The court issues the sentence declaring the bankruptcy of a company when someone brings to its knowledge the state of insolvency in which it finds itself.
The law provides that the declaration of bankruptcy can take place following an appeal (often also called bankruptcy) presented by certain subjects.
From the debtor, that is to say from the same company that is no longer able to pay its debts.
If it is an individual company, the appeal is presented by the same entrepreneur, while if it is a company, it is presented by the administrator, with the power of legal representation. The debtor must attach to the bankruptcy application the documentation useful to the judge to verify the existence or non-existence of the conditions for the declaration of bankruptcy.
For example, it must enclose the accounting and tax records relating to the last financial years, the status of the company’s activities, the list of creditors with details of the individual credits and the indication of the revenues achieved in the last three financial years.
From one or more company creditors who, in this way, trust in the possibility of obtaining the sums they are entitled to.
Also in this case, the documents that allow the court to verify the conditions for proceeding to the declaration of bankruptcy must be attached.
In particular, the company registration form extracted from the Business Register and the title to the credit claim, for example invoices or bills of exchange, must be attached.
The appeal must be presented to the bankruptcy section of the court of the place where the company has its head office, that is to say the place in which it mainly carries out administrative activities.
The head office often coincides with the registered office, but it is not mandatory that it coincides.
Pursuant to Article 6 of RD 16/03/1942 , the court can issue a declaration of bankruptcy even at the request of the public prosecutor, when the situation of insolvency has emerged in the course of a criminal proceeding, results from the escape, from the the unavailability or absence of the entrepreneur, the closure of the business premises, and the behavior of the entrepreneur that affects the assets of the same (for example the fraudulent taking, replacement or decrease of assets), or has been reported by a judge who, in turn, detected it in a civil proceeding.
In the past it was envisaged that the bankruptcy could also be declared on the court’s own initiative, whereas now the law no longer provides for this possibility and requires the judge to issue the bankruptcy sentence if requested by the debtor, creditors or the public ministry (Cassation civ. No. 3472/2011).
Once the application and documentation have been obtained, the court verifies the existence of the conditions of the bankruptcy, that is to say, that the company is fallible and that it is in a state of insolvency.
If the verification is successful, it issues the sentence to declare bankruptcy.
The declaration of bankruptcy and its contents
When the judge finds that the conditions exist for declaring a company bankrupt, it issues a sentence through which the bankruptcy procedure is initiated, that procedure which allows the group’s assets to be grouped together and the debts to be paid, within the limits in which they allow it.
In particular, with the sentence of bankruptcy declaration, the bankruptcy court provides:
To appoint the delegated judge, who supervises the correct execution of the procedure.
To appoint the bankruptcy trustee, who has to administer the company until the procedure is concluded.
In the event of an application filed by the creditors or the public prosecutor, to order the bankrupt to deposit, within three days, the accounts and the accounting and tax records, in addition to the list of creditors.
To set the hearing for the verification of the receivables and the deadline for allowing the other creditors to participate in the procedure, through the requests of insinuation and claim.
The sentence is notified to the debtor, communicated to the creditor who requested the declaration of bankruptcy and to the public prosecutor, in addition to being noted in the register of companies.
From this moment the declaration of bankruptcy produces effects both towards the bankrupt and towards the creditors and any other subjects.
The declaration of bankruptcy and its effects
Once the sentence of the declaration of bankruptcy has been issued, the first effect is that of the opening of the bankruptcy procedure.
This procedure, according to the current rules, is divided into three distinct phases:
The assessment phase of the liabilities, during which the patrimonial consistency of the company is ascertained, verifying the existence and the consistency of both debts and credits of the bankrupt.
The liquidation phase of the assets, during which the assets of the debtor company are subjected to a forced sale.
The asset allocation phase, during which any available sums and other sums deriving from the liquidation are redistributed among the creditors of the bankrupt company.
The redistribution of the credits takes place on the basis of a project presented by the bankruptcy trustee and declared executive by the delegated judge.
The declaration of bankruptcy and the effects on creditors
The main effect deriving from the declaration of bankruptcy against the creditors consists in obtaining, almost always with the other creditors, the payment of the sums due within the limits of the residual assets of the company.
The declaration of bankruptcy and the effects on the bankrupt
With regard to the bankrupt company, three distinct effects are produced:
On the financial side, on the personal and penal side.
In relation to the patrimonial effects, the entrepreneur suffers the so-called dispossession.
With the declaration of bankruptcy, the bankrupt lose the availability of his existing assets and can neither administer them nor can he legally act in disputes relating to them, nor receive sums deriving from their enjoyment, for example, the rent on a real estate. The entrepreneur retains ownership of the assets.
Assets excluded from dispossession
The strictly personal property, salaries, pensions, wages and other earnings deriving from the activity of the subject are excluded from dispossession, within the limits of what is necessary for its maintenance and for the maintenance of its family.
In addition to this there are impregnable assets.