Out-of-court activities in debt restructuring

Out-of-court activity in debt restructuring

When a company enters a state of crisis, the administrator's instinct is often to wait or fear the inevitable intervention of the court. 

However, proactive management is the only way to preserve business continuity and protect corporate value.

L'extrajudicial activities (or out-of-court) represents the most effective set of negotiating tools that the Corporate Crisis and Insolvency Code (CCII) offers to resolve the imbalance before it becomes irreversible.

It is a path that develops outside of litigationbased on direct negotiations and voluntary agreements. 

The objective is to restructure the debt in a sustainable manner, avoiding business interruption and minimising reputational impact. 

Studio Cappuccio acts as strategic advisor for the entrepreneur and the administrator, guiding the reorganisation process outside the courtroom.

The extrajudicial levers at the administrator's disposal

Unlike compulsory insolvency proceedings, the out-of-court approach relies on a wide range of operational levers that allow the entrepreneur to maintain control. 

Our consultancy focuses on identifying and using the most suitable tool for the specific situation:

• Negotiated Crisis Resolution: It is the main tool for the early emergence of a crisis. Through the appointment of an independent expert, negotiations with creditors are facilitated in order to find shared solutions and benefit from protective measures.
• Debt Restructuring Agreements: They are formal contracts with creditors that, while requiring court approval, arise from voluntary negotiation. They may be:
  • Ordinary: They involve at least 60% of the creditors.
  • Facilitated: They require the 30% consent of creditors, ensuring a more streamlined procedure.
  • Extended effectiveness: They also allow non-member creditors belonging to the same category to be bound, if approved by the 75% of it.
• Moratorium Conventions: Specific agreements, often with credit institutions, aimed at temporarily suspending enforcement actions and obtaining payment extensions. This gives the company 'breathing space' to negotiate a final settlement.
• Transactions and Exchanges: Direct negotiations with individual creditors (such as strategic suppliers or banks) to define partial waivers of credit (write-offs), deferrals or debt renegotiations, including against new collateral.

Strategic advantages of the out-of-court approach

For an administrator acting in good time, choosing the out-of-court route offers decisive strategic advantages over managing the crisis in a litigious judicial context:

• Preservation of business continuity: The primary objective is not to liquidate, but to save operations, business relations and jobs.
• Process control: The administrator and the entrepreneur keep the helm of strategy, guiding the negotiations without being passively subjected to the timing and decisions of the court.
• Time and cost savings: Direct negotiations, if well conducted, are almost always quicker and less costly than complex court procedures.
• Greater flexibility and confidentiality: It allows tailor-made solutions, adapted to the specific debt structure and real prospects of the company, while maintaining a low profile and protecting the company's reputation.

To whom this service is addressed

Our out-of-court activity advice is designed for:

• Directors (CEOs) and Boards of Directors detecting the first signs of financial imbalance.
• Entrepreneurs who want to act proactively to protect corporate value before the crisis becomes apparent.
• Companies who need to restructure their debt exposure to banks or strategic suppliers.
• Company who want to avoid the negative reputational impact and costs of a public competition procedure.

The role of Studio Cappuccio

In out-of-court restructuring, the forensic accountant is a crucial partner. Studio Cappuccio does not limit itself to accounting analysis, but acts as a strategic advisor and technical negotiator:

1. Analysis and Diagnosis: We carry out a preliminary crisis assessment to identify the best strategy (Negotiated Settlement, Agreement, Single Settlement).
2. Drafting of Plans: We prepare the recovery plans and business plans that form the basis of any credible negotiations with creditors.
3. Support in negotiations: We support the administrator in discussions with banks and creditors, translating technical and financial data into sound negotiating arguments.
4. Acknowledgement: Where required by law (as in Restructuring Agreements), we can act as independent professionals to attest to the veracity of the data and the feasibility of the plan.

This activity is closely linked to our services of:

• Negotiated crisis resolution
• Debt restructuring agreement
• Concordat preventivo