at the Second Justice Commission of the Senate in 2017 and at the Second Justice Commission of the Chamber in 2018 in order to propose observations on the text of the crisis and insolvency code; 2) both at an international level since, in the light of the results obtained, the authors Riva and Danovi have been actively involved in the research funded by the EU (European Commission JUST / 2014 / JCOO / AG / CIVI / 7627) "Best practice in European restructuring . Contractualized resolution of the inconvenience in the shadow of the law "(www.codire.eu) which saw the partnership between the University of Florence (Project Coordinator), Humboldt-Universität zu Berlin (Partner) and Universidad Autónoma de Madrid ( Partner), supported by the Consejo General del Poder Judicial (Associate Partner), Bank of Italy (Associate Partner) and OCRI-Entrepreneurship Lab Research Center of the University of Bergamo (Associate Partner). This international research led to: 2.i) the publication of a book and several collective papers and publications edited by the research representatives in the various countries (Lorenzo Stanghellini, Riz Mokal, Christoph G. Paulus, Ignacio Tirado) in which the researches here under consideration were considered as the italian data set reference; those works suggested, on the basis of the results obtained, possible changes to the Insolvency Directive; 2.ii) the presentation of the results obtained in Brussels at the Center for European policy studies on 5 July 2018.