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Client Alert 20 Apr. 2020
The alert is available for download HERE
Pursuant to Law Decree April 8, 2020, no. 23 (published in the Italian Official Gazette no. 94 on April 8, 2020) (also referred to as “Liquidity Law Decree”) new measures have been adopted in order to face the COVID-19 epidemic crisis.
Please find below a description of the main aspects of the Liquidity Law Decree, focusing on corporate and commercial law, tax law and labour law related matters.
Considering the ongoing evolution of the epidemic, and the political and legislative measures to face it, it should be noted that the Liquidity Law Decree provisions may be extended or amended by further provisions subsequently adopted by the Italian Government or Parliament.
Corporate and Commercial Law Focus
A) Reduction of share capital and winding-up (Section 6 of Liquidity Law Decree)
With effect from the entry into force of the Liquidity Law Decree (i.e. April 9, 2020), the following provisions of the Italian Civil Code do not apply with respect to events occurred until the end of financial year 2020 (December 31, 2020):
B) Provisions relating to the 2020 Financial Statements (Section 7 of Liquidity Law Decree)
Financial statements concerning financial year 2020 (December 31, 2020) and financial statements already approved by February 23, 2020 but yet to be approved by the shareholders meeting, may make reference to the recent past (i.e. prior to the emergence of COVID-19) in order to conduct the assessment of the company’s business/financial continuity required pursuant to Section 2423-bis par. 1, no. 1 of the Italian Civil Code.
In particular, such assessment may also be carried out by making reference to the last approved financial statements before February 23, 2020, to the extent they confirmed the business/financial continuity of the company.
The assessment criteria shall be specifically indicated in the informative note to the financial statements to be approved (even by mere reference to the previous financial statements only as per above).
The new provision is without prejudice to the possibility to extend the term by which the shareholders’ meeting can be called to approve the 2019 financial statements, from the ordinary term of April 30, 2020 to June 28, 2020, as provided by Section 106 of Law Decree no. 18/2020.
C) Suspension of subordinate status of loans by shareholders (Section 8 of Liquidity Law Decree)
Sections 2467 and 2497-quinquies of the Italian Civil Code – providing that all loans granted by shareholders to companies will be subordinated to any other loan granted by third parties – shall not apply to any loan granted by shareholders to companies from the entry into force of the Liquidity Law Decree until December 31, 2020.
D) Corporate Crisis and Insolvency Code (Section 5 of Liquidity Law Decree)
The entry into force of the Legislative Decree no. 14/2019 (i.e., Corporate Crisis and Insolvency Code) is postponed to September 1, 2021, except for specific provisions.
E) Compositions with creditors and restructuring agreements (Section 9 of Liquidity Law Decree)
The following provisions have been introduced with respect to compositions with creditors and restructuring agreements:
F) Interruption of bankruptcy and insolvency proceedings (Section 10 of the Liquidity Decree)
All claims filed between March 9, 2020, and June 30, 2020, concerning the following matters shall be declared as not admissible:
Such proceedings may only be exceptionally activated upon request by the Public Prosecutor, whenever such claims are instrumental to the request for interim or conservative measures in order to protect the assets of the company, pursuant to Section 15, par. 8, of Royal Decree no. 267/1942.
G) Suspension of deadlines for debt instruments and interruption of protests (Section 11 of Liquidity Law Decree)
All deadlines falling between March 9, 2020 and April 30, 2020, which are applicable to promissory notes, bills of exchange and other debt instruments issued before April 9, 2020, as well as to any other enforceable act issued before such date, are suspended until April 30, 2020.
Therefore, the following terms are due to be suspended:
Debtors and co-debtors, including guarantors, have the right to waive such suspension.
Furthermore, all transmissions by public officers of protests or equivalent acknowledgments to the competent Chambers of Commerce are suspended from March 9, 2020 until April 9, 2020; if a transmission has already been made, the Chambers of Commerce must not take it into consideration.
Finally, all transmissions to the authority (Prefettura) of information concerning protests, equivalent acknowledgments or non-payment pursuant to Section 8-bis, par. 1 and 2, Law no. 386/1990 are also suspended.
H) A wider application of the Italian Government “Golden Powers” (Sections 15 to 17 of the Liquidity Law Decree)
The Liquidity Law Decree grants a wider application of Italian Government “Golden Powers” to certain sectors of strategic importance.
In particular, the obligations to notify the President of the Council of Ministers originally applicable with respect to (i) any purchase of shares, at any title, (ii) by entities incorporated outside the European Union, (iii) in companies holding assets and relationships of strategic importance in the sectors referred to by Section 4, par. 1, letters (a), (b), (c), (d) and (e), including credit and insurance sectors in the context of the financial services, pursuant to Regulation (EU) 2019/452 of the European Parliament and the Council of March 19, 2019, have been extended, until 31 December 2020, also to the following:
In case of breach of the notification obligations, the Presidency of the Council may initiate proceedings against the responsible party.
CONSOB is expressly authorized to lower – for a limited amount of time – to 5% the relevant thresholds for notifications pursuant to Section 120 of the aforementioned Legislative Decree no. 58/1998 for companies with a significant number of shareholders.
Tax Law Focus
A) Tax credit for the purchase of protective equipment at the workplace (Section 30 of the Liquidity Law Decree)
The tax credit for sanitation costs pursuant to Section 64 of Law Decree no. 18 of March 17, 2020 (“Italy Care Decree”) – equal to 50% of the related expense in 2020, up to a maximum amount of EUR 20,000 per subject – also applies to all expenses throughout 2020 for purchase of personal protective equipment and any other safety devices to protect workers from accidental exposure to biological agents and to ensure interpersonal safety distance.
B) Quantification of advance instalments based on the forecast method (Section 20 of the Liquidity Law Decree)
With respect to advance instalments of IRPEF (personal income tax), IRES (corporate income tax) and IRAP (regional tax) due for the current FY and quantified on the basis of the forecast method (i.e., based on the amount expected to be due for the current year), no penalties and interests shall be applied if the difference between the amount paid and the amount actually due based on the current year tax return does not exceed 20%.
C) Suspension of tax and social security payments (Section 18 of the Liquidity Law Decree)
The Liquidity Law Decree suspended payment deadlines on enterprises, artists and professionals, falling on April and May 2020, concerning (i) WHT on the pay of employees and equivalent workers, (ii) VAT, (iii) social security and welfare contributions, and (iv) compulsory insurance premiums.
The suspension is effective only in case of a decrease in turnover – respectively, in March and April 2020 compared with the same months of last year –by at least:
For taxpayers performing business, art or professional activities with tax residence, registers office or place of business in the Provinces of Bergamo, Brescia, Cremona, Lodi and Piacenza, VAT payments scheduled on April and May 2020 are suspended in case of decrease of turnover by at least 33%, regardless of the volume of revenues in the previous tax period.
The suspended payments shall be made, without penalties and interests, either (i) in a single instalment, by June 30, 2020, or (ii) by monthly instalments, up to a maximum of 5 instalments, starting from June 2020.
D) New terms for payments (Section 21 of the Liquidity Law Decree)
Payments to Public Administrations originally due on March 16, 2020, whose deadline was postponed to March 20, 2020, pursuant to Section 60 of Italy Care Decree, shall be considered timely made if made by April 16, 2020.
Labour Law Focus
A) Extension of economic aids to Employment: “Cassa Integrazione Guadagni Ordinaria”, “Assegno Ordinario” and “Cassa Integrazione in deroga” (Section 41 of the Liquidity Law Decree).
The Liquidity Law Decree extended the scope of application of the legal instruments for the protection of workers as provided for by Italy Care Decree.
In particular, pursuant to Section 41 of the Liquidity Law Decree, the provisions concerning the economic aids to employment provided by Sections 19 (Cassa Integrazione Guadagni Ordinaria and Assegno Ordinario) and Section 22 (Cassa Integrazione in deroga) of the Italy Care Decree, shall not only apply to all employees in force as of February 23, 2020 (as provided by Italy Care Decree), but also to workers hired between February 24, 2020 and March 17, 2020.
Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal or tax advice. No legal or business decision should be based on its contents.
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