Bankruptcy agreement, related companies excluded from the vote

The companies that control the proposing company or are controlled by it or are subject to common control are excluded from the vote on the proposed bankruptcy arrangement and from the calculation of the majorities. This is what the Supreme Court sanctioned with sentence n. 17186/18, on an appeal against the decree of the Court of Appeal which denied that a conflict of interests can be configured in the bankruptcy agreement procedure.


The fact


The creditor companies A and B proposed an arrangement to close the bankruptcy of company C, providing for the payment of 30% of unsecured creditors, with the exception of those due to the companies Alfa and Beta, which would have been settled separately. The proposal of companies A and B was approved with the favorable vote also of the companies Alfa and Beta.

The approval was denied by the Court of Rome following the opposition of Tizio, Caio and the company D. The Court of Rome considered that the proposal had been approved by an illegitimate majority since it also included the vote of the Alfa and Beta companies which, being part of the corporate group to which the proposers belong, they had to be excluded from voting due to a conflict of interest. On the other hand, the Court of Appeal denied the configurability of the conflict of interest in the bankruptcy arrangement procedure and, therefore, accepted the claim of the proposing companies.


The bankruptcy arrangement

The bankruptcy arrangement

The bankruptcy agreement is a sub-procedure that expresses its essence within a bankruptcy proceeding already in progress that has already started towards a liquidation process. The agreement constitutes a real way of closing the bankruptcy procedure in itinere .

In general, the procedure, based on a privatistic plan, allows creditors to rule on a proposal tending to their partial “satisfaction”, with debts of the bankrupt for the residual part of the credits. The content of the bankruptcy arrangement proposal therefore has the satisfaction of creditors as its main purpose.

The subjects to whom the power of initiative is assigned make the bankruptcy agreement peculiar and different from the arrangement with creditors. In fact, the proposal can only be presented by one or more creditors, or by a third party (the contractor in the arrangement with assumption). The bankrupt will be able to present this proposal only after one year from the declaration of bankruptcy.

The composition proposal must be subsequently presented with an appeal to the delegated judge who, having acquired the opinions of the trustee and the creditors’ committee, will proceed with the communication to the creditors of the proposal together with the opinions in order to allow the voting – of the proposal – of the creditors.

Those entitled to vote will be unsecured creditors and, equivalent to the latter, creditors with privileges, pledges or mortgages, but only to the extent that the proposal does not provide for their complete payment or if they renounce, even partially, the Rosalind of first refusal.


The Court’s ruling



Precisely with regard to those entitled to vote, the problem solved by the Supreme Court is resolved by the sentence in question. In fact, the art. 127 V and VI paragraph of Royal Decree 267/1942 (bankruptcy law) clearly states that the debtor’s spouse, his relatives and relatives up to the fourth degree and those who have become assignees or successful bidders of the credits are excluded from the vote and the calculation of the majorities. of such persons for less than a year before the declaration of bankruptcy, as well as the controlling or controlled companies or companies under common control, while nothing claims with respect to the proposing creditor or the companies that control the proposing company or are controlled by it or are subjected to common control (so-called related companies ).

First of all it is necessary to examine the situation of the proposing creditor as this question is prejudicial to that of the related companies. The problem concerns the fact that he, having the necessary majority, can succeed in approving his own proposal by himself and if, therefore, given the strong private component of the matter, the institution of the conflict of interests is applicable.

The Supreme Court resolves the problem with the sentence under examination, clarifying, first of all, that “in order for a conflict of interests of a subject to be configurable, as part of a community” it is necessary that a “contrast” occurs between “an individual interest with the common interest of the whole community “.

Subsequently the Court affirms that it is “a fact the lack, in the bankruptcy law, of a general rule (…), which regulates the conflict of interest of the creditors in the vote on the arrangement”. However, despite this deficiency, the same art. 127 paragraph V l. fall., by denying the right to vote to certain subjects (eg the spouse), indicates some cases that can be included precisely in the typical cases of conflict of interest.


The Ermellini continue by stating that “the need for sterilization of conflicts of interest” is “imposed by the fundamental principle of private autonomy, in which also the bankruptcy agreement is registered for its (…) contractual profiles” and that “between whom formulate the proposed composition agreement and the creditors that such a proposal are required to accept (…) there is a contrast of interests of an immanent nature “, being interested” the first, to conclude the agreement with the least possible outlay “and, on the other chant, “the others to maximize the satisfaction of their credits”.

Taking into consideration the principle of private autonomy, the hypothetical situation in which the same proposer could go to vote on the proposal “would be placed outside the system” as it would conflict with the notion of contract going to “subject creditors to the will , in a decisive hypothesis, of their own counterpart ”. It is now necessary to analyze, instead, the question concerning the companies related to the proposing company.

Paragraph VI of the art. 127 l. fall., as previously seen, indicates that the regulation referred to in paragraph V “applies to the claims of parent companies or subsidiaries or companies subject to common control”. According to the Court, by broadly interpreting this assumption, it is possible to apply it “also to all the hypotheses of exclusion from the vote for conflict of interest” relating to related companies, since “their will (vote) is effectively conditioned or conditioned by the subjects who directly pay in a situation of conflict “and that” there is no reason to believe that this logic applies exclusively to the conflict of interest of the joint creditors of the bankrupt (V paragraph), and not also to that of the proposing creditor “.

In conclusion it can be stated that both the creditor ( rectius , the company) and the companies related to the proposing company will not be able to vote on the composition proposal as it is in conflict of interest .