Liquidity Decree

Maurizio RubenCofounder of CDR & ASSOCIATI and founding partner of CDR legal, CDR Legal

With the publication in the Italian Official Gazette of the so called  “Liquidity Decree” approved by the Council of Ministers, the measures to support companies, artisans, self-employed and professionals and to encourage the restart of the Italian production system are now operational. The Decree addresses issues such as urgent measures concerning access to credit and deferral of obligations for companies, as well as special powers in areas of strategic importance and justice.

Here Below we provide a summary of the measures adopted by the Liquidity Decree:  

  1. Access to credit, liquidity, export, internationalisation and investment support

The measures adopted provide for State guarantees for overall EUR 200 billions granted through the company SACE Simest, part of the Cassa Depositi and Prestiti group (a SpA controlled by the Italian Ministry of Economy and Finance which promotes the growth of the country and manages postal savings) in favour of banks providing loans to businesses in any form.

In particular, the guarantee will cover between 70% and 90% of the amount financed, depending on the size of the company, and it is subject to a number of conditions including the impossibility for the beneficiary company to distribute dividends for the following twelve months and the necessary allocation of the financing to support expenditure on productive activities located in Italy. Specifically:

  • companies with less than 5,000 employees in Italy and a turnover of less than 1.5 billion euros obtain coverage equal to 90% of the amount of financing required. For these companies a simplified procedure is provided in order to access to the guarantee;
  • the coverage drops to 80% for companies with more than 5,000 employees and a turnover between 1.5 and 5 billion euros and 70% for companies with a turnover above 5 billion euros;
  • the amount of the guarantee may not exceed 25% of the turnover recorded in 2019 or twice the personnel costs incurred by the company;
  • 30 billion are reserved for small and medium enterprises, including individual enterprises or professionals with VAT, and access to the guarantee issued by SACE will be free of charge but subject to the condition that they have exhausted their capacity to use the credit issued by the Central Guarantee Fund.

The decree further strengthens the Guarantee Fund for p.m.i., increasing both its financial endowment and its capacity to generate liquidity also for companies up to 499 employees and professionals.

The Fund – already extended by the “Cura Italia” decree (Decree Law no. 18 of 17 March 2020) with 1.5 billion euros – thus completes its transformation into a tool to support small and medium enterprises, to protect entrepreneurs, artisans, self-employed and professionals, as well as to safeguard exports and all those sectors related to Made in Italy.

There is also a strong streamlining of bureaucratic procedures to access the guarantees granted by the Fund.

The decree also strengthens public support for exports, to improve the incisiveness and timeliness of state intervention. The intervention introduces a co-insurance system under which 90% of the commitments deriving from SACE’s insurance activity are assumed by the State and the remaining 10% by the company itself, thus freeing up to a further 200 billion resources to be allocated to the strengthening of exports.

The aim is to enable SACE to meet the growing demand to insure operations deemed to be of strategic interest to the national economy which the company would otherwise not have the financial capacity to cover.

  1. Measures to ensure the continuity of companies’ businesses

The Decree provides for a series of measures aimed at ensuring the continuity of companies in the emergency phase, with particular regard to those that were in balance before the crisis and presented a regular prospect of business continuity. This intervention takes place:

– during the preparation of the current financial statements, assessing the criteria of prudence and continuity in the light of the situation emerging from the last financial statements closed;

– deactivating the causes of company dissolution due to reduction or loss of share capital.

In addition to these two measures to directly protect the company, there is a third measure aimed at encouraging the involvement of shareholders in increasing the flow of financing to the company, deactivating at this stage the mechanisms that in the ordinary course of business put them in second place to creditors.

There are also measures relating to the discipline of bankruptcy which are aimed at this stage at:

–  preventing companies from opening bankruptcy and other insolvency proceedings for as long as the emergency lasts;

– sterilising the period of the emergency for the purposes of calculating actions for the protection of creditors (i.e. once the emergency period has passed, creditors may, if necessary, bring actions for revocation).

  1. Strengthening of special powers in areas of strategic importance and financial transparency obligations

The approved rules are designed to strengthen the discipline of special powers in areas of strategic importance in the current context of an epidemiological emergency:

– the extension of the frame of the golden power discipline’s objective intervention is anticipated, with immediate effect, to those sectors considered of strategic importance by the European Regulation n. 452/2019. Therefore, it will be possible to submit to the prior authorisation the operations related, inter alia, to the financial, credit and insurance sectors, critical infrastructures and technologies, including energy, transport, water and health, food safety, access to sensitive information, including personal data, artificial intelligence, robotics, semiconductors, cybersecurity, as well as nanotechnology and biotechnology;

– provide for the possibility for the Government to open the procedure ex officio if companies fail to comply with their notification obligations;

– extend, on a transitional basis until 31 December 2020, the scope of application of the discipline of special powers also to intra-European transactions that will require the prior authorisation of the Government, in the case of the acquisition of control of assets falling within the sectors described above; in the case of extra-European transactions, the extension, again on a transitional basis, will also cover acquisitions of holdings exceeding 10% by non-EU entities, if they exceed the threshold of one million euros.

As far as financial transparency is concerned, the transparency obligations provided for by art. 120 of the TUF have been integrated to allow CONSOB to temporarily lower the relevant thresholds for communications (bringing it to 5%) and also to expand the number of companies subject to them, including companies with a widespread shareholder base.

  1. Tax and accounting measures
  • Urgent measures are taken to postpone tax and fiscal obligations by workers and companies. In particular, the suspension of payments of VAT, withholding tax and contributions for the months of April and May, in addition to those already provided for with the “Cura Italia”.
  • In detail:
  • – VAT, withholdings and contributions suspended for subjects with a decrease in turnover of at least 33% for revenues/revenues under 50 million and at least 50% above this threshold;
  • – in any case, these payments are suspended for individuals who started operating on 1 April 2019;
  • – for residents of the 5 provinces most affected (Bergamo, Brescia, Cremona, Lodi, Piacenza), suspension of VAT payments if turnover drops by at least 33% regardless of the turnover threshold of 50 million;

– resumption of payments in June, with the possibility of instalments in 5 instalments

The suspension of withholding tax on income from self-employment provided for by the “Cura Italia” decree is extended to April and May.

The deadline for payments due on 20 March is extended to 16 April and the deadline for sending the Single Certificate has been extended from 31 March to 30 April.

In addition, the 50% tax credit for workplace sanitization expenses is also extended to the purchase of personal protective equipment, masks and glasses.

Inps is allowed to issue a simplified Pin, by means of telematic identification of the applicant and postponing verification with direct recognition at the end of the emergency.

Rules are introduced on “compassionate medicines” (medicines not yet authorised), which provide for the exclusion from the application of taxes in the case of free supply.

  1. Further provisions

The decree provides, finally:

– the postponement, from 15 April to 11 May, of the time limit for the automatic postponement of hearings in civil and criminal proceedings pending at all judicial offices, as well as the suspension of the time limit for the completion of any act in civil and criminal proceedings (preliminary investigations, the adoption of judicial measures and the filing of their motivation, the lodging of the preliminary proceedings and executive proceedings, appeals and, in general, all procedural deadlines). The time limits for the notification of the appeal at first instance before the tax commissions shall also be suspended for the same duration;

– the expansion, until the end of the current year, of the operation of the Guarantee Fund for sports facilities, administered under separate management by the Istituto per il Credito Sportivo, also including financing for the liquidity requirements, currently excluded, of the National Sports Federations, Associated Sports Clubs, Sports Promotion Bodies, associations and amateur sports clubs. For these purposes, a special section of the aforesaid Fund has been set up with an endowment of € 30 million for the year 2020.

Mara Bolzoni                         Maurizio Ruben