The Negotiated Business Crisis Settlement (Composizione Negoziata Della Crisi)

1. Introduction

Introduced for the first time by Legislative Decree No. 118 of 24 August 2021, the negotiated business crisis settlement (composizione negoziata della crisi d’impresa, or CNC) has progressively become one of the preferred instruments for both Italian and foreign debtors with their business centre of main interests in Italy for addressing situations of corporate distress.

The framework governing the CNC was later incorporated – albeit with some additions – into the new Italian Insolvency Code (Codice della crisi d’impresa e dell’insolvenza, or CCII), which entered into force on 15 July 2022 after multiple postponements, under Articles 12 et seq, implementing EU Directive No. 1023/2019 (the so-called Insolvency Directive).

The CNC pathway is designed to encourage early intervention in situations of financial difficulty, allowing the debtor to engage with creditors under the supervision of an independent Expert appointed by the competent Chamber of Commerce. The Expert’s role is to facilitate dialogue among stakeholders, promoting agreements that can ensure the company’s recovery or, when necessary, lead to a more orderly restructuring process by means of the traditional insolvency tools. The CNC, therefore, represents a significant evolution in the Italian approach to business crisis management, marking an evident shift from a punitive and liquidation-oriented model to one that prioritises early detection of distress, co-operation among parties and the preservation of the going concern.

2. The main features of the negotiated settlement of crisis pathway

Unlike other tools offered by Italian insolvency law, the CNC is primarily aimed at fostering business continuity – even indirectly – and is characterised by its extrajudicial nature.

Judicial intervention is envisaged only upon request by the debtor pursuant to Articles 18 and 19 CCII, for the implementation of protective and precautionary measures, or under Article 22 to seek authorisation for super-senior loans (finanziamenti prededucibili) or to transfer the business without the effects provided for in Article 2560, Paragraph 2, of the Italian Civil Code, regarding joint and several liability of the purchaser.

Another distinctive feature of the CNC lies in its limited publicity requirements and its inherently negotiated, flexible and confidential character, which together make it particularly attractive. The pathway is entirely voluntary, considering that it is the debtor that decides whether to initiate it or not. The qualified public creditors, such as the tax or social security authorities (Article 25-novies CCII), or the debtor’s controlling bodies, such as the statutory auditors (Article 25-octies CCII), have the duty to report the company’s crisis situation, but it does not create any obligation for the entrepreneur to act.

Furthermore, pursuant to Article 21 CCII, the debtor retains full possession and control of the business assets, maintaining both the ordinary and extraordinary management powers of the business. Moreover, the pathway does not involve competition between creditors as the entrepreneur is prevented neither from agreeing to the creation of new secured rights nor from making voluntary payments (Article 18, Paragraph 1, CCII); thus, the par condicio creditorum rule (ie, the same conditions for creditors with the same ranking) does not apply.

3. Access to the CNC pathway

The CNC is not an insolvency or a pre-insolvency procedure, and it is considered as a pathway (percorso) that could be finalised in several ways according to the CCII.

It begins with the submission of an application by the debtor to the general secretary of the Chamber of Commerce where the registered office of the debtor is located for the appointment of an Expert,who must be registered in a dedicated registry of specialised professionals.

Before submitting the application, the company shall assess whether one condition is fulfilled (negative condition of admissibility) and simultaneously whether two prerequisites exist. Regarding the condition, the application for the appointment of the Expert cannot be submitted when the entrepreneur is subject to other restructuring or insolvency proceedings to which the debtor itself has requested access.

As regards the prerequisites, pursuant to Article 12, Paragraph 1, CCII, the application for the appointment of an Expert may be submitted both by commercial and agricultural entrepreneurs registered in the Register of Companies and by small businesses, defined as “below-threshold companies” under Article 25-quater CCII. Small businesses may benefit from a simplified version of the CNC, which, among other aspects, requires fewer documents to be submitted with the application.

The aforementioned entrepreneurs may benefit from the CNC in any situation where the debtor is experiencing a crisis situation, or insolvent, or – unlike other crisis resolution tools – merely in a state of asset or financial imbalance. In any case, it is pivotal that the plan for restructuring the debt, prepared by the company for overcoming the crisis, is adequately feasible and reasonably achievable considering the degree of imbalance.

A crisis situation refers to a phase of financial imbalance in which the enterprise begins to show signs of tension in liquidity or profitability but still remains capable of restoring equilibrium through timely corrective actions. This stage precedes the actual crisis stage, which arises when insolvency becomes likely and is characterised by the inadequacy of prospective cash flows to satisfy the debtor’s obligations over the following 12 months.

Insolvency, in turn, denotes a situation in which defaults or other external circumstances reveal that the debtor is no longer able to regularly fulfil its obligations, marking a state of structural financial decline that could justify the beginning of formal insolvency proceedings.

4. The managing of the company

It should be noted that, for CNC purposes, the debtor is not deprived of the powers to manage the company pursuant to Article 21 CCII: it continues to manage the company, provided that such activities do not jeopardise its economic and financial sustainability.

Article 21 CCII also regulates the execution of extraordinary activities, ie, acts capable of affecting the debtor’s assets to the detriment of creditors. Before executing them or making payments inconsistent with the ongoing negotiations or with the prospective turnaround, the debtor must give prior written notice to the appointed Expert.

The purpose of this notice is to allow the Expert to assess whether those acts may prejudice creditors, the negotiations or the restructuring prospects. Furthermore, where protective or precautionary measures have been granted, Article 21 CCII requires the Expert to inform the court under Article 19, Paragraph 6, CCII so that it may revoke or shorten their duration in case the debtor decides to not consider the opinion of the Expert.

According to Article 22 CCII, the debtor can request from the court, among other things, the authorisation to enter into super-senior loans or to transfer the entire business or a business unit to a third party.

In this regard, it is worth mentioning an act frequently carried out in practice, namely, the lease of the entire business or one of its branches. Contrary to what might be assumed, such act does not require judicial authorisation, on the basis that it is not a final transfer, but may be carried out subject to a favourable opinion from the appointed Expert, as consistently clarified by case law.

5. The Expert’s role

Within the CNC, the Expert plays a central role in verifying the company’s prospects of recovery and guiding the entrepreneur through the negotiation process. He/she identifies the key stakeholders, organises meetings, co-ordinates discussions and, where appropriate, assists the company in finding suitable solutions to overcome the distress. The Expert also ensures that negotiations are conducted in good faith and aimed at reaching balanced, consensual solutions capable of preserving business continuity. When necessary, the Expert may invite the parties to renegotiate existing contracts whose performance has become excessively burdensome or whose equilibrium has been altered by supervening circumstances. In addition, the Expert provides opinions on acts of extraordinary management, reports to the court in proceedings for the confirmation of protective measures, and drafts a final report to be uploaded to the dedicated digital platform.

Furthermore, the Expert has control over the outcome of the CNC. In particular, if the Expert considers the restructuring process unfeasible, he/she shall notify this circumstance to the company. If the company does not align the plan with the Expert’s instructions, the Expert may close the CNC on the digital platform.

6. Negotiations with creditors

In practice, negotiations are typically organised by clusters of creditors, grouped according to their nature and strategic importance – such as financial institutions, the Tax Authority (Agenzia delle Entrate), social security authorities (INPS and INAIL), and strategic or non-strategic suppliers – further allowing for more targeted and effective discussions. Unlike in insolvency procedures, the par condicio creditorum rule does not apply, enabling the debtor to present differentiated proposals depending on each creditor’s category, importance, and contribution to business continuity. Creditors must nevertheless be satisfied in accordance with the ranking of their privileges: secured creditors (privilegiati) enjoy priority treatment, while unsecured creditors (chirografari) may be subject to greater reductions, generally through discounted pay-off. Social security authorities must be paid in full, while financial creditors are often repaid through rescheduled plans, and the Tax Authority may enter into tax settlements (transazioni fiscali) under Article 23, Paragraph 2-bis, CCII, allowing for negotiated agreements that ensure a reasonable recovery of public claims in line with the company’s sustainability prospects. Finally, strategic suppliers are generally granted more favourable conditions compared with non-strategic ones, given their essential role in maintaining operational continuity, as the CNC assumes.

7. Protective and precautionary measures

As mentioned above, pursuant to Articles 18 et seq CCII, the debtor may request protective and precautionary measures aimed at safeguarding the company’s assets for a defined period while the negotiated settlement is ongoing, further enhancing the CNC’s effectiveness as a preventive and co-operative tool.

Protective measures (misure protettive) take immediate effect from the date on which the Expert’s acceptance is published in the Register of Companies (if they are requested by the debtor), but must be confirmed by the competent court upon an application to be filed to the court by the debtor within one day from the acceptance by the Expert and the publication of the CNC in the Chamber of Commerce. Conversely, precautionary measures (misure cautelari) require the appointed judge to first assess the presence of fumus boni iuris (ie, likelihood of success on the merits) and periculum in mora (ie, danger in delay), since – unlike protective measures, which may be requested erga omnes, ie, towards all the third parties – they have a different purpose and are specifically addressed to certain identified creditors.

The assessment of the above-mentioned fumus boni iuris requirement differs from that used for ordinary applicable precautionary measures pursuant to Article 700 of the Italian Civil Procedure Code, in that the fumus boni iuris lies in the objective condition entitling the debtor to access the CNC pathway and in the existence of a concrete and not manifestly unrealistic prospect of business recovery, based on the information available and the Expert’s preliminary findings.

On the other hand, periculum in mora concerns the risk that the absence of precautionary measures could jeopardise the progress or successful outcome of the negotiations. Case law requires the court to ensure that genuine negotiations are taking place in good faith, that the measures are instrumental to their continuation, and that they remain proportionate to the potential prejudice caused to creditors.

Protective measures may be granted for a duration of 30 to 120 days, which may be extended once for an additional 120 days. Nevertheless, this temporal framework creates a potential gap in protection, as the maximum duration of protective measures (240 days) does not fully align with the possible overall length of the mandate of the Expert, equivalent to 180 days and extendable up to a total of 360 days. As a result, the debtor may find itself temporarily unprotected while the CNC is still ongoing. However, according to the most recent case law, precautionary measures may be granted even after the expiry date of the protective ones, thereby extending judicial protection beyond term.

The permissible content of precautionary measures significantly differs from that of protective measures. While protective measures are limited to those expressly provided for under Article 18 CCII, precautionary measures may vary according to the specific needs of the company. For instance, the debtor may requestjudicial confirmation of the conditions necessary to obtain social security or tax compliance certificates (so-called DURC and DURF), or measures such as the suspension of the enforcement of state guarantees and pledges, or the inhibition of bank account freezes by certain creditor institutions.

In any case, precautionary measures may only have a non facere content, ie, they may impose prohibitions or suspensions but cannot compel the performance of positive obligations.

8. Other operations requiring judicial intervention

Given that the CNC is an out-of-court proceeding, the circumstances in which the court may intervene are limited. As already explained, a first example of judicial activity is the request for protective measures, while another is the authorisations that the debtor may request to the court pursuant to Article 22 CCII: at the entrepreneur’s request, the court, having verified the functionality of the acts with respect to business continuity and the best satisfaction of creditors, may authorise the debtor to enter into super-senior financings, or to transfer the business or its branches with the release of the obligation to assume past debts.

If, in order to preserve business continuity during the CNC, a third party, a shareholder or even a company within the same group provides new financing to the debtor, such financing may qualify prededucibile, ie, with priority repayment under the CCII in the event of subsequent insolvency proceedings.

The reason behind this rule is to encourage the injection of new resources into distressed companies, thereby supporting the continuity of operations and the success of the turnaround. The possibility of priority also for the shareholder is in the interest of the restructuring according to the CCII. Consequently, both external lenders and shareholders are more likely to contribute new financing when they know their claims will enjoy preferential treatment in the event of a future insolvency process.

Another possible form of judicial intervention within the CNC concerns the transfer of the business or one of its branches. As already noted, the purpose of the CNC is to promote the recovery of the debtor, even indirectly, for instance through its sale to a third party willing to ensure business continuity. In such cases, potential purchasers are naturally more inclined to proceed if they can be released from the burden of the debtor’s pre-existing liabilities. To this end, the court may authorise the transfer of the business without the purchaser assuming the seller’s previous debts, in derogation of Article 2560, Paragraph 2, of the Italian Civil Code, except for those arising from employment relationships, which are to be jointly satisfied. In granting such authorisation, the court may consult the Expert on the process by which the purchaser was identified, the fairness of the agreed price, and any other relevant circumstance, while the Expert shall in turn inform the court if the purchaser qualifies as a related party of the debtor. In this way, the legislation seeks to reconcile the need to preserve the company’s value and operational continuity with the protection of creditors, ensuring that the transfer serves the broader goal of an efficient restructuring, through the indirect continuity of the business.

9. Possible outcome of the negotiations

The negotiated settlement procedure operates as a flexible framework that enables the debtor to entertain structured discussions with creditors within a protected environment, without the interference of external commissioners or supervisory bodies, other than the appointed Expert. Its function is to provide a legally safeguarded environment in which the parties can explore viable solutions to the company’s financial distress, often paving the way for the subsequent adoption of more traditional restructuring instruments.

In the event of a successful negotiation pursuant to Article 23 CCII, the outcome may consist of the conclusion of (a) a contract with one or more creditors, with the tax benefits outlined in Article 25-bis, Paragraph 1, CCII, if, in the Expert’s opinion, it is suitable to ensure business continuity for a period of no less than two years; (b) a moratorium agreement; or (c) an agreement signed by the debtor and the creditors, endorsed by the Expert, who confirms its suitability to address the crisis or insolvency. This agreement produces the effects outlined in Article 166, Paragraph 3, letter d), CCII (ie, exemption from claw-back actions) and Article 324 CCII (ie, exemption from certain insolvency-related criminal sanctions). Consequently, it has the same value as a recovery plan without the certification of an independent professional, but only the approval of the Expert. Furthermore, the company may establish a tax settlement (pursuant to Article 23, Paragraph 2-bis, CCII), albeit without the cram-down mechanism.

In the event of unsuccessful negotiations, the law allows the entrepreneur to file an application for the homologation of a simplified composition of debts with creditors or simplified arrangement (concordato semplificato). In order to benefit from the simplified procedure, the Expert needs to identify tangible prospects for restructuring the debts and confirm that genuine negotiations have taken place in good faith. Only when these conditions are met, and all potential negotiated or non-negotiated solutions have been considered unfeasible, may the debtor submit a proposal for a liquidation plan aimed at the transfer of assets.

A simplified arrangement differs markedly from an ordinary composition with creditors. It does not require a formal admission decree, the involvement of a judicial commissioner or delegated judge, or any voting phase by creditors. Furthermore, it does not entail a formal agreement between debtor and creditors, as the Expert’s final report and opinion replace the certification normally issued by an independent professional. Subsequently, the court appoints an auxiliary who, based on the final report of the Expert, assesses the requirements to access and to homologate the simplified arrangement. The auxiliary performs a function like a judicial commissioner in a composition of debts with creditors, ensuring transparency and procedural fairness throughout.

10. The relevant data

Recent statistics reveal a significant increase in the number of applications for the CNC among Italian companies. As of October 2025, approximately 3,400 applications had been submitted, compared with 2,767 recorded as of 15 May 2025, according to the Unioncamere report on the results of the CNC since its introduction. By October 2025, 402 companies had reached a positive outcome, while 1,990 CNCs were closed without success.

Unsurprisingly, only eight companies that successfully completed the CNC qualified as below-threshold enterprises, while 60 were part of a group of companies. This data clearly indicates that the CNC, as currently structured, tends to be more suitable for medium-sized and large enterprises than for smaller ones. The latter, due to their limited organisational capacity and lack of adequate internal controls, often detect warning signs of financial distress too late, leading to an unsuccessful outcome. Additional factors may include the limited interest of financial creditors in negotiating the recovery of small exposures and, probably, the involvement of professionals with less experience in restructuring proceedings.

Based on the available data, it is possible to outline the general trends in the outcomes of the CNC. Among the cases concluded positively, the most common solution appears to be an agreement jointly signed by the debtor, the creditors and the Expert pursuant to Article 23, Paragraph 1, letter c), CCII, accounting for roughly one-third of successful cases. This is followed by agreements with one or more creditors under Article 23, Paragraph 1, letter a), CCII (around 20%), while a smaller share relates to the homologation of debt restructuring agreements and access to other restructuring or insolvency proceedings provided by the CCII (together around 15%). Residual outcomes include certified recovery plans and moratorium agreements, which together represent less than 5% of the total.

Conversely, among the CNCs that ended without success, approximately half of the companies initiated a formal proceeding following the closure of the CNC. Around one-quarter entered judicial or voluntary liquidation, while a smaller proportion accessed composition with creditors or debt restructuring agreements. Roughly 15% of the unsuccessful procedures resulted in an application for a simplified arrangement for the liquidation of assets. It should be noted that these percentages are approximate and refer to the proceedings registered after the conclusion of the CNC, without indicating their final outcome in terms of homologation or closure.

In conclusion, the CNC represents a fundamental step in the modernisation of the Italian insolvency framework. By promoting early intervention, dialogue with creditors and business continuity, the CNC has shifted the focus from a liquidation-oriented system to one centred on recovery and co-operation. Nevertheless, the data shows that its effectiveness remains closely linked to the company’s size, its governance structure, and access to competent professionals.