Reforming Italy’s Old Insolvency Regime
The long-awaited radical overhaul of Italy’s arcane insolvency regulations came into force when in 2006, parliament replaced a once notoriously cumbersome body of procedures with one resembling key provisions of Chapter 11 in the United States. The new process favors corporate restructuring over the finality of liquidation and strengthens lenders’ rights to stimulate freer flow of credit to small and medium sized firms.
With momentum for reform languishing on the parliamentary agenda for over five years, the financial crises that rocked some of Italy’s leading corporate giants—highlighted by Parmalat’s near overnight demise in 2003—finally brought to bear sufficient political pressure to significantly revisit the bankruptcy law for the first time since 1942. Comprehensive reform saw the light of day when the final set of 2006 regulations demolished the old law’s outdated criminal liability provisions.
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