COVID-19 as a Force Majeure Event and Effects on Pending Restructuring Procedures
Introduction Covid-19 is a force majeure event, meaning an extraordinary, unexpected and unforeseeable event, which is certainly not attributable to the voluntary conduct of an entrepreneur who is currently undergoing a restructuring or insolvency procedure and now faced with the Covid-19 crisis. The entire economy, not only in Italy, is facing a negative economic impact, sometimes coupled with preexisting financial distress which, in certain cases, has already been addressed through one of the restructuring procedures provided under R.D no. 257/1942 (the “Bankruptcy Law”). Set out below are guidelines for companies in financial distress (or already placed under restructuring or insolvency procedures) (the “Company”) to manage and overcome this crisis.
Set out below are guidelines for companies in financial distress (or already placed under restructuring or insolvency procedures) (the “Company”) to manage and overcome this crisis.
STEPS TO BE ADOPTED BY THE COMPANY
Is the pandemic Covid-19 cause or occasion of the crisis?
First, the Company should verify whether the Covid-19 pandemic, also in light of its business activity and the restrictions introduced by the Government, represents the cause or reason of a crisis or a deviation of the final recovery plan with the prognostic plan established when the restructuring operation was approved. In other words, the Company should analyse whether, in the absence of the force majeure event, it would have found itself in a crisis or, depending on the circumstances, have complied with its recovery plan.
Does the company meet the subjective and objective requirements to access the benefits introduced by the recent legislation to tackle the Covid-19 pandemic?
Second, the Company must check whether it can, based on the applicable objective and subjective conditions, benefit from the support measures that the Government is adopting. Law Decree no. 18 of 17 March 2020 introduced, among others, measures to support: • employee’s income by budgeting about EUR 10 billion public spending, mostly dedicated to social shock absorbers, such as Cassa Integrazione Guadagni also extraordinary, the Fondo Integrazione Salariale, and contributions and vouchers also for selfemployed workers; • the credit system, to enable banks and financial institutions to meet the demands of companies and to provide, inter alia, for (i) a moratorium on the withdrawal of credit lines or advances on invoices on the amounts granted until 30 September 2020; (ii) the extension of the maturity of non- instalment loans; and (iii) the suspension of any instalments and fees for loans until 30 September 2020; • liquidity of companies, by granting tax payment and other non-tax related deferrals to legal and physical persons located throughout the national territory.