Perdite da bilancio 2020 Covid-19: Art. 6 DL 23/2020

Losses of share capital in the COVID-19 context: Art. 1, paragraph 266, Law no. 178/2020

In order to support companies that have suffered economic damage during the pandemic Covid-19, the 2021 Budget Law (Article 1, paragraph 266, Law no. 178 of December, the 30^th, 2020) postponed the obligations to cover losses incurred in the current year to the date of 31 December 2020 to the fifth year thereafter, that means, to the date of the shareholders' meeting that approves the financial statements for 2025. 

This aforesaid rule entered into force on 2021, January 1^st replacing the previous, Law Decree no. 23 of 8 April 2020, Article 6 and identified more in detail the reference period for losses and the period within they must be covered.

In particular the previous art. 6, Law Decree 23/2020 conv. in Law 40/2020 (so-called Liquidity Decree), born in the midst of the health emergency, has provided that, starting from the date of entry into force of the decree (9 April 2020) and until 31 December 2020, for the cases occurring in during the financial years closed by the latter date:

•  the obligations deriving from the reduction of the capital beyond one third do not apply (art. 2446 para 2 and 3 and art. 2482-bis para 4, 5 and 6 Italian Civil Code);

•      the provisions that envisage the obligation to recapitalize in cases of reduction below the legal limit (articles 2447 and 2482-ter of the Italian Civil Code) do not apply;

•      for the same period the cause of dissolution of the company due to reduction or loss of the share capital does not take place (articles 2484 c. 1 no. 4 and 2545-duodecies of the Italian civil code).

However, the concise formulation of the original article has given rise to several application doubts, with regard, on the one hand, to the period of formation of the losses and, on the other, to the consequences related to the imminent termination of the suspensive effects, set at 31 December 2020, the effectiveness of the transitional regulations having to be considered exhausted on that date.

Through art. 1, para 266 of the 2021 Budget Law, the legislator intervenes again to resolve both pending issues.

Losses affected by “sterilisation’’

The legislative novel now clearly identifies the reference period of the losses which, in most cases, will coincide with the 2020 Financial Statements, while for the financial years different to calendar year it must in any case have its start in the year in which the epidemiological emergency begins.

The new formulation of art. 6 para 2 postpones the deadline by which the loss must be reduced to less than one third to the fifth following year. The Shareholders’ meeting that approves the financial statements for that year, in the most frequent cases the Shareholders’ meeting at the financial statements as at 31.12.2025, must intervene in proportion to the ascertained losses. So, the companies have five years to reabsorb the loss of 2020, through the profits of the following years or, in the worst case, through future capital increases.

Art. 6 par. 3, establishes also that in the cases regulated by articles 2447 or 2482-ter of the Civil Code, the shareholders' meeting called without delay by the directors, as an alternative to the immediate reduction of the capital and the simultaneous increase of the same to one figure not less than the legal minimum, may resolve to postpone these decisions to the end of the year referred to in paragraph 2. The Shareholders’ meeting that approves the financial statements for this latter year must proceed with the resolutions referred to articles 2447 or 2482-ter of the civil code and the cause of dissolution of the company due to reduction or loss of the share capital referred to articles 2484, first paragraph, number 4), and 2545- duodecies of the civil code will return applicable.

Basically, if the current financial year as at 31 December 2020 closes with a loss of more than one third of the capital, the directors are in any case obliged to call the shareholders 'meeting without delay and show the information on the company's performance but the shareholders' meeting, instead of resolving on the reinstatement or reduction, it may decide to postpone the decision to the shareholders' meeting which approves the financial statements for subsequent years up to the maximum of the next fifth, i.e. the current financial statements as at 31 December 2025.

In this respect, also the Ministry of Economic Development intervened with circular n. 26890 issued on 29 January 2021, clarifying that as the standard expressly stated "for losses incurred in the current year as at 31 December 2020", the wording of the provision makes it clear that only losses incurred in financial year 2020 are covered by the said updated rule (or in the non-solar years showing the date of 31 December 2020).

It is therefore excluded that the provision may relate to losses of previous years, as initially assumed by the former art. 6 Law Decree 23/2020, and consequently such hypotheses shall remain subjected to the ordinary rules of the Civil Code, also in the matter of dissolution pursuant to Article 2484, no. 4 of the Civil Code.

To sum up

1. Reduction over one third of share capital

In the event of losses of more than a third of the share capital which continue for a further period than the current financial year:

-        (standard rule) the obligation to solicit the coverage of these losses it is up to the directors (and, in the event of inaction, to the auditors) if, within the following financial year, the loss is not reduced to less than one third of the share capital;

Or

-        (exceptionally only for FY2020) the verification of the reduction of the third of the share capital could no longer be made within the following financial year, but within the following fifth financial year.

2. Loss of share capital

In case statutory loss of the year reduces the share capital below the minimum established by the Civil Code (i.e. 2447 and 2482-ter, Civil Code) it is foreseen the obligation for the directors (and, in the event of inaction, to the auditors) to call without delay the shareholders’ meeting, which, however, can approve:

-        (standard rule) the immediate reduction of the share capital and the simultaneous increase to not less than the legal minimum;

Or

-        (exceptionally only for FY2020) the postponement of the decision until the end of the current financial year at 31 December 2025.

This rule avoids the application of the method of comparison of net equity referred to in Art. 2486, paragraph 3, of the Italian Civil Code, for the determination of damages, for which the directors are directly liable, following the failure to dissolve the company due to the loss of the share capital.

However, in accordance with the abovementioned Ministry of Economic Development’s resolution, the postponement of the deadline for covering losses to the date of the shareholders' meeting approving the financial statements for 2025 does not preclude the possibility, for the companies concerned, to proceed in advance of that date to take the determinations provided for by standard rules.

Disclosure requirement

Finally, the above-mentioned rule introduces a disclosure obligation for the company.

In particular, the losses emerged in the current financial year as of 31 December 2020 must be indicated separately in the notes to the financial statements, with an indication of their origin and of the movements occurred during the financial year.

However, these provisions do not exempt the directors of a company from the respect of Article 2086 of the Italian Civil Code that requires the directors to set up with their companies adequate organizational, administrative, accounting systems to detect the crisis of the company and the loss of business continuity.

Therefore, in case of economic and financial imbalance of the company, the managing bodies are still required to implement the most appropriate measures required by law to overcome the crisis and the recovery of business continuity.

It should be noted that the provision in question must not be interpreted as a way to continue the business activity without the appropriate business continuity assessments, but as a possibility of temporarily disregarding an obligation to recapitalise assets or a cause of dissolution in order to face the economic crisis caused by pandemic Covid-19.