THE LIQUIDITY DECREE – NEW MEASURES FOR THE ENTERPRISES

The Decree-Law No. 23 of April 8, 2020 (the "Liquidity Decree" or also, the "Decree") introduces, inter alia, support measures aimed at granting credit to Italian enterprises, which have been severely damaged as a result of the Covid-19 emergency.

 

The main measures set forth in the Decree may be summarized as follows:

 

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

 

Euro 200 billion shall be allocated to production activities. Companies will have access to the above funds in accordance with certain conditions and SACE Simest S.p.A. (“SACE”) shall guarantee between 70% and 90% of the financed amount. In particular:

 

• in relation to companies with less than 5,000 employees in Italy and a turnover of less than Euro 1.5 billion, 90% of the amount financed shall be guaranteed by SACE and same companies shall be granted access to the guarantee by means of a simplified procedure;
• in respect of companies with more than 5,000 employees in Italy and a turnover between Euro 1.5 and 5 billion said coverage shall amount to 80%, and to 70% for companies with a turnover above Euro 5 billion;
• the amount of the guarantee may not exceed the higher between 25% of the turnover recorded in the 2019 financial year and twice the personnel costs incurred by the company in the 2019 financial year;
• the beneficiary companies may not fall within the category of companies in difficulty and may not be part of the non-performing exposures of the banking system, pursuant to European Union legislation;
• the beneficiary companies, as well as any other company based in Italy belonging to the same group as the former, may not distribute dividends or repurchase shares in the course of 2020;
• the financed amount covered by the guarantee must be allocated to production plants or entrepreneurial activities located within Italy.

 

• Small and medium sized enterprises:

 

Euro 30 billion of the total amount shall be granted to small and medium-sized enterprises, including individual enterprises or VAT numbers, provided that same companies have exhausted the credit granted by the Small and Medium Enterprises Fund (“SME Fund”).

 

In this regard, the Decree acknowledges the extraordinary and temporary provisions in relation to the SME Fund already provided for in the Law-Decree No. 18/2020 (so-called Decree “Cura Italia”), including access to the guarantee free of charge and the increase to Euro 5 million of the maximum amount guaranteed per company, further strengthening same measures. In particular:

 

• the implementation period of these measures is extended until December 31, 2020;
• it is expressly provided that the guarantee shall be granted also to companies with up to 499 employees (so-called "mid-cap");
• no evaluation of the company is required in order for the same to be granted access to the SME Fund; and
• an increase of the percentages of coverage.

 

0. 2.    Measures to ensure business continuity:

 

Further measures were enacted in favour of companies with regular business activities prior to the COVID-19 outbreak. In particular, the procedures have been provided in relation to the following:

 

• the postponement as at September 1, 2021 of the entry into force of the Business Crisis and Insolvency Code (Codice della crisi d’impresa e dell’insolvenza)
• the drafting of the financial statements;
• the non-applicability of the causes of company dissolution due to reduction or loss of share capital;
• direct financing by shareholders, in accordance with simplified procedures, with temporary suspension of the provision of subordinated shareholder funding;
• with reference to insolvency proceedings:

• measures relating to agreements with creditors or restructuring agreements, in particular in respect of the date when said agreements shall be carried out;
• bankruptcy and other insolvency proceedings may not be filed against companies during the emergency period.

 

0. 3.    Reinforcement of special powers in sectors of strategic importance and financial transparency obligations (“Golden Power”):

 

Pursuant to Italian laws[1], the Italian government is entitled, in limited and exceptional circumstances, to exercise special powers (so-called Golden Power) in relation to transactions involving Italian companies (i) carrying out strategic activities for the defence and national security sectors or (ii) operating in the sectors of energy, transport, communications and high technology, as better specified below.

 

(i)           In case of companies carrying out strategic activities for the defence and national security sectors[2], the Italian government is entitled to:

(a)  impose conditions concerning the security of supply, information, technology transfer and export control;

(b)  exercise a veto power over the adoption of shareholders’ or board of directors’ resolutions concerning, inter alia, merger, demerger, transfer of the company, its business units or its controlled entities; and

(c)  object to an acquisition of qualified stakes by a third-party (other than the Italian state, Italian public entities or companies controlled by the latter) entitling to an amount of voting rights that, in the relevant case, may be detrimental to the interests of defence and national security.

 

For the purposes of enabling the government to exercise the power:

• under letter (b) above[3], the company shall notify the resolution or the act to be adopted to the Presidency of the Council of Ministers who shall exercise the veto right within 45 days[4], subject to the suspension of said term shall further information be required;
• under letters (a) and (c) above, any entity acquiring a stake in companies carrying out activities of national strategic importance for the defence and national security system, shall notify same purchase in the event same entity, following the acquisition, builds up stakes exceeding the threshold of 3%, and in case of following acquisitions resulting in the exceedance of the [3%], 5%, 10%, 15%, 20%, 25% and 50% thresholds.

The powers under items (a) and (c) above may be exercised by the Italian government within 45 days of the notification[5].

 

(ii)          in relation to companies operating in the sectors of energy, transport, communications and high technology instead[6], the Italian government, in case of serious threat to essential national interests concerning the security and operation of networks and facilities and the continuity of supplies, is granted with the power to block[7] any resolutions, acts or transactions which result, among others, in the change of control or ownership of the company, merger and demerger, transfer of the registered office and change of the corporate purpose.

 

The acquisition at any title by a non-EU entity of a stake in companies operating in the sectors of energy, transport, communications and high technology resulting in the acquisition of control over the company and the permanent settlement (insediamento stabile) of the acquirer, shall be notified within 10 days to the Presidency of the Council of Ministers.

 

In case the acquisition leads to a serious threat to essential national interests concerning the security and operation of networks and facilities and the continuity of supplies or a danger for public policy or public security[8], within 45 days of the notification, the Italian government may decide to condition the effectiveness of the acquisition to the assumption by the acquirer of a commitment to safeguard those interests. In case of extraordinary circumstances, when the above-mentioned threats and dangers cannot be removed by means of such acquirer’s commitments, the government may block the acquisition. Otherwise, following the expiry of such term, the transaction may be carried out.

 

The Decree introduces the following temporary measures, which shall be in force until December 31, 2020:

 

• the extension of the objective scope of application of the Golden Power Provisions to sectors deemed strategically relevant pursuant to the European Regulation No. 452/2019, providing for a notification obligation in respect of acts, resolutions, transactions and acquisition of stakes in relation to the financial, credit and insurance sectors, critical infrastructure 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;
• the possibility for the Italian government to commence the proceedings ex officio should companies fail to comply with their notification obligations;
• the extension of the notification obligation to purchase of stakes in companies carrying out activities of strategic importance in the energy, transport, communications and high technology sectors and in the further, afore-mentioned sectors, by foreign entities, including those part of the European Union, which entail control over same companies;
• the extension of the notification obligation to purchase of stakes by non-EU entities, provided that said acquisition determines voting rights or participation in the share capital of at least 10% and provided that the total value of the investment is equal to or greater than Euro 1 million.

 

With reference to Article 120 of the Consolidated Law on Finance:

        

• the Italian Companies and Exchange Commission (“Consob”) may revise and provide for lower thresholds which require a notification to same Consob in the case of companies with a particularly widespread shareholder base, it being understood that a high current market value is not required;
• in respect to companies with a particularly widespread shareholder base, in the event an investor purchases a stake exceeding the 5% threshold, same acquirer shall, along with communication, also disclose the objectives pursued by virtue of the acquisition.

 

0. 4.    Tax and accounting measures:

 

In addition to the measures already set forth under Decree “Cura Italia”, the postponement of the fiscal and tax duties for employees and companies shall be provided.

 

In particular, the Decree provides for a suspension of VAT payments, withholding taxes and contributions due in April and May 2020. More specifically:

 

• VAT, withholdings and contributions are suspended in the event of a decrease in turnover of at least 33% with regard to revenues/compensations below Euro 50 million and of at least 50% with regard to revenues/compensations exceeding Euro 50 million;
• the afore-mentioned payments are suspended in any case for all individuals who started their business activity as of March 31, 2019;
• in respect of the individuals residing in the 5 municipalities which are most affected by COVID-19 (i.e. Bergamo, Brescia, Cremona, Lodi, Piacenza), VAT payments are suspended if the turnover decreases by at least 33% irrespective of the turnover threshold;
• the above payments shall be due again in June 2020, with the possibility to pay in 5 instalments.

 

The deadline for payments due on March 20, 2020 shall be extended to April 16, 2020 and the deadline for the submission of the so-called ”Certificazione Unica” shall be extended from 31 March 31 to April 30, 2020.

 

The 50% tax credit provided for expenses in relation to sanitation procedures of the workplace shall be granted also for the purchase of personal protective equipment, masks and glasses.

---

 

[1] Law Decree No. 21 of March 15, 2012 (as amended and ratified by Law No. 56 of May 11, 2012) as modified by Law Decree No. 148/2017, ratified by Law no. 172/2017, and as modified by Law Decree No. 105 of September 21, 2019, ratified and amended by Law No. 133 of November 18, 2019 (the “Golden Powers Provisions”) 

[2] Article 1 of the Golden Powers Provisions

[3] Article 1 of the Golden Power Provisions

[4] Or the less stringent power to impose certain conditions in the event these could be sufficient to ensure the safeguard of essential services of the defence and national security.

[5] Such 45-day term may be suspended, once and for a maximum of ten days, in case the further information from the company are needed.

[6] Article 2 of the Golden Power Provisions; following the Liquidity Decree also in the financial, credit and insurance sectors, critical infrastructure 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.

[7] Or the less stringent power to impose certain conditions in the event these could be sufficient to ensure the safeguard of essential services of the defence and national security.

[8] In order to determine whether a foreign investment may affect public policy or public security, consideration may be given to the possible control exercised over the foreign investor by a non-EU government, including through significant investment.