The law decree no. 59/2016 concerning “Urgent provisions regarding executive and winding-up procedures,  also in favour of the ones who invest in has been published in the Official Journal on May 3rd 2016.

The legislative purpose was to more guarantee banks through the time reduction for credit recovery as well as introducing new forms of guarantees. The reform could definitely benefit banks in so far as the time reduction for credit recovery will have a positive impact in the sale of defaulted debts.

The more important provisions will be analyzed as follows.

Starting from the news juridical institutes, the “non possessory pledge” has been introduced as a new form of pledge that takes place without transferring the asset to the creditor. The pledge secure claims granted to an enterprise, recorded in the Company Register, and concerns the business activity. It allows the on-going business activity through its assets, even if pledged. The pledged assets may also be transferred or transformed (so called “rotative effect”, Italian “effetto rotativo”): in these cases the pledge will be transferred to the price of the transfer orto the results of the transformation. The object of the non possessory pledge are movable assets, not recorded, pertaining to the business activity, both existent or future, not only determinate but also determinable by reference to a product category or to an overall value.

The non possessory pledge contract requires the written form with the indication of the above mentioned terms and will have to be set up within the Italian Tax Office in the “Register of Non possessory Pledges”, on the basis of a Law Decree conversion law thus entering into force.

The recording is important in order to establish the rank of the pledge, as a the time of relevant registration; the only exception is the one in which the pledged asset is granted for a loan aimed at purchasing such asset. This pledge prevails over the non possessory pledge even if previously registered.

About the enforcement procedure, the creditor - without needing to claim before the Court, expect in case of challenges or opposition by the debtor - may sell the pledged asset, through a sort of tender procedure, enforce the pledged receivables or also rent out the pledged asset applying the installments to repay the secured amount or, if provided for under the non possessory pledge contract, retain the pledged asset until satisfaction of the secured amount.

Another institute is the “Financing to enterprises secured by the transfer of real estate asset subject to condition precedent”.

The loan agreement entered into by an entrepreneur and a bank may be granted by the transfer, in favor of the latter, of the ownership or other immovable right on real estate asset of the enterprise or of a third party, being subject to the condition precedent of the debtor’s payment default. The agreement requires the form of notary deed.

In order to enforce this “Patto marciano clause” the creditor shall notify to the debtor and other relevant third parties its intention to benefit from the effects of the clause and, after sixty days from the notification the Court shall be requested by the creditor to appoint a specific expert for the purpose of an appraisal over the value of the real estate assets. Given this, the condition is deemed to be verified and the legal ownership of the assets will be transferred to the creditor. In case of a positive difference between the estimate value and the amount of the secured credit, the creditor will have to pay the difference to the debtor.

In case of loans agreement of this kind already into force, the Patto marciano clause requires an amendment to the agreement, to be executed by notary deed.

Over the introduction of these new legal institutes, the law decree no. 59/2016 reforms the civil procedure law, on the enforcement task.

The opposition to the enforcement procedure by the debtor shall be no more admissible until the assets sale is started, except for the cases in which the delay does not depend on the debtor’s behavior; this limits shall be specified on the foreclosing act. The sales attempts will up to a maximum of three, to be performed within six months.

Other amendments regard the insolvency proceeding, with the provisions of holding meetings and hearings of the creditors by electronic means, ensuring the attendance of all the legitimate creditors.

In order to ensure transparency and accessibility of information, a “register of the enforcement, insolvency and crisis management proceedings” will be set up, in order to collect data and documents pertaining enforcement, insolvency and restructuring procedures.

This new law will definitely promote the use of the new means granting bank loans as well as, more in general, the enforcement procedures as they are not more deemed to be an extrema ratio but rather a most rapid a simple way.