Italy: Temporary provisions introduced by the new Liquidity Decree in the area of corporate law


published on 16 April 2020 | reading time approx. 2,5 minutes


​On 9 April 2020, Law Decree no. 23 of 8 April 2020 (hereinafter the “Decree”), also known as the “Liquidity Decree” or “Business Care”, entered into force, containing measures for access to credit for businesses and facilities designed to ensure the continuity of businesses affected by the Coronavirus emergency.


Below we will briefly discuss some of the main instruments introduced by the Decree concerning the provisions on capital reduction and the principles for the preparation of financial statements.


Temporary provisions on capital reduction

Article 6 of the new Decree provides for a suspension from 9 April 2020 to 31 December 2020 of the application of the statutory provisions on the reduction of share capital for losses (articles 2446, paragraphs 2 and 3, and 2447, 2482-bis, paragraphs 4, 5 and 6, and 2482-ter of the Italian Civil Code) for corporations.

This implies, therefore, that the cause of dissolution of the company for reduction of the share capital below the legal minimum provided for in Articles 2484, no. 4, and 2545-duodecies of the Civil Code is not operative.

In particular, these are all those cases in which the share capital is reduced due to losses (by more than one third or even below the legal limit) to which the administrative body is required to proceed without delay to convene the shareholders' meeting to cover the losses themselves by restoring the minimum share capital, or to resolve on the dissolution of the company.

This is, in essence, a measure aimed to consider that the economic crisis caused by Covid-19 could follow up crises in companies which, before the epidemic, were in positive economic conditions, but which, as a result of the present emergency situation, could suffer a pathological loss of capital which, in fact, does not correspond to the real potential of the companies involved.

However, in order to guarantee shareholders adequate information on the company's real equity situation, the obligation of the administrative body to convene the shareholders' meeting to submit the report on the company's equity situation pursuant to Article 2446, paragraph 1 of the Italian Civil Code remains unaffected.

The scope of application of the abovementioned suspension is nevertheless not clear, since the economic consequences of the Covid-19 emergency will certainly have a significant impact on the financial statements for the current year, which will therefore be approved during the first months of 2021. It is hoped that the legislator will extend the applicability of this rule, so it is likely that the rule will have to be interpreted according to the reference period and not as the date on which the financial statements will be approved.

Temporary provisions on company financing

Article 8 of the Decree provides that Articles 2467 and 2497-quinquies of the Italian Civil Code do not apply with regard to the subordination of the return of financing made by shareholders or by those who exercise management and coordination activities, when such financing is granted in the period between 9 April and 31 December 2020. Therefore, the mechanisms that in the ordinary way in the presence of bankruptcy proceedings put shareholders in second place to creditors, are deactivated.

The purpose is to encourage the increase of financing flows to the company by shareholders.

Temporary provisions on the principles for the preparation of financial statements

With regard to the financial statements, Article 7 of the Decree allows the items in the financial statements for fiscal year 2020 to be valued on a going concern basis, provided that the principle of going concern is met in the previous financial statements, i.e. those closed on 31 December 2019. Basically, it’s a rule that makes it possible to ensure the continued application of valuation criteria also for such companies that had to temporarily cease their activities due to the health emergency.

This measure also applies to financial statements closed by 23 February 2020 and not yet approved.
It is still possible to convene the shareholders' meeting to approve the financial statements for the year ended 31 December 2019 by 28 June 2020 even in the absence of a specific provision in the Articles of the by-laws, as already provided for by Article 106 of Law Decree 18/2020.

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