Cura Italia Decree - Law Decree No. 18 of 17 March 2020

As a result of the Coronavirus ("Covid-19") outbreak in Italy, the Government issued Law Decree No. 18 of 17 March 2020 ("Cura Italia Decree"), published in the Official Gazette on the same day, at which time it became effective. The several measures enacted aimed to (a) strengthen the health sector, and (b) mitigate the impact of Covid-19 on business in general and also in relation to the broader emergency and day-to-day life.

Measures to boost the health sector and face the medical emergency

Several extraordinary measures, departing from the ordinary administrative procedure and for which extraordinary funds have been allocated, have been issued in order to boost the health sector and industry in the face of the Covid-19 emergency, these include: (i) an increase in liquidity to fund healthcare needs, in particular payment to hospital employees in relation to extraordinary working hours; (ii) provision for the Ministry of Health to hire additional doctors, nurses and other qualified persons with contracts for an unspecified period of time (and additional measures related to army personnel); the National Social Security Institute is also permitted to hire further doctors and qualified personnel; (iii) provision for the Region to acquire additional healthcare services to meet specific needs; (iv) provision for the Region to set up new emergency hospitality structures; (v) allocation of new liquidity to fund enterprises that produce healthcare aids needed in the current epidemic; (vi) provision to expropriate (temporarily or permanently) medical devices and other movable assets; (vii) additional finance provision for the benefit of the Superior Health Institute; (viii) provisions allowing for the increase in medical staff by way of derogation of the current provision on retirement or legal apprenticeship; (ix) provisions departing from the applicable legislation in relation to the production and commercialisation of medical devices for personal protection; and finally (x) new measures aimed at simplifying and centralising new tests on medicines.

Supporting measures for workers and employers

The Decree includes special provisions in order to extend the possibility for employers who are facing a reduction or suspension of their activities due to the Covid-19 emergency to apply for ordinary social security funds (cassa integrazione ordinaria) for their employees (who were already employed as at 23 February 2020) for a maximum duration of nine weeks and, in any case, no later than August 2020 and with a simplified procedure. Furthermore, the relevant payments are not counted in the overall support ordinarily allowed to each employer and in relation to future requests. The above support has also been extended to enterprises that already benefit from extraordinary social security funds (cassa integrazione straordinaria) upon certain conditions or in replacement of existing solidarity contribution (assegni di solidarietà).

Each Region is also permitted to provide for additional social security support for employers who are not normally allowed to apply for social security funds (cassa integrazione in deroga), including in favour of employees in the agricultural, fishing and religious sectors (but excluding domestic employees), and for a maximum period of nine weeks.

Other significant measures have been enacted to directly support employees of the private sector who have children. The measures are as follows: (i) with respect to children of less than 12 years old, additional parental leave periods have been envisaged, which are paid at 50% of the salary and for a period of 15 days; (ii) provision for unpaid parental leave, for the period during which schools are closed; and (iii) as an alternative to the measures under (i) and (ii), a contribution of a maximum of Euro 600 may be requested to pay for babysitting services during the same periods (and this provision also applies to autonomous workers). Additional leave periods and financial support are provided for healthcare personnel. Similar measures have been enacted in relation to the public sector and in particular in relation to doctors, nurses and other specialised employees in the health sector in relation to the above-mentioned bonus to buy babysitting services.

In consideration of the lockdown of several economic sectors in Italy, additional indemnity payments of Euro 600 have been agreed for autonomous workers, who do not benefit from specific social security coverage, with reference to March 2020. Other indemnity payments have been provided for with reference to seasonal workers who lost their job before the entry into force of the Cura Italia Decree or to other employees of the agricultural sector as well as to workers in show business, subject to certain conditions being met.

Main financial measures

Guarantee Fund for SMEs (Fondo centrale di garanzia PMI)

From 17 March 2020 to 17 December 2020, the following provisions apply, departing from the current legislative framework of the SMEs fund set out by article 2, paragraph 100, letter (a) of Law 23 December 1996 n. 662 for SMEs (the "Fund"), expanding the scope of the guarantees issued by the Fund as well as the access thereof (the ordinary provisions where relevant have been reported between brackets). In particular:

• the guarantee is granted free of commission [commissions are usually paid by the relevant enterprises, with certain exceptions, in a variable amount depending on the risk assumed by the Fund];
• the maximum amount of the guarantee in relation to each enterprise has been increased to Euro 5,000,000 (five million). [The ordinary threshold is set at Euro 2,500,000];
•  the maximum secured amount in relation to:
  
  • direct guarantees of the Fund, are set at 80% of the relevant facility and up to Euro 1,500,000 (one million five hundred thousand) per enterprise. [The ordinary regulation on this point provides for different secured amounts to be determined on the basis of (A) the credit rating of the relevant enterprise, (B) the type of the underlined secured transaction and (C) the duration of the underlined secured transaction]; and
  • reinsurance measures, are set at 90% where the underlined guarantees issued by Confidi or other guarantee fund provided that the amount guaranteed by such Confidi or guarantee fund is up to 80% of the exposure and for a maximum amount equal to Euro 1,500,000 for each enterprise. [The ordinary threshold is 80%];

• as an exceptional measure, renegotiation transactions are also admitted to benefit from the guarantee of the Fund provided that an additional amount, equal at least to 10% of the outstanding amount of the facilities, is made available to the relevant borrower [refinancing transactions of facilities already disbursed are not covered by the ordinary regulations of the Fund];
• public administrations and holders of Special Sections of the Fund and contributing EU programmes may grant their contribution in order to increase the number of participants, thereby raising the maximum coverage ratio by the Fund of up to 80% as direct guarantee and 90% as reinsurance;

• should a bank or financial intermediary agree to a moratorium of interest or principal payments as result of Covid-19 emergency and in relation to transactions covered by the Fund guarantee, the duration of the guarantee granted by the Fund is automatically extended accordingly;

• without prejudice to some exceptions already envisaged by the applicable regulation of the Fund (e.g. in relation to new enterprises, start-up, microcredit), access to the Fund's coverage has been simplified and assessed only in terms of the basis of the economic and financial valuation of the enterprises. Companies with exposures already classified as "non-performing" or "unlikely to pay" and "company in difficulty" under Article 2.18 of EU Regulation 651/2014 remain out of the scope of application of the Fund [the ordinary regulation provides that the assessment of the relevant enterprise is to be made also on the basis of other indexes which may evidence a distressed situation, in particular the last 6 month period reports from Centrale Rischi, this change will thus allow a broader application of the Fund in consideration of the current emergency];

• no break-up fees are due to the Fund [such fees are usually applied if transactions are not closed];
• in relation to real estate investments in the real estate and tourism sectors, for transactions with a minimum duration of 10 years and for an amount higher than Euro 500,000, the Fund guarantee may be combined with other forms of security interests granted to the relevant lender;
• for guarantees on specific portfolios of facilities reserved to enterprises affected by the Covid-19 outbreak, or belonging, for at least 60%, to specific sectors/branches affected by the epidemic, the portion of the junior tranche covered by the Fund may be increased by 50%, and may be further increased by 20% in the event of existence of other guarantors;
• new financings with a maturity of 18-months minus one day and up to a maximum amount of Euro 3,000 granted to individuals carrying out business activities, arts or professions are eligible for the Fund guarantee up to 80% for direct guarantees and 90% for reinsurance coverage where directly affected by the Covid-19 outbreak. The Fund guarantee is not remunerated and not subject to credit appraisal [this is a specific new provision only applicable to individuals meeting the above conditions];
• public bodies, together with the relevant associations and entities, may provide resources to the Fund for the purpose of setting up special sections to facilitate access to credit by certain sectors of the economy or business chains; and
• the term for completion of the administrative formalities concerning transactions guaranteed by the Fund has been extended by three months.

Furthermore, in relation to Fund's guarantees on microcredit transactions, the secured amount has been increased from Euro 25,000 to Euro 40,000 and the relevant guarantees are issued without any assessment of the credit merit and in relation to certain entities the secured amount may be up to 80% of the relevant financing and no commissions are due to the Fund.

The provisions under (a) to (m) above, will also apply, to the extent compatible, to guarantees issued by the ISMEA (Istituto di Servizi per il Mercato Agricolo e Alimentare) to enterprises in the agricultural and fishing sectors.

Further measures are envisaged to be issued in the future with separate decrees of the Ministry of Economy and Finance.

Financial support measures for small and medium-sized enterprises affected by the Covid-19 outbreak 

For the purposes of the provisions of the Cura Italia Decree mentioned in this paragraph, the Covid-19 outbreak is formally recognised as an exceptional event and as a disturbance to the economy according to Article 107 of the Treaty on the Functioning of the European Union.

Micro, small and medium-size enterprises, certifying to have suffered a temporary liquidity shortfall as a consequence of the spread of the Covid-19 epidemic, benefit from the following measures in relation to financings granted by banks, financial intermediaries or other entities entitled to advance facilities in Italy:

• in relation to overdraft facilities (aperture di credito) or credit advance facilities (prestiti a fronte di anticipi sui crediti) already existing as at 29 February 2020 or, if later, as at the date of publication of the Cura Italia Decree, outstanding amounts and existing commitments shall not be revoked until 30 September 2020;
• facilities with bullet repayment maturing before 30 September 2020 together with any ancillary rights are deemed to be extended without further formalities to 30 September 2020 on the same terms; and
• loans and other financings repayable in instalments and instalments or leasing payments due prior to 30 September 2020 are deemed to be suspended until 30 September 2020 and the related amortisation schedule together with the related ancillary rights are deemed extended without further formalities. No additional costs shall be charged for either party. Companies are also entitled to request a suspension with respect to the principal component only.

The above measures shall not apply to companies with existing debt classified as impaired exposure (credito deteriorato) according to the relevant regulations applicable to financial intermediaries. 

The definition of micro, small and medium-size enterprises for the purposes of the above provisions is contained in the EU Recommendation 2003/361 of 6 May 2003. 

In order to support the lenders providing for the above measures, upon request of the relevant lender, the relevant transaction can be guaranteed by a special division of the Fund up to the amounts set out in the Cura Italia Decree. The guarantee is granted on a gratuitous basis and can be enforced by the relevant lender only if the specific conditions set out in the Cura Italia Decree are met.

Liquidity support through State guarantee scheme

In order to support the liquidity of enterprises affected by the Covid-19 epidemic, exposure of Cassa Depositi e Prestiti S.p.A. ("CDP") in favour of banks and other lenders of certain categories of enterprises (to be identified with a subsequent ministerial decree) may be backed by a State guarantee up to a maximum guaranteed amount of 80% of the relevant CPD exposure. The scope, criteria and conditions of such State guarantee will be regulated by separate decree still to be issued. 

Relevant tax measures

Tax credit in case of assignment of defaulted receivables

The Cura Italia Decree provides for several tax measures applicable also to small and medium-size enterprises. One of the most interesting is the measure which provides for an incentive to transfer non-performing receivables and loans.

The Cura Italia Decree introduces an incentive for transfers of receivables, which are overdue for a period longer that 90 days from the original due date, carried out by 31 December 2020 and for consideration, to transferees not belonging to the same group. Such measure provides for the conversion of a portion the assignor’s deferred tax assets (DTAs), into tax credits for financial and industrial companies within the following thresholds: 20% of the nominal value of the exposures for up to Euro 2 billion (nominal value) in transferred receivables. For the above purposes, the DTAs may be those not recognised in the financial statements. The DTAs eligible for conversion are those relating to (i) adjusted tax losses and (ii) the amount of the notional return on the Allowance for Corporate Equity (ACE) tax benefit in excess of total net income, and which, as at the relevant transfer date, were not used as a decrease in taxable income, or used or deducted from taxable income.

The conversion of such DTAs into tax credits generates immediate liquidity in a measure equalling the lower tax charge that would have been generated by utilising the tax losses and excess of ACE underlying such DTAs to reduce the taxable income of subsequent tax periods.

The tax credits arising from the conversion do not generate interest and may be used to offset other taxes and social security contributions, or they may be transferred to third parties or within their group, or used to claim a tax refund.

In order to benefit from the above incentive, the relevant company has to opt for it according to the provisions of the Cura Italia Decree.

Other relevant tax provisions

Additional tax measures have been enacted in order to provide relief to tax payers in relation to tax matters, including the following:

• extension of the deadlines for taxpayer payments from 8 March to 31 May 2020 (some exceptions are however applied);
• suspension of tax payment deadlines and the terms for tax authorities' activities; and
• suspension of the applicable terms for tax inspections from 8 March to 31 May 2020 (except in relation to the payment of taxes and formal inspections), assessments, collection and disputes. 

In general, other measures related to specific circumstances or areas of activity are also enacted and can be analysed if the relevant entity is concerned (e.g. agricultural and fishing sectors, aeroplane transportation, printing, industry etc.).

Corporate law measures

The Cura Italia Decree also includes measures under which a postponement of the term to convene the annual general meeting to approve 2019 financial statements is allowed as well as facilitate the attendance of the shareholders to the meeting in order to reduce the risk of infection. In particular:

• Shareholders' general meeting to approve 2019 financial statements can be convened within 180 days from the end of the financial year, by way of derogation of the ordinary provisions of the Italian civil code; 
• Regardless of any different by-law provisions, attendance at the shareholders' meetings is generally allowed by remote connection or other electronic means, provided that the identification of the participants is guaranteed. The chairman and the secretary of the meeting (or the notary) need not attend the meeting in person in the same place. The vote of the shareholders can be cast by correspondence, including electronically. For limited liability companies (società a responsabilità limitata) decisions by written consultation or written consent are allowed.

• The representative (rappresentante designato) can be appointed by listed and public Companies in ordinary and extraordinary shareholders' meetings, regardless of any different by-law provisions. Companies can establish their attendance through a representative as the sole possible. The same rule is applicable to cooperative banks (banche popolari, banche di credito cooperativo), cooperatives (società cooperative) and mutual insurance companies (mutue assicuratrici), regardless any different law provision.

The above provisions apply to shareholder meetings convened up to 31 July 2020 or the end of the Covid-19 emergency, whichever date is the later. 

Suspension of judicial terms

The Cura Italia Decree introduces suspension provisions for judicial terms as well as the postponement of court hearings as follows:

• Court hearings and procedural deadlines are suspended in the period between 9 March to 15 April 2020, together with the relevant statute of limitations period; and
• any hearing or deadline falling within the suspension period shall be rescheduled or postponed after 15 April 2020. 

The (very) limited exceptions to the suspension are provided for urgent needs regarding: 

• criminal and civil proceedings aiming at protecting vulnerable categories as in adoption, family abuses and basic maintenance obligations matters;
• criminal proceedings relating to punishment and detention; 
• undeferrable hearings on evidence in criminal proceedings;
• provisional proceedings for fundamental rights' protection; and 
• any proceedings where a delay is harmful for the parties, provided that a specific declaration of urgency is issued by the competent authority. 

In light of the above (and with the above exceptions) civil, criminal, but also administrative and tax proceedings are subject to a sort of general stay of the judicial activities, including with respect to enforcement and restructuring/insolvency proceedings. 

Furthermore, given the current uncertainty about the duration of Covid-19 emergency, the Chief officers of any Court have been empowered (currently until 30 June 2020), to adopt any further required measures for the purpose of countering the epidemic, including by further postponement of the hearings and limitation of free access to the Courts.