Chapter 11" booming in Italy

The crisis law reform came into force in Italy more than two years ago, in July 2022, and brought with it a major innovation, the ‘Negotiated Settlement’. For the first time, companies had an instrument designed precisely for crisis management at an early stage. Enterprises in crisis could now seek a solution through a path protected from the individual actions of creditors, confidential and essentially out-of-court.

Initially, just a few companies made use of the new and partly untested instrument. Over time, however, use grew, together with awareness that an early-stage approach could minimise crisis consequences. Only 5% of the crisis procedures opened in 2022 in Italy were ‘Negotiated Settlements’. In 2024, the percentage almost doubled to 9%, and comes close to the results of the much better-known Chapter 11, which has been the world's reference tool for early crisis resolution for many years. Over time, the average size of companies accessing the negotiated settlement has also increased. In 2022, only small companies, with an average turnover of EUR 4 million, resorted to it. In 2024, the average revenue of companies entering the ‘Negotiated Settlement’ was close to EUR 32 million.

Entrepreneurs and advisors in Italy also learned how to use the new instrument. Initially, only 5% of restarting plans were successful, and too often those who resorted to the negotiated settlement were “dead on arrival”. Today, after only two years, the percentage has risen to 18%. The awareness that solving the crisis requires clear ideas and reliable plans, and that the regulatory instrument is only a support, albeit a fundamental one, is gaining ground. The path is still long, but the trend is very positive, with success levels already comparable to the USA and France, which have been using these instruments for much longer. The objective, of course, is that far more than two out of ten companies in crisis can manage to design and implement their recovery plan, tackling the crisis early on.

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Dr Claudio Ceradini is a Senior Partner of SLT Strategy Legal Tax, working in the Business and Tax department as an auditor and a business and tax advisor.