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					                               Consulenza legale e tributaria




  To                                                                                                    Date    25 January 2008


From   Prof.Carlo Bruno Vanetti                                                                       Our ref




  cc   BANKRUPTCY, LIQUIDATION AND COMPANY CRISIS
       RESOLUTION PROCEDURES IN ITALY

       UPDATED 1 FEBRUARY 2008

  1           Legislation

              Italian bankruptcy, liquidation and crisis resolution law is primarily contained in:

                 Articles 2272-2283, 2308-2312 and 2484-2496 of the Civil Code, as regards the
                  liquidation of partnerships and companies;

                 the Bankruptcy Act of 1942 (Royal Decree no 267 of 16 March 1942), as regards
                  bankruptcy procedures and other arrangements. Many articles of this Act were revised
                  by Law Decree no 35 of 14 March 2005, Law no 80 of 14 May 2005 and Legislative
                  Decree no 5 of 9 January 2006 ed ulteriormente integrati o modificati con Legislative
                  Decree no 169 of 12 September 2007(1).

                 the Large Insolvent Corporations Act, known as the “Prodi Law” (2), as regards the
                  extraordinary controlled management of large corporations in insolvency. The Prodi
                  Law was revised by the “Prodi-bis Law” of 1999 (3) and integrated, in the case of very
                  large companies, by the “Parmalat Decree” of 2003 and subsequent amendments (4).

              Italian law contains insolvency procedures for both incorporated and unincorporated
              organisations. Dissolutions or restructuring of insolvent companies are regulated by
              liquidation, bankruptcy, extraordinary administration or company crisis resolution
              procedures, depending on the particular situation.


       (1)
             This memorandum is based on the new rules. In the case of bankruptcy, however, they refer only to proceedings
             starting after the rules come into force (from 16 March 2005 for Law Decree no 35/2005 and from 16 July 2006
             for Legislative Decree no 5/2006 and from 1st January 2008 for Legislative Decree no 169/2007).
       (2)
             Law no 95 of 3 April 1979.
       (3)
             Legislative Decree no 270 of 8 July 1999.
       (4)
             Law Decree no 347 of 23 December 2003, converted with amendments into Law no 39 of 18 February 2004. Law
             no 39 was amended by Law Decrees nos 119 of 3 May 2004, 281 of 29 November 2004 and 22 of 28 February
             2005 (converted with amendments into Law no 71 of 29 April 2005).




       The contents of this memorandum are for internal use only and should not be transmitted to third parties without prior
       authorisation.
                                                                                            Bankruptcy Procedures in Italy
                                                                                                         25 January 2008




2          Liquidation (Liquidazione)

           The term “liquidation” refers to a winding-up procedure that does not necessarily imply
           insolvency; liquidation can also be decided voluntarily by a partnership or company.

           There are no particular legal requirements for the voluntary liquidation of an individual
           concern (impresa individuale) (5).

           The sections of the Civil Code governing the liquidation of joint-stock companies (SpAs),
           limited partnerships (società in accomandita per azioni) and limited liability companies
           (Srls) were partially modified by Legislative Decree no 6 of 17 January 2003, in force
           since 1 January 2004 (the relevant sections are now Articles 2484-2496 of the Civil Code).

           These bodies can be dissolved and liquidated for one of the following reasons:

           -    they reach the end of their duration, as established in their articles of association;
           -    the purpose for which they were established has been achieved or can no longer be
                achieved;
           -    the shareholders’ meeting can no longer operate or remains inactive;
           -    the capital is reduced below the legal minimum and the shareholders’ meeting does
                not approve an increase;
           -    a resolution of the shareholders’ extraordinary meeting;
           -    the inability of the company to repay the stake of an exiting shareholder;
           -    any other reason fixed in the articles of association;
           -    any other reason provided for by law.

           In order to put a company into voluntary liquidation, a resolution to that effect must be
           passed at an extraordinary shareholders’ meeting. This meeting must appoint one or more
           liquidators to act in place of the directors and whose main function is to dispose of the
           company’s assets, pay off its creditors and prepare the final liquidation financial
           statements and a report specifying the amount, if any, of the proceeds of the liquidation
           available for distribution to each shareholder.

           Unlike the provisions in force before 1 January 2004, if a cause of winding-up arises, the
           directors are not prohibited from starting new operations; they are merely obliged not to
           undertake particularly risky operations and to limit their activities to those that maintain
           the operations of the company.

           The liquidators must prepare a liquidation plan and, if necessary, arrange for the
           temporary continuation of the business divisions, which can be sold separately or jointly.
           The continuation of the activity must be authorised by the shareholders’ meeting, which

    (5)
          In case of insolvency, the same procedures as for companies and partnerships are applicable.




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    must also establish the rules to be followed by the liquidator, unless they are already
    indicated in the articles of association.

    The statutory bodies remain intact during the liquidation phase; for instance, the rules
    governing the shareholders’ meeting still apply if they are compatible with the liquidation
    procedure. The company retains its general powers (eg, to participate in mergers and
    acquisitions), provided that the distribution of assets has not started. Moreover, a capital
    increase, or decrease on account of losses, may be approved during the liquidation process.

    If the business activities are continued on a temporary basis, the annual financial
    statements must be drawn up in part at realisation value and in part at going concern value
    (during liquidation the shareholders’ meeting retains the power to approve the financial
    statements, appoint the statutory and the external auditors, and modify the articles of
    association). The auditors continue to serve during liquidation.

    The company’s board of statutory auditors and the external auditors are required to
    examine the final liquidation financial statements and to issue a report, which, together
    with the financial statements and liquidators’ report, must be expressly approved by a
    resolution of the general meeting or deposited with the court for a period of three months,
    during which the shareholders have the opportunity, if they wish, to raise objections
    regarding the liquidation financial statements. If no objections are raised, the final
    liquidation financial statements are deemed to have been approved and, accordingly, the
    liquidator may distribute any proceeds of the liquidation to the shareholders. Immediately
    afterwards, the company is struck off the register of business enterprises and the books are
    deposited with the court, which holds them for ten years.

    Striking-off does not exclude a subsequent declaration of bankruptcy for unexpected
    contingent liabilities; however, the recent corporate law reform has limited this risk to a
    period of one year from the date that a company is struck off the register. The striking-off
    of the company cannot prejudice unsatisfied creditors, who will be able to have recourse
    against the shareholders, up to an amount equivalent to the distribution received by the
    latter after liquidation of the assets. Creditors may also have recourse against the
    liquidators if their claims are not satisfied due to the fault of the latter (including instances
    where the liquidators, even though they know, or should know, about a certain debt, fail to
    pay it off).

    If the cause of winding-up is no longer valid and the company has not yet been cancelled,
    the liquidation resolution can be revoked by a resolution of the extraordinary meeting,
    passed with the majorities required for amendments to the memorandum or articles of
    association (in the case of companies that do not make recourse to the risk capital market).
    Any shareholders who do not consent to such revocation have the right to withdraw from
    the company, cashing in their investment despite the continuation of the company’s
    production activity.




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         Any creditors who might be damaged by the revocation of the liquidation are guaranteed
         the right to object. This freezes the effects of the revocation unless the court declares it to
         be effective because it considers the risk of damage to be unfounded or receives an
         adequate guarantee from the company.

         Lastly, the revocation of the liquidation is effective only 60 days after registration of the
         relevant resolution in the register of enterprises. However, the revocation becomes
         effective before that term if the creditors express their consent or, in the case of those who
         do not express their consent, are paid (Article 2487-ter, second paragraph, of the Civil
         Code).

3        Bankruptcy (Fallimento)

         All entrepreneurs who engage in commercial business, except for public bodies and small
         entrepreneurs6, are subject to the provisions on bankruptcy (Article 1, paragraph 1, of the
         Bankruptcy Act).

         An insolvent entrepreneur is declared bankrupt (Article 5, paragraph 1, of the Bankruptcy
         Act). Bankruptcy is declared after petition by the debtor, one or more creditors, or the
         public prosecutor (non è possible il fallimento d’ ufficio da parte del tribunale).

         Jurisdiction lies with the court for the area where the company’s main office is located.
         Even the simple presence in Italy of a branch could be enough to declare bankruptcy in
         Italy (Article 9, paragraph 2, of the Bankruptcy Act): however there is no prejudice to
         international treaties and EU legislation (Regulation 1346 of 29 May 2000, on insolvency
         proceedings).

         The court appoints a bankruptcy judge to supervise the bankruptcy procedure and a
         receiver (usually an accountant or a lawyer, or a firm of associated professionals) to
         manage the liquidation of the business and distribute the proceeds. If possible, all or part
         of the business activity must be continued. The judge also appoints a committee of three to
         five creditors; this committee has supervisory powers over the receiver’s activity (its
         duties have been extended by Law Decree no 5/2006).

         The entrepreneur or the company’s directors lose their right to manage the business or sell
         any assets.



    6
      Il decreto legislative 169/2007 ha stabilito che l’imprenditore che voglia evitare il fallimento a causa delle sue
    ridotte dimensioni, deve dimostrare di possedere tutti i seguenti requisiti: 1) di avere debiti (anche non scaduti)
    inferiori (o pari) a E 500.000,00; 2) che in ciascuno dei 3 esercizi precedenti il valore contabile del suo attivo non ha
    superato 300.000,00 E; 3) che in ciascuno dei 3 esercizi precedenti i suoi ricavi lordi non hanno superato i
    200.000,00 E. Inoltre, se i debiti scaduti sono meno di 30.000,00 E, basta tale requisito per non fallire.




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       The receiver must dispose of all of the entrepreneur’s assets, where possible preserving
       any business unit and goodwill, verify all the creditors’ claims, and distribute the available
       funds to the creditors listed in the schedule approved by the court.

       The bankruptcy assets include not only the assets owned by the debtor when bankruptcy is
       declared, but also those which are not in his possession at that time, but which the law
       includes among the assets subject to the bankruptcy procedure.

       Under the Bankruptcy Act of 1942 an action to set aside transactions (azione revocatoria
       fallimentare) could be brought against any payment or contract that violates the obligation
       to apply the same treatment to creditors. This was one of the most powerful tools available
       under private law to receivers. Payments, securities and contracts predating the bankruptcy
       or other analogous procedures (7), even when made in normal conditions, could thus be
       rendered ineffective.

       Assets and money that had left the hands of the debtor in the year (normal transactions) or
       two years (anomalous transactions) prior to bankruptcy could in this way be included in
       the bankruptcy estate. Such transactions included normal payments of debts.

       The most common cases regarded payments made to bank current accounts and suppliers,
       and securities granted to banks.

       Law Decree no 35 of 14 March 2005 (not applicable to proceedings already underway) has
       however greatly reduced the scope of actions to set aside payments. It reduces the one-
       year and two-year terms to six months and one-year respectively and excludes, among
       other things, normal payments, transactions made in the context of a restructuring plan
       approved by an expert, and normal payments on bank current accounts (other laws have
       reduced the risk faced by purchasers of property when builders become insolvent; and the
       risk attached to purchases of business receivables or securitisation operations).

       The ranking of creditors is governed by Article 111 of the Bankruptcy Act and Articles
       2777-2783bis of the Civil Code and is the same for bankruptcy, compulsory administrative
       liquidation and extraordinary administration procedures. It can be summarised as follows:

       -   claims secured by a pledge or mortgage;
       -   claims due for the management of the procedure and for the continuation of the
           enterprise, if authorised;
       -   claims having a general privilege, such as claims for salaries, professional fees, social
           security contributions and taxes (these claims are sub-divided into different classes);
       -   unsecured claims;


(7)
      Compulsory winding-up with a declaration of insolvency; or extraordinary administration with liquidation of
      assets.




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         -    subordinated claims8, if any.

         The procedure ends when one of the following conditions has been met:

         -   all the assets have been shared between the creditors;
         -   a bankruptcy composition (“concordato fallimentare”: see below) has been reached;
         -   no creditor has presented any claims;
         -   all creditors have been paid in full;
         -   the assets are insufficient to satisfy even a minimal percentage of the creditors’ claims.

         The duration of the procedure depends on the assets involved. Five or more years are
         normally required.

         When the procedure is closed and all the assets have been shared between the creditors,
         but the creditors have not been paid in full, it can be reopened if:

         -    five years have not yet elapsed since the closing of the procedure;
         -    there are enough assets to justify reopening the procedure, or the bankrupt offers to
              pay at least 10% of the claims of old and new creditors;
         -    this is expressly requested by the debtor or by one of the creditors.

4        Arrangement with creditors during bankruptcy (Concordato fallimentare)

         An arrangement with creditors is a special way of closing a bankruptcy procedure without
         liquidating the assets of the company. Liquidation, if necessary, takes place when the
         bankruptcy proceedings have already finished.

         In an arrangement with creditors, the debtor or a third party proposes the payment of all
         (or an appropriate percentage of) the secured creditors and a percentage of the unsecured
         creditors; these offers must be approved by creditors representing the majority of
         unsecured claims (and by the majority of each class, if the creditors have been divided into
         classes) and validated by the court.

         It must be stressed that abstentions are counted as votes in favour.

         The contents of the offer are adapted to each case and are very similar to those of a
         composition with creditors before bankruptcy (see below).

         After the arrangement is validated and the decision becomes final, the bankruptcy
         procedure is considered closed and the debtor is freed from the unpaid percentage of its
         debts.

    8
     Tra i debiti subordinati vanno ricordati i debiti verso la holding o altre società del gruppo per finanziamenti ricevuti:
    art.2497quinquies cod.civ..




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        The arrangement is enforced under the supervision of the judge, receiver and creditors’
        committee.

        The arrangement may be:

        -   terminated if promised guarantees are not actually given or if obligations are not
            fulfilled. Termination can be requested by the receiver or by the creditors’ committee.

        -   annulled if it is discovered that the debtor’s liabilities have been wilfully exaggerated
            or a significant portion of the assets has been hidden or sold.

        If the arrangement is terminated or annulled the bankruptcy procedure is reopened.

5       Composition with creditors before bankruptcy (Concordato preventivo)

        The aim of a composition with creditors is to avoid putting entrepreneurs into bankruptcy.
        Only entrepreneurs can initiate this procedure.

        The original version of Articles 160 et seq of the Bankruptcy Act, in force until 16 March
        2005, stated that only a “deserving” entrepreneur could be admitted to the procedure,
        which was designed to benefit insolvent entrepreneurs who were “honest but unlucky” (the
        conditions for eligibility were the same as those for supervised administration: see below).

        Moreover, through real or personal securities of third parties, or the transfer of assets to
        creditors, entrepreneurs had to ensure that all unsecured creditors would receive at least
        40% of their claims, and that all classes of preferential creditors would be paid in full.

        The composition had to be approved by the majority of unsecured creditors, representing
        two thirds of the total unsecured claims.

        Law Decree no 35/2005 has introduced a number of changes: a business no longer has to
        be definitively insolvent but in a generic “state of crisis”; less rigid majorities are required;
        there is no longer a minimum percentage to be offered to unsecured creditors; the debtor
        can offer creditors, in addition to a sum of money, any alternative means of satisfaction,
        based on a specific plan.

        For example, assets can be offered to creditors or to a third party that takes over the debts
        of the insolvent business. Other extraordinary transactions are possible, including those in
        which shares, quotas, convertible bonds or other financial instruments are granted to
        creditors.

        The entrepreneur can propose that the unsecured creditors be divided into different classes,
        which are treated differently in terms of the percentage or form of payment. For example,




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       banks can be treated differently from goods suppliers and small suppliers can be treated
       differently from large ones.

       The court must check and confirm that the classes of creditors have been correctly divided
       (after the changes introduced by Law Decree no 35/2005, these checks are mainly legal
       ones and do not consider the merits of the claims).

       Fino al 2007, preferential creditors of all classes had always to be paid in full and any
       waivers agreed individually. Con il D.Lgs. 169/2007 (in forza dal 1.1.08), si è introdotta la
       possibilità di pagare meno del 100% anche ai privilegiati9.

       In his application the debtor must account for the events that led to the crisis and give
       reasons for requesting a composition. He must file his books of account, an analysis and
       forecast of his business, and the list of creditors, together with an expert’s report
       confirming the feasibility of the plan and the accuracy of the documentation regarding his
       profitability, assets and liabilities and financial position.

       The application is investigated by a supervisor (usually an accountant) appointed by the
       court. This person must verify all the details of the application, notify the creditors of the
       proposed composition and of the date of the meeting where it will be discussed and voted
       upon, and file a report describing the entrepreneur’s financial position, the reasons for the
       crisis and the advantages of a composition compared with bankruptcy.

       The composition has to be approved by (creditors representing) the majority as amount of
       the unsecured claims.

       If the unsecured creditors have been divided into classes, the proposal must also be
       approved by the majority of the claims in each class, or at least by the majority of the
       classes. In the latter case, the court must verify that the proposal is also the best solution
       for creditors of the classes that have not actually approved the composition.

       The court must confirm the composition by issuing a decree within six months of the filing
       of the initial application for a composition. The term may be extended just once, by a
       maximum of 60 days. The supervisor then oversees the execution of the payment plan.

       If the composition is not approved, the court must immediately inform the public
       prosecutor, who may request bankruptcy.

       The composition may be terminated if the entrepreneur does not fulfil his obligations. It
       may also be annulled if it is discovered that his liabilities have been wilfully exaggerated
       or a significant portion of the assets has been hidden or sold.


9
    Purchè quanto offerto sia almeno pari al market value dei beni sui quali grava il diritto di prelazione




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        This procedure is shorter than bankruptcy and, unlike bankruptcy, a debtor who is
        admitted to a composition with creditors continues to administrate his assets and the
        business of the company continues. However, his activity is overseen by the supervisor
        and by the judge. Moreover, the judge’s authorisation is required for transactions that fall
        outside the ordinary administration of the company (loans, settlements, granting of pledges
        and mortgages, acceptance of an inheritance or donations, sale of real estate, etc).

        For the creditors the effects are mostly the same as those in the bankruptcy procedure, but
        no actions to set aside transactions are allowed.

6       Debt restructuring agreement

        The Law Decree of 11 March 2005 has also introduced a “fast-track composition”
        (concordato accelerato). The debtor reaches an “out of court” agreement with at least 60%
        of the unsecured creditors and lo pubblica sul Registro Imprese e submits it to the court,
        together with the accounting records and an expert’s declaration that the plan is feasible,
        particularly in terms of the debtor’s ability to pay creditors who are not parties to the
        agreement.
        La pubblicazione del piano sospende per 60 giorni le azioni esecutive (anche già in corso)
        di tutti i creditori (anche non aderenti al piano).
        The court then issues a decree approving or rejecting the agreement. Any party concerned
        has fifteen days in which to ask the court of appeal to re-examine the plan.

7       Abolition of supervised administration (Amministrazione controllata)

        The Bankruptcy Law of 1942 also envisaged a supervised administration procedure, which
        involved the suspension of payments for a maximum of two years, and which a debtor
        could request if it was not yet actually insolvent but was experiencing temporary
        difficulties in meeting its commitments.

        This procedure was abolished by Legislative Decree no 5/2006, given that it had little
        practical use and that, all other things being equal, better results can be obtained from a
        composition with creditors.

8       Compulsory administrative liquidation (Liquidazione coatta amministrativa)

        Compulsory administrative liquidation applies only to public undertakings, insurance
        companies, banks, cooperative societies, mandatory consortia, fiduciary and audit
        companies, SIMs (investment companies), institutions managing council housing and
        certain joint-stock companies in which the state is the majority shareholder or creditor.

        Compulsory administrative liquidation precludes a declaration of bankruptcy, and vice
        versa.




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        Proceedings for compulsory administrative liquidation can be managed only by the
        appropriate supervisory authority, and may originate in insolvency, mismanagement or a
        public interest in winding up the company.

        An application is made to the relevant authorities or the court by the company or one or
        more of its creditors. The court verifies the insolvency, but a ministerial decree is also
        required. The liquidator is appointed by the government department supervising the
        company and the liquidation proceedings. His duties are to verify creditors’ claims and to
        investigate whether or not a composition is feasible. If it is, the liquidator and the company
        prepare a proposal for the creditors to vote on.

        If a composition is not feasible, the entrepreneur’s assets are disposed of and the funds are
        distributed among the creditors.

9       Extraordinary administration (Amministrazione straordinaria)

        This procedure, first established by the Prodi Law of 1979 (valid for proceedings still
        pending) and revised by the Prodi-bis Law of 1999, is restricted to large insolvent
        industrial enterprises and can be adopted when:

        -   the debts of the insolvent enterprise are equal to two thirds of both the assets and the
            ordinary gross profits shown on the financial statements of the last fiscal year;

        -   there have been more than 200 employees for at least the last year;

        -   the company has a real chance of recovery from insolvency.

        The main purpose behind the Prodi-bis Law, as clearly stated in Article 1, is to protect
        employment levels and safeguard production assets through the continuation, re-
        establishment and conversion of business. Unlike bankruptcy and compulsory
        administrative liquidation procedures, which are normally aimed at winding up the
        insolvent company in order to satisfy creditors’ rights, in this procedure the creditors’
        rights are subordinated to the possible recovery of the business and the “social” impact of
        insolvency. This is why public authorities, such as the Ministry for Industry, are involved.
        Extraordinary administration also extends to insolvent controlling and controlled
        companies and to insolvent companies under common management, whether or not the
        controlling or controlled company meets the above admission requirements.

        The extraordinary administration procedure is divided into two stages: 1) the preliminary
        stage – declaration of insolvency and observation period; 2) the implementation stage –
        bulk sale or restructuring (or bankruptcy). The first stage begins when the competent court
        declares the company to be insolvent. Insolvency can be petitioned by the entrepreneur,
        the creditors, or the public prosecutor.




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    Upon the declaration of insolvency, which is immediately enforceable, the court:

    -   appoints one or three administrators, according to the directions given by the Ministry
        for Industry (the appointment of three administrators is limited to cases of exceptional
        importance and complexity);

    -   orders the entrepreneur to file the financial statements of the company (within two
        days) with the court;

    -   gives creditors who have claims on goods in the possession of the entrepreneur a
        deadline (from 90 to 120 days) by which they must file their applications to have their
        claims recognised (ammissione al passivo);

    -   fixes the venue and schedule of the hearings at which the debts of the company will be
        discussed;

    -   decides whether the company should be managed by the existing management or a
        judicial commissioner until the extraordinary administration procedure begins or
        bankruptcy is declared.

    The initiation of the procedure, with the declaration of insolvency, produces some of the
    effects of a bankruptcy: 1) the company’s debts mature early; 2) no further interest accrues
    on the debts; 3) any payment made by the company after the declaration of insolvency is
    invalid unless approved by the court; 4) the company’s creditors cannot enforce their
    claims against the assets of the insolvent company; 5) the debts arising from operations
    after the declaration of insolvency are to be paid before the other creditors.

    However, pending contracts are not cancelled and actions to set aside transactions cannot
    be started for payments already made.

    During extraordinary administration the company’s statutory bodies are deprived of their
    management powers, which are entrusted to one or more administrators. The actual
    procedure is as follows.

    The administrator has 30 days from the declaration of insolvency to file a report at the
    judge’s office. The report must detail the reasons behind the insolvency and explain why
    the company should be admitted to the extraordinary administration procedure.

    After receiving the administrator’s report, the court asks the Ministry for Industry for its
    (non-binding) advice and, within thirty days of the depositing of the judicial
    administrator’s report, issues a decree declaring the company bankrupt or admitting it to
    the extraordinary administration procedure.




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    In the latter case, the Ministry must appoint one or three extraordinary commissioners
    within five days. The extraordinary commissioner has full powers to manage the company
    and all the assets of the entrepreneur and must:

    -   draft a plan for the recovery of the company through

            the reorganisation of the company’s assets (without selling core assets); or
            their sale to third parties;

    -   report to the Ministry for Industry on action taken;

    -   ask for the Ministry’s prior approval before

            selling businesses, business units or real estate;
            making transactions of over Euro 200,000.

    These steps, from the first court ruling to ministerial approval of the plan, take
    approximately one year.

    The extraordinary commissioner’s plan, to be delivered to the Ministry for Industry within
    60 days of the opening of the procedure (this term is extendable by another 60 days if the
    plan is particularly elaborate) will cover:

    -   the business to be continued and those to be discontinued;

    -   any liquidation of the non-core businesses;

    -   the economic and financial forecasts for the business;

    -   the ways of remedying the financial deficit, specifying any foreseeable loans or public
        grants;

    -   any information concerning the possibility of paying the creditors.

    The plan should also include:

    -   details of the sale of assets, including any offers or declarations of interest; or

    -   details on the financial restructuring of the company, any other changes to the
        company structure, timing, and the potential satisfaction of creditors.




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         The Ministry for Industry should approve the plan within 30 days, after consultations with
         the supervisory committee (10). The plan automatically comes into effect after 90 days if the
         Ministry does not respond.

         When the plan is approved, the extraordinary commissioner has up to:

         -       12 months to implement the plan to sell the assets; or

         -       24 months to implement the plan to financially restructure the company.

         Extraordinary administration ends:

         -       if the business comes out of insolvency;

         -       when a settlement agreement is finalised with the creditors.

         If a plan to sell the assets is approved (not a reorganisation), extraordinary administration
         ends when the creditors are fully satisfied or when the proceeds from the sale of assets
         have been totally distributed.

         The end of extraordinary administration is declared by the court and this decision can be
         appealed within 15 days.

         Should the transfer of assets or the reorganisation plan not be completed within one year
         (in exceptional circumstances extendable by another three months) or two years
         respectively of the ministerial authorisation, the court will declare the company bankrupt
         and start the standard bankruptcy procedure.

         The EU Commission must also be informed, should the plan include state aid.

10       Extraordinary administration for the restructuring of very large companies
         (Amministrazione straordinaria per la ristrutturazione delle imprese di grandissime
         dimensioni).



         (10)
                Apart from the court and the extraordinary commissioner, another body involved in the extraordinary
                administration procedure is the supervisory committee, appointed by the Ministry for Industry within 15
                days of the appointment of the extraordinary commissioner. This committee has three or five members
                (one of whom represents the creditors) and advises the Ministry. The creditors’ approval is required only if
                an early closing of the procedure is proposed, through the intervention of a third party acting as a guarantor
                or assignee of goods and through an agreement with the unsecured creditors for the payment of an agreed
                percentage of the debts.




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        The Parmalat Decree no 347 of 23 December 2003 amended the Prodi-bis Law in order
        to streamline and accelerate the extraordinary administration procedure in view of the
        deteriorating Parmalat situation. It introduced certain changes to the extraordinary
        administration procedure described above and is now (11) applied when (taking the group
        companies as a whole):

        -   there have been at least 500 employees for at least the last year;
        -   there are debts of at least Euro 300 million.

        Another difference between extraordinary administration under the Prodi-bis Law and the
        new system is that the first stage of the procedure is now managed by the Ministry for
        Industry instead of the courts. The Ministry, at the request of the insolvent debtor,
        evaluates the gravity of the situation and the reasons for the request before admitting the
        company immediately to the extraordinary administration procedure and appointing an
        (extraordinary) administrator, to whom the management of the company is entrusted.
        Meanwhile, the directors appointed by the shareholders’ meeting are suspended and the
        debtor must inform the court of the procedure since a ruling has to be issued to confirm the
        insolvency.

        The powers of the (extraordinary) administrator are wider than those granted under the
        Prodi-bis Law.

        Within 180 days (extendable by a further 90 days) of appointment, the administrator must
        submit a two-year financial and economic restructuring plan to the Ministry for Industry.
        Within the same 180-day period, the administrator must also submit a report detailing the
        causes that led the company to insolvency; this report must be accompanied by a detailed
        appraisal of the assets and a list of creditors, indicating their respective claims and pre-
        emption rights.

        At the request of the administrator, the Ministry for Industry can authorise the sale and use
        of the assets, businesses or business units of the company, if these operations are aimed at
        restructuring the company or group. After the authorisation of the plan, the administrator
        can also propose actions to set aside transactions, if such actions are functional to the plan
        itself.

        In derogation of the Prodi-bis Law (Article 27, paragraph 2), the company can continue to
        run for no more than 24 months (instead of 12 months) after the plan is authorised.

        If the restructuring plan is not authorised by the Ministry for Industry, or the entrepreneur
        is unable to satisfy its obligations by the deadline indicated in the plan, or it is not possible


(11)
       After Decree no 281 of 2004 lowered the original thresholds (1,000 employees and debt of one thousand million
       euro).




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             to sell the company’s assets, the extraordinary commissioner will ask the court to convert
             the procedure into a bankruptcy proceeding and to appoint a receiver.

             In this procedure, the administrator appointed by the Ministry can propose an arrangement
             whereby – as in the composition with creditors before or during bankruptcy, or in
             American Chapter 11 – unsecured creditors can be divided into classes, with different
             percentages of payment and separate votes.

             Moreover - as in compositions with creditors - the administrator is expressly authorised to
             propose the restructuring of the debts through any technical or juridical means, including
             the conferral to the creditors of shareholdings in companies purchasing the company or its
             business units (see Article 4-bis of Law Decree no 347 of 2003, as amended by Law no
             119 of 2004).

             The Parmalat Decree does not leave any gaps in the new rules because any questions that
             it does not specifically deal with are governed by the Prodi-bis Law.


11          The reform of the bankruptcy law

             The need to reform bankruptcy procedures and, more generally, the entire question of how
             to regulate company crises, have given rise to a long debate, which is still in progress,
             despite the recent changes to bankruptcy rules culminating in Legislative Decree no 5 of
             2006 (12).

             This debate had led to several bills to reform the Bankruptcy Law.

             The scheme contemplated by Law no 270/1999 (declaration of insolvency, observation
             period, choice of specific procedure) was to be extended to all insolvency procedures
             (except supervised administration), according to many of the projects under discussion up
             to 2004.

             Moreover, an “alarm and prevention” procedure (procedura di allerta e prevenzione) was
             to be introduced (13),, while the tax and criminal rules on bankruptcy and other proceedings
             should have been changed.


     (12)
            See section 1 of this memorandum.

     (13)
            The aim of the alarm and prevention procedure was to ensure that difficult situations come to light quickly. The
            banks, tax authorities and social security institutions would therefore have reported any delays in payment to the
            court. The court would have summoned the debtor and encouraged him to take steps, before reaching the point of
            insolvency, to reorganise and restructure his company and reach settlements with his creditors.




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    The common denominator of the reform projects was to preserve as far as possible the
    operativeness of insolvent companies and their remaining goodwill, even in the case of
    small- and medium-sized companies.

    Instead of revising the legal framework as a whole, however, the changes introduced in
    2005, 2006 and 2007 have made amendments to the Bankruptcy Act of 1942 that move in
    that direction, without abandoning the previous structure. More decisive intervention has
    been put off to a later date.




25435a73-85c9-4ce9-b248-7a073dcd29e1.doc                                                        16

				
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