After the relative slowdown experienced over the past years due to (i) increased interest rates, which concerned, in particular in 2023, LBO financings and real estate finance deals; (ii) the persistence of geopolitical tensions; and (iii) the legacy of restrictive monetary policies, in 2024, Italy's bank loan and corporate bond markets exhibited significant activity, reflecting a dynamic financial environment. As an effect, the real estate market made an encouraging recovery, especially in the first nine months of 2024, with investment volumes exceeding those achieved in 2023.

In line with previous years, mid-size acquisition finance remains very active.

The number of corporate finance transactions remained steady over the past years thanks to the public guarantees issued by the Italian export credit agency (Servizi Assicurativi del Commercio Estero, or SACE), which is fully owned by the Ministry of Economy and Finance, to support Italian companies in the context of international crises and, especially starting from 2023, in investing in infrastructure, including social and local public services, sustainable mobility, digitisation and the transition to a circular economy.

Moreover, we reasonably expect that, starting from 2025, a number of borrowers who have benefitted from the “Supportitalia” public guarantee (available from 2021 to 31 December 2023) will begin to consider renegotiating the relevant economic terms or refinancing the guaranteed indebtedness, given that the guarantee was free of charge until 1 April 2022 – effectively functioning as a form of state aid – but subsequently became subject to a progressively increasing fee, rising through to the sixth and final year of its duration.

Italy’s corporate bond market demonstrated robust growth in 2024. The country ranked fourth in Europe for corporate bond issuance, following France, Germany, and the United Kingdom. Italian companies issued EUR45 billion in corporate bonds across 78 transactions during the year, marking a double-digit percentage increase compared to 2023 and 2022.

Finally, a notable recent trend in the Italian debt finance market is the increasing importance of the sustainability aspects of economic activities and assets. Credit institutions are increasingly offering green and sustainability-linked loans, and in 2024, the issuance of green bonds accounted for around 11% of the global amount.

The main players in the Italian debt finance market are, traditionally, local banks (both large and mid-sized), while Italian branches of international banks are often involved in larger deals. Even if banks (both local and foreign) still have a major role in the debt finance market, starting from 2023, and with 2024 confirming such trend, the market saw a further decrease in the granting of new loans by such players, while the share of loans granted by private debt funds (both Italian and international) in the context of structured transactions further increased.

At present, however, any forecast concerning the future configuration of the Italian banking market should be approached with caution and greater precision, pending the outcome of the ongoing M&A activity involving both major credit institutions and smaller, specialised banks. This wave of consolidation could have far-reaching implications for the broader economic ecosystem. On the one hand, a more robust banking system – with larger, better-capitalised banks equipped to compete globally – could emerge. On the other hand, concerns persist regarding potential reductions in market competition, increased systemic risks, and employment consequences stemming from bank restructuring. Given the unprecedented nature of this consolidation, the role of the Italian government and supervisory authorities will be crucial over the coming month.

Alternative lending structures remain an important resource for those companies that do not have easy access to the traditional banking credit channels and, in general, for medium-sized enterprises.

In 2024, three key geopolitical considerations significantly impacted the Italian banking market: the war in Ukraine, European Union (EU) policies, and global trade dynamics.

Firstly, the war in Ukraine has caused energy price volatility, directly affecting Italy’s economy. As an energy-importing country, Italy’s banks face increased credit risks in energy-intensive sectors like manufacturing. The conflict also contributes to inflationary pressures, affecting borrowing costs and economic stability, which banks must navigate through more cautious lending practices.

Secondly, Italy’s membership in the EU remains a critical factor. The European Central Bank’s monetary policies, particularly interest rate hikes to combat inflation, have raised borrowing costs across the region. These changes affect demand for loans and bank profitability in Italy. Additionally, EU green finance initiatives encourage Italian banks to invest in sustainable projects, driving the transition to a more resilient economy while meeting regulatory requirements.

Lastly, global trade dynamics, especially post-Brexit, shape Italy’s export-driven economy. Trade tensions, the introduction of US tariffs on EU products, and shifting global supply chains influence Italian banks’ trade financing and investment strategies. As Italian businesses face new challenges in international markets, banks must assess the risks associated with cross-border transactions, especially in sectors vulnerable to geopolitical instability.

In Italy the main types of debt finance transactions are:

• Corporate Finance Deals: Traditionally, the Italian banking system has been inclined to support the liquidity needs of Italian companies through the granting of corporate loans, either secured or unsecured, for general corporate purposes or aimed at supporting capex.
• Acquisition Finance Deals: Transformational acquisitions are largely financed by debt finance transactions, whether or not backed by a financial sponsor, and include standard private equity LBO financings or corporate acquisition financings.
• Real Estate Finance Deals: Despite the difficulties since 2020 due to the COVID-19 pandemic and the reduced profitability related to increased interest rates in 2023, the real estate market remains attractive (especially for foreign investors), with a particular focus on logistics assets.
• Project Finance Deals: Despite the reduced feed-in tariff scheme, the market remains very active in Italy for both public and private projects, in part due to the strong presence of entities such as the European Investment Bank and Italian development finance institutions.
• Asset-Based Finance: Such financing, which can also include any combination of factoring, invoice discounting, leasing and inventory finance, is strictly related to the lender valuation of the borrower’s assets in terms of quality and cash value.
• Securitisations: The flexibility of such lending structure contributes to a large use of securitisation schemes, not only for structural disposals of non-performing loan portfolios held by banks or financial intermediaries but also to support smaller investments involving real estate and registered assets.
• Debt Decurities: The Italian debt securities market has expanded thanks to a number of laws introduced by the Italian legislature to make the Italian bond market more competitive by allowing, in addition to large issues by multinational companies and financial institutions and high-yield bonds, access to bond financing for non-listed companies and SME, such as the introduction of the mini-bonds instrument.

The form of bank loan facilities largely depends on the nature of the borrowers, and the purpose and duration of the transaction.

Focusing exclusively on corporate borrowers, commercial facilities are usually short-term and are aimed at supporting companies’ working capital, such as revolving facilities and credit lines backed by the assignment of receivables arising from commercial agreements and/or invoices issued by companies. In these cases, banks provide the corresponding amount, either as a discounted price for the assignment or, where applicable, as cash advances.

Long-term general liquidity needs are normally supported by unsecured corporate bank loans, which typically have a maturity of 18 months or longer. Such bank loans are largely bilateral facilities.

The most common secured bank loans are mortgage loans. In this category, medium- to long-term mortgage facilities named “mutuo fondiario” pursuant to Articles 38 and following of the Italian Consolidated Banking Act are quite common and preferred by banks because of their favourable loan-to-value ratio (capped at 80%) and, from an insolvency law perspective, because the relevant mortgage is excluded from the ordinary claw-back rules once registered.

Syndicated Loans

Syndicated bank loans are common in the Italian loan market in connection with transactions that have a specific purpose. They are medium- to long-term facilities, and the relevant form depends on the given purpose and, accordingly, on the related security package. They are commonly used to finance larger acquisitions, where local lenders still tend to share the aggregate risk.

Bank Loans v Debt Securities

In recent years, acceding to structured and syndicated bank loans has become quite difficult, especially for small and medium-sized enterprises. This has led to growing interest in and increasing use of debt securities. Despite this, borrowers still tend to prefer bank loans due to:

• the greater confidence and experience that borrowers have with such transactions (including the approval procedure adopted by banks) and the relevant documentation;
• more flexibility in managing any waiver or amendment to the finance documents (not necessarily in notarial form, as required for debt securities) and, accordingly, lower costs in this respect; and
• lower interest rates and generally more favourable pricing.

However, when assessing a debt finance transaction, it shall be taken into account that debt securities may be more advantageous as an alternative to structured or syndicated bank loans for the following reasons:

• no limitations on alternative lenders, including the possible involvement as subscribers of non-licensed investors and financial intermediaries;
• time savings due to less strict credit approval procedures by non-bank lenders; and
• longer maturity dates (usually, on a bullet repayment scheme) and, except for pricing, terms and conditions that are quite favourable to borrowers (eg, lighter financial covenants).

Typically, the main transaction documents used in market standard deals when structuring a debt finance transaction include the following:

• the bank mandate letter or commitment letter, as the document instructing the lender to arrange for the financing or setting up of the lenders’ syndicate;
• the term sheet, as a preliminary document essential to set forth the main terms and conditions of the financing to be submitted for credit approval to the relevant lenders’ committee;
• the financing agreement, being a facility agreement in the case of loan transactions, or the terms and conditions of the bonds in the case of debt securities issuance;
• the transaction security documents, to specify the securities granted as security for the payment obligations arising in connection with the given debt transaction;
• the subordination agreement, to set forth the seniority positions and/or the security ranks between different creditors (see 6. Intercreditor Issues for specific limitations);
• the equity commitment agreement, which provides the terms and conditions of financial support by possible sponsors;
• with express reference to securitisation transactions, the specific agreements that are intended, as the case may be, to manage the SPV (namely, the letter of undertakings) and the cash allocation, management and payment agreement, to set forth the main terms and conditions of the different agents involved, such as the servicer, the mandator, the programme administrator and the computation agent;
• the fee letters;
• the hedging strategy letter and the relevant hedging agreements; and
• the intercreditor agreement (see 6. Intercreditor Issues for specific provisions and limitations).

The terms of a loan transaction that can be affected by the kind of investors involved include:

• the repayment profile (amortising as opposed to bullet) and maturity;
• the level of interest rates;
• the tax regime, should a foreign investor not be a qualifying lender or not resident for tax purposes in a country with a double taxation treaty; and
• the set of covenants, which are normally lighter for non-bank lenders.

Provisions specific to Italian law to be included in cross-border transactions concern the following:

• the tax regime, including a tax gross-up regime, in the event lenders do not benefit from any withholding tax exemption on interest amounts;
• the overall cost of the loan (including interest, fees and other costs) for an Italian borrower, which cannot exceed the maximum limit as set out by Italian usury law and published quarterly by the Italian Ministry of Economy and Finance; if the limit is exceeded, the interest clause is null and void and no interest is due;
• the fallback provisions (in accordance with Article 118-bis of the Italian Consolidated Banking, as amended and effective as of 10 January 2024), to pre-agree the replacement benchmark if the screen rate originally agreed under a facility agreement is unavailable or has materially changed, implementing a procedure very similar to those usually set forth in this concern also in the LMA forms;
• the DAC6 provisions (in compliance with the EU rules enacted under the Council Directive of 25 May 2018 amending Directive 2011/16/EU), to set forth reporting undertakings to tax authorities in respect of certain information about cross-border arrangements that exhibit one or more specified characteristics referred to as “hallmarks”;
• the AML representations and warranties and undertakings and the US Foreign Account Tax Compliance Act clauses;
• the choice of governing law, it being understood that, unless there is a provision that sets forth the mandatory competence of Italian law in accordance with EU regulation No 593/2008, the parties are free to choose any foreign law other than Italian law;
• the settlement of disputes arising from the transaction documents, which can be remitted to the exclusive jurisdiction of an Italian or a foreign court, or to arbitration; should an Italian court have jurisdiction, it is mandatory for the parties to agree to refer the matter to a mediation body registered in the register of mediation bodies held by the Italian Ministry of Justice before pursuing the case (in accordance with Legislative Decree 149/2022, as of 25 January 2025 new provisions are in force to speed up and make more efficient the procedure before mediation bodies);
• limitation language for the purposes of demonstrating sufficient corporate benefit and a maximum guaranteed amount in the guarantee provisions or security interest granted by an Italian company for payment obligations arising from the relevant debt transaction (see 5.2 Key Considerations for Security and Guarantees for further details); and
• financial assistance provisions, limiting the possibility of a target company providing loans or guarantees, or granting security interests, in the context of the acquisition of its own share capital.

The forms of security available in connection with debt financings can be classified according to the asset concerned, as outlined below.

Real Estate and Certain Registered Movable Assets

This category includes real estate assets (including soil and surface) and certain registered movable assets (such as cars, aircraft or ships) considered as immovable assets for security purposes.

The standard security granted over such assets is the mortgage. The mortgage deed must be notarised and then registered in the local land registry to be enforceable against third parties. Priority is based on the date and time of registration.

Subject to the condition precedent of the debtor defaulting, loans made available to an entrepreneur by a bank or another entity authorised to grant loans vis-à-vis the public in Italy may also be secured by transferring to the creditor (or to a company in the creditor’s group authorised to purchase, hold, manage and transfer rights in rem in immovable assets) the ownership of a property or of another immovable right of the entrepreneur or of a third party.

Tangible Movable and Unregistered Assets

A pledge is typically granted as security over such assets. It is created by way of a deed with a certain date at law and concerns present movable assets at all times identifiable; therefore, future assets must be separately pledged under a new security. However, a rotating mechanism enabling the substitution right of the pledged assets may be provided.

Except for the non-possessory pledge implemented by Law Decree 59/2016, the pledge requires delivery of possession of the charged assets to the pledgee or to a third party acting as custodian; without dispossession, the pledge is null and void.

As outlined above, the non-possessory pledge has recently been introduced to secure financing granted to a company in order to run its business. The non-possessory pledge can be granted over movable goods, including intangible goods or credits pertaining to the company’s course of business, such as future goods and credits. The pledged assets can also be transformed or sold; accordingly, the pledge will be automatically transferred onto the product resulting from the transformation or the consideration deriving from the sale or the substitute assets purchased with that consideration, as applicable, without giving rise to the creation of new security.

The non-possessory pledge becomes enforceable against third parties and, in the context of individual and bankruptcy proceedings, once registered in the relevant digital register held by the Italian Revenue Agency. It became operational in June 2023. Priority is based on the date of registration, which remains valid for ten years and it is renewable before expiry.

Certain Operating Movable Assets

Pursuant to Article 46 of the Italian Consolidated Banking Act, a “special privilege” may be granted as a floating security over the operating movable assets of a company. The company is free to deal with the assets in the course of its business. The special privilege is available only if:

• the lenders are Italian or EU banks;
• the facility agreement lasts at least 18 months;
• the assets are located in Italy; and
• the borrower/grantor is incorporated in Italy.

Following a recent change in law, this type of security can also secure debt securities issued by Italian companies for a term exceeding at least 18 months and where these are subscribed by qualified investors.

The relevant deed must be in notarial form and charged assets must be identified as specifically as possible.

The security is perfected by way of registration with a court register, subject to ongoing renewal as the grantor acquires new eligible assets that are subject to the security.

Claims and Receivables

Present and future receivables arising under an existing contract can be pledged or assigned by way of security. Both types of security are granted by way of a deed with a certain date at law. Notarial form is required when receivables arise out of a lease with a residual duration of over three years and contracts with public authorities. The formalities for making the pledge/assignment enforceable against third-party creditors of the pledgor/assignor are either a notice of the assignment/pledge to the obligor or an express acknowledgement by the latter, in each case bearing a date certain at law.

Cash deposited into bank accounts can also be pledged. In order to make such pledge enforceable, it must be notified to the relevant depository bank or, alternatively, accepted by it. Perfection formalities must be renewed every time the account balance changes. It is not possible to exclude the possibility – including for claw-back purposes – that the pledge purported to be created over each increase in the balance of the relevant account is considered a new and different pledge for all intents and purposes.

Shares and Financial Instruments

This category includes shares (literally, shares or quota if referring, respectively, to the corporate capital of a joint stock company or to a limited liability company) and other financial instruments (such as bonds, fund units, derivatives instruments and any other instrument negotiated on a regulated market, multilateral trading facility or organised trading facility).

The typical security over such assets or, to the extent they are in dematerialised form, over the relevant securities account is the pledge. A pledge over financial instruments is granted by a non-notarial deed, but bearing a certain date at law. The deed of pledge over quotas, instead, requires notarisation and is perfected by way of registration with the Company Registry. The physical certificates representing the shares and other financial instruments represented by certificates shall be endorsed in notarial form or annotated as pledged by a director of the issuing company. The creditor (directly or through a depository) must take possession of the pledged share certificates.

If the instruments are in dematerialised form, the pledge must be registered on the relevant register or securities account. Security over financial instruments is regulated by Legislative Decree 170/2004, which has simplified the relevant perfection and enforcement formalities set forth under EU Directive 2002/47.

Intellectual Property (IP)

The typical security for IP is the pledge, which can be granted over IP rights related to patents, trade marks, copyrights and registered designs, other than the assignment by way of security of the receivables deriving from the intellectual property. The pledge must be in notarial form and registered with the Italian Office of Patents and Trademarks to be effective against third parties.

Guarantees

Guarantees are also very common in the Italian lending market and are usually parent-company guarantees or bank guarantees. They are construed as first-demand guarantees without any exceptions or opposition by the relevant guarantor. To create a valid and enforceable guarantee, the maximum guaranteed amount must be capped.

The most important considerations under Italian law in respect of security and guarantees in debt finance transactions are outlined below.

Agent

Especially with reference to syndicated loans, it is possible and quite common to appoint an agent, by virtue of a mandate, to perform the lenders’ duties, obligations and responsibilities and to exercise, inter alia, their rights and powers, also as secured creditors, in connection with the transaction documents and, in any case, in accordance with intercreditor arrangements. However, such mandate cannot also cover judicial enforcement in the event of acceleration of the financing and subsequent enforcement. Accordingly, each creditor shall intervene personally in the enforcement.

Trusteeship

Even though Italy has recognised the concept of the trust through the ratification of the 1985 Hague Convention on the Law Applicable to Trusts and on their Recognition, under Legislative Decree 364/1989, trusteeship is generally not permitted in Italy. Therefore, security must be granted to, and perfected in favour of, each creditor individually.

Parallel Debt

As per trusteeship, parallel debt arrangements are not recognised in Italy.

Corporate Benefit

Under Italian law, guaranteeing or securing, by a company, payment obligations of other members of the same group requires the guarantor or security provider to receive a direct or indirect adequate corporate benefit. The existence of actual corporate benefit shall be carefully evaluated, on a case-by-case basis, by the directors of the guarantor or security provider. In fact, while there is no particular issue in respect of downstream guarantees (as the corporate benefit is often self-evident), the actual existence of corporate benefit in relation to upstream and cross-stream guarantees shall be assessed thoroughly and documented in the corporate minutes approving the guarantee or the security.

Moreover, due to corporate benefit reasons, the maximum amount recoverable by a guarantor for payment obligations of parent or sister companies shall be capped at an amount not exceeding a threshold, which may be determined by reference to, for instance, the net worth of the company resulting from the latest annual financial statements or the aggregate of financial resources directly or indirectly made available to that guarantor and its subsidiaries by other members of the group and the amounts borrowed by it under the financing agreement.

Financial Assistance

Generally, under Italian law, companies cannot grant loans, guarantees or security for debt incurred to acquire or subscribe to its shares. However, subject to certain conditions and compliance with the procedure set forth in the Italian Civil Code, a few exceptions to these restrictions on financial assistance apply:

• the “whitewash procedure” under Article 2358 of the Italian Civil Code;
• loans or guarantees granted to employees of the company; and
• merger of the target company in the context of leveraged buyouts.

However, any risk of voidness must be assessed on a case-by-case basis by looking at the transaction as a whole.

Guarantee Fees

Under Italian law, the provision of a guarantee fee is not a requirement for the validity of the relevant guarantee or security interest.

Whenever there are several lenders and/or finance parties acting towards the same borrower in Italy – including, by way of example, senior bank lenders, mezzanine alternative lenders providers and/or junior shareholders’ loans – intercreditor arrangements are commonly set out between such parties:

• the seniority positions and/or the security rankings between different classes of lenders;
• the application order of proceeds of security enforcement;
• the enforcement procedure for the security; and
• the consultancy procedure decision and waiver-approval majority between different classes of lenders (including the appointment of agents).

Italian law sets priority rules and security interests in relation to competing security interests and acts of disposal. Basically, the prevailing security interest is determined according to a timing preference, based on the date of completion of the perfection formalities (and with respect to a registrable security, the registration) of such security.

Each class of creditors is legally entitled to individually accelerate the loan or debt security, and enforce the relevant security package, regardless of their legal ranking.

Nonetheless, priority rules may be amended contractually with the consent of all creditors (usually by an intercreditor agreement entered into by the latter) providing, for instance, that certain lenders may have prior right to enforce or that enforcement is subject to the prior consent of certain majority lenders, or that the proceeds of certain securities are applied in a different order to certain creditors and/or groups of creditors.

However, any contractual subordination provisions derogating priority rules set by Italian law are effective between the parties exclusively in connection with non-distressed financings, and they are not enforceable in an insolvency scenario and in-court restructuring proceedings involving a borrower incorporated in Italy.

Any breach of payment obligations under any debt transaction documents and/or the occurrence of certain specific events provided therein, enabling a secured lender to accelerate the debt, entitle such creditor to withdraw from the relevant agreement or, as the case may be, to terminate it and enforce the security package.

Generally, upon an unsuccessful written notice to the debtor (requiring, for instance, payment within a certain term), a creditor must procure an enforceable title, which can be judicial or non-judicial (such as a deed of drawdown in notarial form), to start an enforcement proceeding.

Procedure

The main enforcement proceedings, which depend on the collateral and the secured assets, are attachment of movable assets, debtor’s claims against third parties, and real estate assets.

The enforcement is mainly carried out through a judicial procedure, but for certain collateral also through a private procedure. In particular, with reference to mortgages, the secured creditor must start a judicial procedure aimed at selling the relevant real estate through an auction. If the value of the real estate asset is equal to or lower than the amount of the claim, the creditor may require the asset to be assigned to it. With reference to pledges, the relevant enforcement does not always require a judicial procedure. If the debtor does not fulfil its payment obligations within a certain term, upon request by the relevant creditor, the court bailiff can sell the relevant asset through an auction or without an auction if the asset has a market price. The secured creditor can also ask the judge for the assignation of the asset.

Bank Accounts

The enforcement of a pledge over bank accounts is started through a notification to the depositary bank stating that the pledgor no longer has the right to benefit from the amounts credited to the relevant bank account and a request to retain an amount necessary to fulfil the debtor’s obligations.

Receivables

A pledge over receivables is enforced through a notification to the assigned debtors to pay the due amounts to the secured party.

• Assignment of Receivables: Under such security, the receivables become the property of the lender as soon as they originate and, accordingly, the lender becomes the owner of the collateral from the outset and must only return any excess proceeds from the collection of the assigned receivables.
• Special Privilege: The enforcement is carried out through a judicial procedure aimed at selling the relevant assets by auction pursuant to Article 46 of the Italian Consolidated Banking Act.

Assignation

In certain circumstances and according to certain provisions, the assets may be assigned to the enforcing creditors in lieu of the sale process.

This form of assignation is different from the transfer of the ownership of a debtor’s asset to the secured creditor in performance of an agreement between the parties. Indeed, it is forbidden to agree to the ownership of a debtor’s assets being transferred to the secured creditor where a debtor defaults, save for a few exceptions provided for by the law.

In fact, the Italian Consolidated Banking Act recognises that banks and financial intermediaries registered as per Article 106 of the Italian Consolidated Banking Act have the right to transfer to the creditor the ownership of a debtor’s real estate property if (i) the debtor’s default lasted more than nine months; (ii) an appraisal survey is carried out on the asset; and (iii) the difference between the asset proceeds and the outstanding debt is paid back to the debtor.

Legislative Decree 170/2004 has set out a simplified procedure that recognises that secured creditors have the right to appropriate or sell the secured asset (more precisely, cash or financial instruments which have a market value), returning to the debtor any excess proceeds.

Judgment by an EU Country

If the judgment is enforceable in an EU member state, such judgment shall be enforceable also in Italy without any declaration of enforceability being required. The relevant procedure for enforcement shall be governed by the Italian Code of Civil Procedure and shall be subject to the filing to the competent Italian court of (i) a copy of the judgment that satisfies the conditions necessary to establish its authenticity, and (ii) the certificate issued pursuant to Article 53 of EU Regulation 1215/2012, certifying that the judgment is enforceable and containing an extract of the judgment.

The recognition of a member state judgment could be refused by an Italian court:

• if such recognition or enforcement were manifestly contrary to public policy in Italy;
• where the judgment was given in default of appearance, if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable them to arrange for their defence;
• if the judgment were irreconcilable with a judgment given between the same parties in Italy;
• if the judgment were irreconcilable with an earlier judgment given in another EU country or in a third state involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in Italy; and
• if the judgment were to conflict with the provisions of EU Regulation 1215/2012 concerning jurisdiction in matters regarding insurance, consumer contracts, individual contracts of employment and/or matters reserved to exclusive jurisdiction.

Judgment by a non-EU Country

The recognition of a judgment rendered by a non-EU country is subject to Law 218/1995 and could be refused by an Italian court if the judgment does not comply with the following requirements:

• The court that issued the decision should have had the jurisdiction to decide on the case, in accordance with Italian laws.
• The first claim deed should have been correctly served on the defendant in accordance with the non-EU country laws, and the defendant’s defensive rights must be respected.
• The parties should have appeared before the court or the absence of one of them should have been declared in accordance with the non-EU country law.
• The judgment is final as to its effects pursuant to the non-EU country law.
• No conflicting domestic or non-EU country final judgment exists.
• No proceedings are pending before an Italian court between the same parties and on the same dispute, which were initiated before the non-EU country proceedings.
• There is no conflict or incompatibility with the Italian public policy principle.

The enforcement in Italy of a recognised judgment rendered by a non-EU country court can also be challenged by the defendant through (i) an appeal against enforcement, challenging the right to proceed with enforcement or the existence of the creditor’s right to proceed with enforcement on the basis of circumstances that occurred after the judgment or (ii) an appeal against enforceable acts, challenging procedural errors.

Arbitral Award

An arbitral award obtained by a foreign court of arbitration is not directly applicable in Italy, but can be recognised and enforced by a decree issued by the competent Italian court of appeal, without the issues in the original litigation being reopened and upon condition that the relevant judgment fully complies with the 1958 New York Treaty, as implemented in Italy by Legislative Decree 62/1968 (ie, the litigation falls within the scope of the arbitration agreement and the arbitral award complies with Italian public policy).

In Italy, apart from traditional insolvency proceedings, there are several rescue and reorganisation procedures available that aim to rehabilitate financially distressed businesses while providing protection to creditors. The great flexibility of the restructuring tools available under Italian legislation (ie, the new Italian Code of Business Crisis and Insolvency (CCII)) allows for restructuring and pre-bankruptcy settlement arrangements with creditors to be tailored to firms’ individual needs. This includes the ability to implement extraordinary transactions and deviate from the absolute priority rule.

Below is a summary of the different restructuring procedures available in Italy and their impact on lenders’ rights to enforce loans, guarantees, or securities.

Negotiated Crisis Composition

The Negotiated Crisis Composition (CNC) is an out-of-court restructuring tool under the CCII, designed for companies in financial distress or insolvency that have a reasonable chance of approving and implementing a restructuring plan to maintain business continuity. It is not available for companies planning to cease operations.

The CNC requires the Chamber of Commerce to appoint an expert, upon the company’s request. The process aims to reach agreements with creditors, who must negotiate in good faith without the need to follow the absolute priority rule.

A key feature of the CNC is its protective measures, which allow companies to negotiate fairly while preserving operations and assets. These include:

• suspension of enforcement actions by creditors (except employees) against the company’s assets or business-critical resources;
• temporary exemption from legal obligations requiring recapitalisation or liquidation of undercapitalised companies;
• protection from credit line suspension or termination, with an obligation for banks to reinstate suspended credit if protective measures are confirmed, except when prudential supervision rules apply; and
• creditors’ inability to unilaterally terminate contracts or refuse performance based on unpaid debts predating the CNC.

Throughout the CNC, the company’s directors retain control over both ordinary and extraordinary management, provided they do not jeopardise financial sustainability. They must notify the appointed expert in writing before carrying out extraordinary transactions.

With court approval, the CNC allows companies to benefit from special legal protections for key transactions, such as:

• debtor-in-possession financing, secured from shareholders or third parties, which enjoys super-senior status (predeductible claims) in any subsequent insolvency proceedings; and
• business transfers or asset sales, including leases, without the transferee assuming joint liability for past debts – except for employee-related liabilities.

Additionally, the company may negotiate a tax settlement agreement with authorities for partial or deferred payment of tax debts. No minimum repayment is required, but an independent professional must certify that the proposal is more favourable for public creditors than judicial liquidation. The court will then review and either approve or reject the agreement. It is automatically terminated if the company fails to pay within 60 days or enters liquidation.

The Certified Reorganisation Plan

The certified reorganisation plan is an out-of-court procedure for addressing business crises or insolvency, consisting of a plan to restructure the relevant company’s indebtedness and support the rebalancing of its financial position. The plan must be certified by an independent third-party expert meeting certain requirements set out in the CCII. The independent expert will also certify the accuracy of the relevant accounting data. The company retains significant discretion and flexibility in determining the content of a reorganisation plan and the agreements on which it is based, provided its aim remains the (at least partial) preservation of the company as a going concern.

Transactions, payments, grants of security and guarantees made by a company under the umbrella of a certified reorganisation plan and expressly set out therein are exempt from: (i) ordinary claw-back actions and claw-back actions in the context of judicial liquidation and (ii) the application of certain criminal law provisions on simple and preferential bankruptcy.

Debt Restructuring Agreements

A Debt Restructuring Agreement (ADR) is an out-of-court restructuring tool between an indebted company meeting judicial liquidation size requirements and creditors representing at least 60% of the total indebtedness.

Creditors entering the agreement are not entitled to pari passu treatment, but non-adhering creditors must be fully repaid within 120 days from homologation for due claims or 120 days from maturity for non-due claims.

In extended effectiveness agreements, a qualified majority of creditors in a homogeneous class can bind the minority, provided their treatment is no worse than in judicial liquidation.

The court may authorise financing from shareholders or third parties with super-priority status, if deemed essential for business continuity and not detrimental to creditors.

The debtor may propose partial or deferred payment of tax and social security debts, which an independent professional must certify as more favourable than judicial liquidation. Public creditors must respond within 90 days, with possible extensions of 60 days for modifications or 90 days for new proposals. If public creditors do not adhere or vote against the agreement, homologation may still be granted if their adherence is decisive, the agreement is not liquidation-oriented, creditors supporting the plan hold at least 25% of the total debt, public creditors receive at least 50% of their claims (or 60% if adhering creditors hold less than 25%), and their treatment is not worse than in judicial liquidation.

The tax cram-down cannot apply if, in the past five years, the debtor entered into a terminated tax settlement, unless renegotiated under restructuring rules, or if public debt represents at least 80% of total indebtedness, arising predominantly from missed payments over five tax periods or fraudulent violations.

Transactions, payments, security grants, and guarantees under a homologated ADR are protected from claw-back actions and certain bankruptcy-related penalties.

Restructuring Plans Subject to Homologation

The PRO is a court-supervised restructuring procedure for commercial entrepreneurs and non-small enterprises in financial distress or insolvency, aimed at ensuring business continuity. It is based on agreements with creditors that do not require adherence to the absolute priority rule but must be unanimously approved by creditor classes with similar legal and economic interests.

The procedure allows for a tax settlement agreement, enabling partial or deferred payment of tax and social security debts, provided that an independent professional certifies that the proposed treatment is no worse than in judicial liquidation, and creditors have 90 days to accept the proposal.

The court may also authorise the transfer of a business or its branches before approval if it is included in the plan and contributes to business continuity and better creditor satisfaction. Transfers can be free of pre-existing liabilities as long as competitive principles are observed with flexibility in their application. The PRO further allows business transfers during negotiations, releasing the seller from debts except for employee liabilities, which remain jointly assumed by the buyer.

Transactions, payments, and guarantees made under the PRO are protected from claw-back actions and certain bankruptcy-related penalties.

The Composition with Creditors Procedure

The Composition with Creditors is a court-supervised restructuring procedure available to commercial entrepreneurs and non-small enterprises in crisis or insolvency, allowing the debtor to continue managing the business under judicial oversight, with court authorisation required for certain transactions.

This framework has been recently revised by the “Correttivo-ter” decree, which came into effect on 27 September 2024, introducing significant modifications to enhance clarity and efficiency in restructuring processes.

Once the petition is published, the debtor cannot make payments on pre-existing claims, and judicial liquidation is suspended for up to 12 months.

The court may authorise financing from shareholders or third parties with super-priority status, provided it supports business continuity and does not harm creditors.

The Correttivo-ter clarifies that the liquidation value corresponds to the net proceeds from asset sales, with potential increases in the case of going-concern transactions impacting the distribution of assets, feasibility of proposals, and applicability of cram-down mechanisms.

Mandatory creditor classes now include small suppliers meeting specific financial and employment criteria. The plan must allocate risk funds to cover public guarantees (SACE/MCC).

In business continuity compositions, the court may approve the plan even if public creditors oppose it, allowing for cross-class cram-downs, except where only one dissenting class exists.

The threshold for competing proposals has been lowered from 10% to 5% of the total debt, increasing creditor participation.

Pending contract protections now apply from the filing of protective measures, rather than from their approval.

Homologation without majority class approval is possible if at least one partially satisfied dissenting class supports the plan, ensuring that they receive a better outcome than they would under liquidation.

For business continuity plans involving asset liquidation, the court may appoint liquidators and a creditors' committee, ensuring efficient and transparent sales, with forced sale effects and automatic lien cancellation upon payment.

Extraordinary transactions must be published in the business register, with objections handled during homologation.

Significant modifications to the plan require renewed certification, judicial oversight, and creditor notification, with 30 days for objections.

The homologation process for shareholder allocations now follows accounting principles to determine retained shareholder value, but uncertainties remain regarding capital contributions and distribution rules when dissenting creditors oppose approval.

All transactions, payments, security grants, and guarantees executed under a homologated composition plan are protected from claw-back actions and bankruptcy-related penalties.

In Italy, the main insolvency law considerations relating to debt financing include the following:

• Lenders’ Rights to Enforce a Loan, Guarantee or Security in Insolvency: Italian insolvency law regulates the enforcement of loans, guarantees, and security interests in the event of a debtor’s insolvency. Secured creditors, such as those holding mortgages or pledges, generally have priority in recovering their claims from the proceeds of secured assets, unless otherwise agreed by the parties or modified by specific insolvency provisions.
• Claw-Back Risks: Italian law includes claw-back provisions aimed at preventing preferential or fraudulent transactions executed before insolvency proceedings. Certain transactions may be challenged and annulled to ensure fair treatment of creditors. However, specific restructuring tools provide statutory exemptions from claw-back actions, mitigating risks for transactions carried out within their framework.
• Equitable Subordination: The principle of equitable subordination allows for certain creditors or claims to be ranked below others, depending on the nature of the financing or the creditor’s conduct. Unless otherwise agreed, this mechanism ensures fair asset distribution among creditors.
• Payment Priority: Italian insolvency law establishes a statutory order of payments for distributing the assets of an insolvent debtor. Secured creditors generally have priority over unsecured creditors, subject to specific legal exceptions. Within each creditor class, further subordination may occur based on contractual agreements or statutory provisions. These priority rules can also be modified through creditor agreements, as permitted by law.

Stamp Taxes

Financing agreements generally fall within the scope of the provision of services exempt from VAT and are therefore subject in Italy to registration tax at a fixed amount of EUR200. If a financing agreement falls outside the scope of this VAT exemption, either on a subjective basis (ie, the lender does not hold a VAT position) or an objective (eg, non-interest bearing loans) basis, registration tax shall apply at a 3% rate on the loan amount.

It should be noted that indirect taxation may be burdensome with respect to the security package related to a financing agreement, considering the following typical features:

• for mortgages:
1. a registration tax of either a fixed amount of EUR200 in the case of a guarantee provided by the debtor, or 0.5% in all other cases, where such guarantee is not required by law; or
2. a mortgage tax of 2% upon registration, calculated on the value of the guaranteed credit, including interest and accessories;
• for a pledge on shareholdings: a registration tax of either a fixed amount of EUR200 in the case of a guarantee provided by the debtor, or 0.5% in all other cases, where such guarantee is not required by law; and
• for the assignment of receivables: a registration tax of either a fixed amount of EUR200 in the case of a guarantee provided by the debtor, or 0.5% in all other cases, where such guarantee is not required by law.

It should be noted that in the case of credits deriving from unregistered financing (for example because made through exchange of correspondence) it is relevant to consider the risk of enunciation, which in some cases (eg, where the financing is not considered subject to the mentioned VAT exemption) involves the application of a proportional registration tax of 3%.

An election for a favourable tax regime consisting of a 0.25% substitute tax in lieu of registration tax, stamp duty, mortgage and cadastral taxes and taxes on government concessions, can be applied if all the following conditions are met:

• the loan is stipulated by banks or financial intermediaries or takes the form of structured financing operations such as bonds or similar securities;
• duration of the loan for a medium- to long-term, intended as a term exceeding 18 months; and
• timely election for the substitute tax regime, duly exercised.

Withholding Tax

Payments of interest income are generally subject to a 26% withholding tax on the gross amount of the interest.

However, interest on loans, if paid to businesses resident in Italy, is generally not subject to withholding tax since it qualifies as business income and will consequently be made subject to tax directly in the hands of the recipient (ie, subject to corporate income tax at 24% in the hands of corporations and other entities, or else individual income tax from 23% to 43% in the hands of individually held businesses).

Moreover, for debt financings, it is worth noting that a 26% withholding tax would apply even if the recipient is a business tax resident in Italy if they are made through issuance of bonds not falling in at least one of the following categories:

• bonds issued by the state and governmental bodies, banks, and companies listed on a regulated market;
• bonds issued by non-listed companies provided that the bonds are listed on an EU regulated market or on a multilateral trading facility; and
• bonds exclusively subscribed and held by qualified investors.

If the recipient of an interest payment is not resident for tax purposes in Italy, the mentioned domestic 26% withholding tax can be reduced according to the provisions of a double taxation treaty entered into by Italy and the country of residence of the beneficial owner of the considered interest, as the case may be. Furthermore, in the case of intra-EU payments of interest, if the conditions set forth by Directive 2003/49/EC are satisfied, no withholding tax would apply in Italy.

Qualifying Lender

According to the Italian tax and legal framework, the definition of a qualifying lender in the case of an Italian resident borrower shall ordinarily include:

• a bank or financial institution duly authorised to carry out banking or lending activity in Italy, resident for tax purposes in Italy;
• a permanent establishment in Italy of a bank or financial institution duly authorised to carry out lending activity in Italy pursuant to the Italian banking and financial laws, for which any payment received under the relevant finance documents is treated as business income;
• a securitisation company incorporated under Legislative Decree 130/1999;
• an undertaking for collective investment that is resident in Italy for tax purposes and set up in Italy in accordance with Legislative Decree 58/1998, duly authorised or licensed to carry out lending activity under the said Legislative Decree 58/1998;
• any party of a facility or lending agreement entitled to receive payments without the deduction of a withholding tax in Italy by virtue of an applicable double taxation treaty; and
• any entity that is entitled under Article 26, paragraph 5-bis of Presidential Decree 600/1973 to receive payments of interest and other income accrued on medium- to long-term loans without the application of any deduction on account of taxes.

Interest Barrier Rules

According to Italian tax law, for non-financial entities, starting from tax period 2019, the deduction of interest expenses for corporate income tax purposes is limited based on specific criteria. In particular, it is provided that interest expenses can be deducted for corporate income tax purposes within the limit of the sum (the “base threshold”) of (i) interest income and similar items of income accounted for in the considered financial year, plus (ii) the surplus of interest income and similar items of income duly carried forward from previous financial years.

Interest costs exceeding the Base Threshold can be deducted within a limit equal to 30% of the accounting EBITDA adjusted (the “EBITDA tax capacity”) according to the deduction’s limitations set forth by corporate income tax laws (eg, items of income that are not deductible for corporate income tax purposes cannot be considered in the computation of the EBITDA tax capacity).

Moreover, the EBITDA Tax Capacity that is accrued but not used in a given tax period can be carried forward up to five tax periods following the one in which it has been accrued.

The interest expenses that exceed the base threshold and the EBITDA tax capacity (both that accrued in the considered tax period and the one carried forward, if any) can be carried forward to be deducted in the following tax periods, according to the aforementioned rules.

For financial intermediaries the aforementioned interest barrier rules do not apply. In particular, interest expenses incurred by insurance companies and parent companies of insurance groups, as well as by fund management companies (SGRs) and securities brokerage companies (SIMs), can be deducted for corporate income tax purposes within the limits of 96% of their gross amount.

Interest expenses can be fully deducted for corporate income tax purposes in the hands of financial intermediaries different from insurance companies, parent companies of insurance groups, SGRs and SIMs.

From a regulatory perspective, debt financing is an activity reserved for Italian banks, foreign banks with a registered office in the EU and duly authorised to carry out banking activities in their jurisdiction, non-EU banks (subject to the Bank of Italy’s prior authorisation) and foreign EU financial intermediaries where these are controlled by EU banks with registered office in the same jurisdiction.

In addition, in recent years, legal developments have also authorised the following subjects:

• securitisation vehicles pursuant to the Italian Securitisation Law (Legislative Decree 130/1999 – this alternative structure, based on the subscription of asset-backed securities by investors which, in their turn, grant loans under certain conditions, is particularly attractive to foreign investors and, accordingly, quite common, especially for foreign funds;
• Italian insurance companies; and
• Italian and European alternative investment funds.

Although signing by counterparts is still not a valid form of signing documents governed by Italian law, signing and closing procedures have changed in the wake of the COVID-19 restrictions, with remote signings and e-signing systems being increasingly preferred to physical ones. Among the main e-signing solutions provided by Italian Law (Legislative Decree 82/2005) and European legislation (Regulation (EU) 910/2014), the more secure e-signature is the “qualified electronic signature” (QES), which is generally equivalent to a handwritten signature. It includes the e-signature systems adopted by certain professionals to submit documents to public services, such as the e-signatures of lawyers on judicial acts to be filed with courts through the internet.

Provided that no specific formalities are required under Italian law, a transaction document becomes effective and enforceable between the parties through the simple signature by each of them and enforceable against third parties to the extent it bears a certain date at law. The certified date can be provided, among other means:

• by delivering a certified electronic mail, in regard to which it should be noted that the latter is available only for Italian entities with a certified electronic address; or
• by an online certified date service, which affixes the date using a time-stamping system with full legal validity.