Bankruptcy Law December 20, 2025 8 min read

Insolvency Code Amendments 2026: Streamlined Procedures and Enhanced Protection

Important changes to the Italian insolvency framework streamline bankruptcy proceedings and enhance creditor protections while promoting business rescue.

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Avv. Carlo Carta

Bankruptcy and Restructuring Law Expert

1 Legislative Reform Overview

The 2026 amendments to the Italian Insolvency Code (Codice della Crisi d'Impresa e dell'Insolvenza) represent a significant evolution in bankruptcy law, building upon the 2019 reforms with enhanced procedures for both business rescue and liquidation.

Key Reform Objectives

  • Accelerate bankruptcy proceedings (target: 50% reduction in processing time)
  • Strengthen creditor priority and recovery rights
  • Promote early detection and preventive restructuring
  • Simplify procedures for SMEs
  • Align with EU Directive 2019/1023 on preventive restructuring
12

Months Maximum for Standard Proceedings

6

Months for Simplified SME Procedures

€5M

Threshold for Simplified Procedures

2 Major Changes to Insolvency Procedures

Enhanced Preventive Restructuring Framework

The amendments introduce a pre-insolvency restructuring framework allowing distressed companies to reorganize before reaching insolvency, protecting business continuity and employment.

Early Warning Mechanisms

  • Mandatory insolvency indicators monitoring for companies above €2M revenue
  • Directors must report financial distress within 60 days of detection
  • Confidential early restructuring negotiations with creditors

Key Benefits of Preventive Restructuring:

Stay of Enforcement

Automatic protection from creditor actions for up to 4 months

Majority Rule

Plan approved by 60% of creditors binds all

New Financing Priority

Super-priority status for restructuring finance

Confidentiality

Non-public proceedings until court approval

Strengthened Creditor Protections

New provisions enhance creditor rights and improve asset recovery rates:

1

Enhanced Priority Rules

Clearer creditor ranking with priority for employee claims, tax debts, and secured creditors. New intermediate priority class for essential suppliers.

2

Avoidance Action Extensions

Extended lookback periods (now 2 years) for challenging preferential transfers and fraudulent conveyances.

3

Creditor Committee Powers

Mandatory creditor committees for proceedings over €10M with enhanced oversight and approval rights.

4

Faster Asset Liquidation

Streamlined procedures for asset sales with electronic auction platforms and reduced court approval delays.

Simplified Procedures for SMEs

Recognizing that 95% of Italian businesses are SMEs, the amendments introduce expedited, cost-effective procedures:

Eligibility for Simplified Procedures:

Annual Revenue

< €5M

Employees

< 50

Total Assets

< €2.5M

Total Debts

< €500K

Faster Processing: 6-month target from filing to closure
Lower Costs: Reduced court fees and simplified documentation
Minimal Documentation: Standard forms replace lengthy legal filings
Informal Negotiations: Court-facilitated creditor mediation

3 Practical Implications and Compliance

For Businesses in Financial Distress

Act Early - New Requirements

Directors now have mandatory reporting obligations when financial distress indicators are detected:

  • Negative working capital for 6+ consecutive months
  • Inability to pay debts as they fall due
  • Debt-to-equity ratio exceeding 4:1
  • EBITDA losses for 2+ consecutive years

60-Day Action Window

Once distress indicators are detected, directors have 60 days to either: (1) implement corrective measures, (2) initiate preventive restructuring, or (3) file for insolvency. Failure to act may result in personal director liability.

Benefits of Early Action

  • ✓ Access to preventive restructuring
  • ✓ Maintain control of business
  • ✓ Preserve company reputation
  • ✓ Better creditor cooperation
  • ✓ Avoid director liability

Risks of Delay

  • ✗ Mandatory insolvency filing
  • ✗ Loss of management control
  • ✗ Director personal liability
  • ✗ Criminal prosecution risk
  • ✗ Reduced recovery for all

For Creditors

The amendments provide creditors with enhanced rights and faster recovery:

Improved Information Rights

Access to real-time financial information through mandatory digital reporting platforms

Participation in Restructuring

Vote on restructuring plans with clear disclosure of treatment and expected recovery

Challenge Rights

Enhanced ability to challenge unfair distributions and preferential payments

Faster Distributions

Target distribution within 12 months vs. previous 3-5 year timelines

Implementation Timeline

Q1

January - March 2026

Amendments take effect. New preventive restructuring framework operational.

Q2

April - June 2026

Mandatory early warning systems implementation for qualifying companies

Q3

July 2026

Simplified SME procedures fully operational nationwide

2027

January 2027

Transitional provisions end - all cases subject to new rules

Key Takeaways

  • Early detection and preventive restructuring are now the priority
  • Directors face new mandatory reporting obligations with personal liability risks
  • Creditors gain stronger protections and faster recovery prospects
  • SMEs benefit from simplified, cost-effective procedures
  • Proceedings target 50% time reduction compared to previous framework

Facing Financial Distress or Insolvency Issues?

Navigate the new insolvency framework with expert legal guidance. Our team provides comprehensive advice on restructuring, creditor negotiations, and insolvency proceedings.

Schedule a Consultation +39 338 862 0718

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