Negotiated settlement: business crisis resolved in 1 in 5 cases and in less time

Source: Unioncamere press office

Rome, 24 May 2024 – It takes far less time and, in one case out of five, the objective of saving a company and its workers from bankruptcy is achieved. Data from the Unioncamere Observatory on negotiated settlement show that this procedure is beginning to take hold in the country. But above all that it is faster than resorting to the courts and more effective when it is more timely.

In fact, the data show that the time elapsed between the date of submission of the negotiated settlement application and the closure of the proceedings was, on average, about 250 days, 357 days for those closed with a successful outcome and 227 days filed with an unfavourable outcome. By contrast, the judicial phase of a successfully concluded composition with creditors lasts on average about 520 days.

The improved awareness of the instrument and probably also its greater speed are favouring its wider use by companies. As of 15 May, there were 1,450 instances of negotiated settlement, 413 more than those recorded in November 2023, an incremental growth of more than 50 % compared to the previous six months (May-November 2023) (413 against 270 instances).

The average quarterly success rate of the Composition is also growing, reaching 21.2 % of closed instances

‘Two positive elements distinguish the data from the Observatory on Negotiated Settlement: recourse by companies is increasing and the success rate is also growing,’ emphasises Unioncamere secretary general Giuseppe Tripoli. ‘This is an excellent sign for this substantially new institute, which is capable of safeguarding the activities of companies, getting them through difficult times, and ensuring that many jobs are maintained. The chambers of commerce are not only helping companies in the crisis, but also developing the relaunch project’.

The largest number of applications came from Lombardy (23% of the total), followed by Lazio (12% of the total) and, in descending order, Emilia-Romagna, Veneto, Tuscany, Apulia, and Campania. Negotiated Composition is used relatively more by manufacturing and construction companies.

Of the 1,450 enterprises that had access to the instrument, 6% belonged to the category of ‘sub-threshold’[1] enterprises and 9% to a group, 22% expressed a need for new financial resources and 76% requested the application of asset protection measures.

Of the total 1,450 petitions filed, 831 were closed, of which about 18% (153 cases) were closed with a favourable outcome. In contrast, 87 applications were rejected and more than 500 are in the process of being processed.

The figure of positive closures has increased by far over the past year and, above all, involved companies of a more significant size – in terms of workers employed and balance sheet assets – than those that concluded the Composition with failure. The companies for which the negotiated Composition was successfully concluded have a larger number of workers (55 versus 45 on average) and higher balance sheet assets (by about 48%).

In addition to being larger, companies that successfully complete the Negotiated Settlement have dealt with the company’s crisis in a more timely manner: companies in ‘severe’ crisis even before the application was filed are less likely to have a favourable conclusion to the proceedings.

Generally speaking, making a comparison with the most widespread bankruptcy procedures, it emerges that the negotiated settlement is mostly accessed by companies that face the crisis more rapidly. Regardless of the outcome of the procedure, companies in negotiated settlements have been distressed for an average of 17.6 months, compared to 30.3 months for those in composition and 44.7 months for those in judicial liquidation.

A further element of analysis emerges from a reading of what happened with regard to unsuccessfully filed applications. The data show that in about half of the cases, the enterprises did not have access to the other institutions or procedures governed by the crisis code, nor did they initiate voluntary dissolution processes. This suggests that these enterprises are currently still operating.