At Valtus Alliance we rely on a global network of restructuring experts as legal frameworks and restructuring cultures differ widely across countries and continents. In this cross-border conversation, Maurizio Ria, managing director of Duke & Kay in Milan, shares insights from decades of experience in restructuring. Interviewed by Christophe Mare, Partner at Valtus France in Paris. Maurizio discusses the new Italian Bankcruptcy Law CCII, the role of a CRO and the impact of private equity in restructuring in Italy.
What makes the legal framework for insolvency and restructuring unique in your country?
The New Italian Bankruptcy Law (CCII: Codice della Crisi di Impresa e dell’Insolvenza) was introduced only a couple of years ago. It’s a rather modern framework that provides a wide range of procedures and tools, from the “lighter” ones (out-of-court process like the Composizione Negoziata della Crisi) to more structured proceedings (e.g. Concordato Preventivo). The aim is to offer instruments tailored to the company’s actual level of insolvency and match the most appropriate intervention needed to address the issues and restore business continuity. Below you find a visual map outlining the key stakeholders and advisors typically involved in a “standard” restructuring process.
Are there mandatory reports or expert opinions required in the event of a liquidity crisis or imminent insolvency?
Board members and statutory accountants are required to supervise their company’s health, and they may even face prosecution if they conceal or fail to report potential future insolvency risks. Under the new bankruptcy law, all companies are obliged to regularly monitor their financial “covenant health status” in order to detect early signs of distress as promptly as possible.
In your experience, what is the most common mistake companies make in the early stages of a liquidity crisis?
Entrepreneurs tend to be naturally optimistic and about 95% of Italian companies are small to medium-sized enterprises, with an annual turnover below € 50m. This often means that business owners initially attempt to resolve their difficulties on their own, which unfortunately leads to valuable time being lost. The longer the delay before the right intervention takes place, the more complex and costly it becomes to implement an effective restructuring plan. For this reason, the new law introduces penalties for failing to act in a timely manner.
At what point, and in what role should an external restructuring expert be brought in – and who should mandate them?
As mentioned earlier, requests for intervention unfortunately tend to arrive too late. This usually happens when the board members are no longer able to handle the company’s difficulties. This typically occurs once financial issues became severe and banks or suppliers start recovery actions.
At that stage, several counterparts may reach out to us such as management, board, owners, banks, advisors or PE sponsors.
The most appropriate role in these situations is often the CRO (Chief Restructuring Officer): an experienced CEO, familiar with the company business and vested with the necessary powers. The CRO joins the board and works alongside legal and financial advisors to set priorities, define the required actions, and implement them in line with the procedures outlined by the CCII, all within a comprehensive restructuring plan. From there, the CRO is responsible for execution and for navigating the inevitable day-to-day challenges.
In some cases, this role can also be handled by an expert CFO, empowered to manage daily operations with the board, while also acting as a project manager (in Italian “direttore di orchestra”) coordinating all advisors involved and serving as the bridge between them and the stakeholders. In particularly complex cases, we have also deployed a dedicated team of managers, each covering critical functions, to ensure both speed and effectiveness throughout the process.
What is your view on the use of protective shield proceedings (or equivalent local instruments) as part of a restructuring strategy? Are there such protective shields in your country?
Thanks to the CCII Law, companies can benefit from the protective shield, which must be activated and approved by the courts in connection with the specific “tool” selected under the law. Most of the time, it is absolutely vital to freeze the banks’ and suppliers’ recovery actions that could drive the company into failure. This in order to gain the necessary time to define the appropriate restructuring solutions and ultimately preserve both jobs and industrial know-how.
Do employees in your country continue to receive their salaries and bonuses in the event of insolvency or do they lose the entire or part of the wages?
Even in case of bankruptcy, employees’ salaries and wages are considered “super-senior” claims, which means that are generally protected. In addition, there are several State backed mechanisms such as “Cassa Integrazione and NASPI”, that provide partial support for employees’ salaries.
In cases of insolvency or bankruptcy, how do interim managers working in restructuring ensure they receive their remuneration?
There are certain risks when operating under out-of-court procedures. To mitigate these, it is mandatory to obtain court recognition, as the role of executive interim experts is vital in the recovery process. With this recognition, we may also benefit from privileged status—such as super-senior ranking—in the payment of fees.
Which case in your career has most profoundly shaped your view of restructuring – and what did you learn from it?
The very first case I’ve managed – when I was 29 – gave me not only the adrenaline of handling such a complex process, but above all the immense satisfaction of successfully resolving the company’s difficulties. I can still clearly remember the smiles on the employees’ faces—it’s something beyond words. Once I rationalized on that experience, I was able to draw key lessons that have shaped my approach ever since.
Additionally, over the years, I have gained specific technicalities and completed important management training programs, which taught me how to lead complex teams under high-pressure conditions. Today, we transfer these learnings to those executives we select and involve to run our restructuring projects.
In your jurisdiction, how efficient is the collaboration between management, creditors, and courts in formal restructuring proceedings?
We are actively part of the “restructuring community”, which is quite a small circle made up of a limited number of highly skilled professional with shared references and a strong sense of commitment. Sometimes, however, the different practices and interpretations of local courts may create challenges and lead to non-harmonized solutions, even when referring to the identical law article. Despite these potential issues, we have learned to consistently deliver the expected results by carefully studying and leveraging the case histories of the courts.
How established is private equity in your country with regard to restructuring? Does PE play a significant role, or do banks and existing shareholders remain the key stakeholders?
There are several specialized turnaround PE firms (Italian and international), that collect/acquire at discount the banks’ NPEs (Non-Performing Exposures) and try to fix the companies difficulties (by implementing new governance structures, new financial support, equity injection, etc.). Typically, these firms aim to recover the situation within an average of three years and then realize a gain through the exit. In most cases the original shareholders are diluted or dismissed.
Does your government support companies in crisis – for example, through specific subsidies or state-backed loans?
Yes, in recent years governments have introduced several mechanisms to provide financial support to distressed companies, under specific conditions. These measures are often linked to turnaround-focused PE firms (i.e. the so-called Patrimonio Rilancio initiative) or take the form of “state guarantees” aimed to encouraging banks to support deserving companies.