Written by Morena Pirollo.
In the Italian legal system, claw-back action is the instrument designed to reconstitute the assets of the bankrupt, by eliminating the effects of the acts made in suspicious semester (this is to say the semester before the date of declaration of bankruptcy) by the same, in violation of the principle of equal treatment of the creditors (par condicio creditorum).
Italian claw-back action is governed by article 67 of the Italian Bankruptcy Law, which sets forth the following provisions.
Unless the other party proves that he/she did not know the state of the insolvency of the debtor (the burden of proof would lie with the defendant), the following transactions are subject to claw-back action:
- acts for consideration made in the year preceding the declaration of bankruptcy, where the services performed or the obligations assumed by the bankrupt surpass by more than a quarter what was given or promised to the latter (for “obligations” the article 67 of the Italian Bankruptcy Law means any commitments performed by the bankrupt, which surpass by more than a quarter what was given or promised to him/her);
- acts aimed at extinguishing monetary debts due, payable and already expired not made with money or other normal means of payment, if made in the year preceding the declaration of bankruptcy. The payment method, actually, has to be different from those ordinary used to pay goods/services in the area of business involved. It might be, for instance, any hypothesis of datio in solutum (giving in payment), such as either the transfer of the title (or other rights) of goods or the performance of services instead of the ordinary means of payment;
- pledges and mortgages constituted in the year preceding the declaration of bankruptcy for existing loans not yet due;
- pledges and mortgages made within six months prior to the opening of a bankruptcy proceeding for overdue debts.
If the official receiver / bankruptcy trustee proves (burden of proof on the claimant, i.e. the official receiver) that the other party knew the insolvency of the debtor, the following transactions if made within six months prior to the declaration of bankruptcy, are subject to claw-back action too:
- payment of debts payable and collectable;
- any act for consideration;
- acts constitutive of a security for debts, including third party debts, simultaneously constituted. In such a case, the constitution of a security for debts shall be created simultaneously with the debts themselves.
In such a scenario, the official receiver shall shoulder the burden to give evidence of the previous awareness of the other party of the insolvency status. This evidence (i.e. the prove of the existence of the so called scientia decotionis), however, can be provided by the official receiver through rebuttable presumptions.
In order to obtain the revocation of payments the official receiver has to prove that the defendant knew the insolvency state of bankrupt at the time of payments. On the contrary, the creditor shall prove that the facts, circumstances and notices concerning the financial distress of the bankrupt were not sufficient to determine the legal conditions of scentia decoctionis.
Once the defendant, as a result of the revocation, will have paid back the debtor, his eventual credit will be admitted to the bankruptcy liabilities by a specific proof of claim petition.
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