In times of crisis, unfortunately, the state of insolvency is a spectrum that often looms over corporate realities. Fortunately, the legislator has provided a series of alternatives to which the sole proprietorship or the company may resort and which allow for more serious and sad epilogues (for example bankruptcy) to be averted.
In this complete guide on the arrangement with creditors I explain how it works, what it means agreed “in continuity” and “liquidation” agreement, the foreseen procedure, the necessary documents to present to the Court to appeal, the role of the creditors and the approval phase and finally how to propose a “blank” concordat.

What it is and how it works

What it is and how it works

The agreement with creditors is an alternative instrument that can invoke the company in crisis to avoid bankruptcy. It is practically an agreement with creditors, aimed at both satisfying their claims and, at the same time, trying to heal the business situation.
This instrument, which is part of the so-called bankruptcy proceedings, therefore has a double advantage:
For the entrepreneur, who can avoid the sad end of failure;
For creditors (suppliers, employees, tax authorities, etc.), who in any case have the opportunity to satisfy their claims, without having to activate the bankruptcy procedure.
Avoiding bankruptcy can be beneficial to both parties. Among other things, it must be emphasized that the entrepreneur cannot oblige the creditors to accept the agreement, he can only propose it: the creditors will then evaluate the convenience and decide whether to accept or reject the agreement.
The arrangement with creditors is therefore a debt payment plan, which establishes the entrepreneur and offers it to creditors. This recovery plan may include:
The sale of company assets;
The assignment of shares, quotas, bonds or other financial products to creditors;
Other extraordinary instruments aimed at satisfying claims.

Procedure
How it happens
The assumption that the procedure begins is the state of crisis of the company and its consequent difficulty in paying its debts regularly. To avoid a future and sad disarray, the entrepreneur can appeal to the Court to demand the subjection to the preventive agreement (art. 161 bankruptcy law). The court to appeal to is the court of the place where the company has its main office.
Caution
The appeal must be presented by the entrepreneur in the case of a sole proprietorship; while in the case of a company by the legal representative (after the decision to use the arrangement has been approved by the assembly). 

Necessary documents
The entrepreneur, in addition to the request for admission to the arrangement, must present to the Court:
Report of an expert confirming the accuracy of company entries and the concreteness of the proposal (Article 161 Bankruptcy Law); such a professional is usually an accountant or a lawyer or an auditor;
Financial statements of the company from which the economic and patrimonial situation of the company is accurately deduced;
Estimated report of all assets and all company credits;
List of all creditors and holders of real rights in the company;
List of all the assets of the entrepreneur (in the case of sole proprietorship or partners with unlimited liability).
The Court then, meeting in council, checks the formal regularity of the request and, through a specific decree (not subject to complaint) admits the company to the arrangement procedure. Otherwise he rejects it.

convocation
The judicial commissioner, based on the accounting records of the company, identifies the creditors (employees, suppliers, tax authorities, etc.) and calls them by post. It therefore prepares an information note that will be useful to creditors to evaluate the proposal.

Creditors
With the decree of the Court, the phase opens where the main actors are the creditors. The decree is in fact not immediately enforceable: the proposal of the company is subject to the scrutiny of the latter, they have the decision to approve or not the proposed agreement.

Meeting
This brings us to the day of the creditors’ meeting. In addition to the judge, the judicial commissioner and the debtor participate. Creditors are asked to discuss the entrepreneur’s proposal and, here, they can also make changes to the proposed plan. Finally we proceed with the vote: the arrangement is approved by the majority of the creditors (in proportion to the credits claimed) (art. 177 I paragraph L. Bankruptcy).
If, on the other hand, the majority does not approve the agreement, the court declares the bankruptcy of the company, at the request of the PM or creditors. The entrepreneur may however appeal the decision before the Court of Appeal (art.184 Law L. Bankruptcy).

Approval
Once the agreement has been approved, the most concrete phase opens: the Court, with a specific decree, approves the proposed arrangement with creditors (art. 180 Bankruptcy Law). The agreement is then implemented: the assets are sold, eventual liquidators are appointed, quotas or shares are granted, in short, everything that the entrepreneur’s proposal provides for satisfying creditors is implemented.

Caution
If it is discovered that the company has concealed, committed intent or fraud, hidden assets or assets or simulated greater debts, the court may revoke the arrangement with creditors.

In continuity
The legislation does not provide for the definition of a continuation agreement with creditors, however it is quite easy to deduce it: it is the agreement approved in view of a business continuation, in order to restore the accounts and restart the activity with new force (art.186- bis L. Bankruptcy Law). On the other hand, this is precisely the main purpose of the agreement: to protect not only the creditors, but also the business activity and to prevent the phantom of bankruptcy.
Therefore, the company resumes full business operations, in compliance with the agreement and the ordinary and extraordinary administration criteria defined by the arrangement. If during the rehabilitation phase, the company does not obtain the desired results or in any case follows a manifest damage to the creditors, the court replaces the creditors and revokes the arrangement.

Blank or with reserve
To speed up the process, the entrepreneur can file an agreement request in court and present only a part of the documents (Article 161 co. 6-10 L.Fall.). The remaining documentation may present it later.
This agreement request is called “blank” or “with reservation” or better still “booking” and allows the entrepreneur to immediately apply (precisely, book it), but take the appropriate time to draft the proposal and recover all necessary documents (expert report, financial statements, etc.).

Caution
Depending on the indications of the Court, the company must present the remaining documentation within 60 or 120 or 180 days.

liquidation
The law is particularly in favor of the agreement with business continuity. However, the legislator must also provide for those cases in which the continuation of the activity is no longer possible. In agreement it has liquidation purposes when the entrepreneur or the partners, after having satisfied the creditors, have no more intention to continue the activity or however there are not the conditions.
In this case, the company can still make use of the arrangement procedure (and thus avoid the most serious bankruptcy) but only if it can ensure the payment of at least 20% of the unsecured creditors (Article 160, paragraph 4, Law Fall .). In this case, the arrangement usually involves the transfer of the company assets and the disposal of the entire company assets in order to satisfy the creditors.

Requirements
When the arrangement is liquidation, the agreement must contain:
An analytical description of company assets; therefore the expert’s report plays a very important role;
The precise indication of times and methods of transfer of the goods;
Also in this case, the creditors are asked to discuss the proposal before the judge and to vote in favor or not. In the case of a majority of favorable votes, the Court concurrently with the approval decree shall appoint one or more liquidators who oversee the procedure for the disposal of company assets.

Caution
The content of the agreement is very important: it can provide that the entrepreneur sells his goods and then distributes the proceeds to the creditors or, more precisely, that he sells his assets but also commits himself with certain sums and times. In the first case, therefore, if the creditors accept, the entrepreneur is freed with the sale of the goods alone and the arrangement cannot be canceled, even if the creditors are not satisfied. In the second case instead, if the agreement provided for precise times and sums, the unsatisfied creditor can obtain the resolution of the arrangement. And therefore to make the company go through more serious procedures, such as bankruptcy.