Source Id: law-9780198808589-chapter-18-div5-920ReferencesCivil Code (as amended) (Italy [it]) Decree No 262 of 1942, Official Gazette No 79, 4 April 1942Libro VI Della Tutela dei Diritti, Titolo III Della responsabilita' patrimoniale, delle cause di prelazione e della conservazione della garanzia patrimoniale, Ch.V Dei mezzi di conservazione della garanzia patrimoniale, Sezione II Dell'azione revocatoria, Art.2901
18.16 Outside the context of insolvency proceedings, creditors of a debtor may apply to set aside any disposal of assets by the debtor in favour of a third party pursuant to Article 2901 of the Italian Civil Code. This right exists provided that:
18.17 Any such action must be initiated within five years of the date of the relevant transaction. If the action is a success, the transaction will be declared void and, therefore, each party must return the assets received under that transaction. The ‘awareness of prejudice’ is interpreted looking at the debtor’s financial position at the time the relevant ‘act’ was done, ie at the time the provision for contractual set-off was entered into. The debtor’s future financial position is not relevant unless the petitioning creditor can show that there was a specific intention on the part of the debtor to preordain prejudice to future creditors, and that the third party was aware of such intention.
Source Id: law-9780198808589-chapter-18-div5-922ReferencesBankruptcy Act (Italy [it])Titolo II Del fallimento, Art.67Civil Code (as amended) (Italy [it]) Decree No 262 of 1942, Official Gazette No 79, 4 April 1942Libro VI Della Tutela dei Diritti, Titolo III Della responsabilita' patrimoniale, delle cause di prelazione e della conservazione della garanzia patrimoniale, Ch.V Dei mezzi di conservazione della garanzia patrimoniale, Sezione II Dell'azione revocatoria, Art.2901
18.18 Once insolvency proceedings are commenced, an insolvency official may, in addition to pursuing any action previously commenced by creditors under Article 2901 C.C., bring actions for avoidance pursuant to Article 67 of the Bankruptcy Law. Article 67 entitles an insolvency official to set aside certain transactions entered into by the insolvent debtor, provided the transactions occurred during a preference period preceding the declaration of bankruptcy (the ‘Suspect Period’). The purpose of this rule is to safeguard the equal treatment of creditors (par condicio creditorum) and to avoid transactions that may diminish the debtor’s assets. Depending on the circumstances, the Suspect Period may be of one year or six months.
18.19 Pursuant to Article 67 of the Bankruptcy Law, the following transactions are subject to a Suspect Period of six months:
18.20 The following transactions are subject to a Suspect Period of one year:
Source Id: law-9780198808589-chapter-18-div5-925ReferencesBankruptcy Act (Italy [it])Titolo II Del fallimento, Art.67
18.21 Certain exemptions from these avoidance rules have been introduced to Article 67 as a result of the Bankruptcy Law Reform, but are not relevant to the subject matter of this chapter.
18.22 In the case of any transaction (whether subject to a six-month Suspect Period or to a one-year Suspect Period, as described above), the debtor’s counterparty can oppose the setting aside, by giving evidence that he was not aware that the debtor was insolvent at the relevant time. In the case of transactions subject to a six-month preference period (except for case sub (i)), the burden of proof is on the relevant insolvency official to prove that the counterparty was aware that the debtor was insolvent at the time of entering into the transaction.
Source Id: law-9780198808589-chapter-18-div5-927ReferencesJudgment of 28 November 2008, No 28445, 28th November 2008, Italy; Supreme Court of Cassation
18.23 There is a significant volume of case law in Italy concerning the elements which may lead to a conclusion that a party was aware of the state of insolvency of another party; however, there is no precise general principle according to which one may establish whether a given circumstance may be considered to point to an effective knowledge of a state of insolvency. Recent case law has established that knowledge of a state of insolvency must be effective and not just potential, but in any case may be proved indirectly including by presumption based on a reasonable standard of diligence (see Court of Cassation n 28445, of 28 November 2008).
Source Id: law-9780198808589-chapter-18-div5-928ReferencesJudgment of 1 July 2008, No 17955, 1st July 2008, Italy; Supreme Court of Cassation
18.24 The indicators used to prove the knowledge of a state of insolvency must be serious, precise, and consistent, such as the following: (a) the existence of numerous and significant execution and attachment proceedings (while there is no specific register for these proceedings, it is possible to obtain information through the local tribunal); (b) frequent and alarming press reports concerning the serious financial condition of the debtor; (c) a default, even if partial, in the performance of obligations vis-à-vis the debtor’s counterparty; and (d) the existence of a number of unpaid cheques or bills of exchange (for which there is a register which may be consulted). The case law tends to apply more rigorous standards with regard to the awareness of banks or financial operators of a state of insolvency, it being assumed that parties of these types have at their disposal more efficient means than those available to ordinary commercial enterprises in order to become familiar with the financial state of their counterparties (see Court of Cassation no 17955, of 1 July 2008).
Source Id: law-9780198808589-chapter-18-div5-929ReferencesBankruptcy Act (Italy [it])Titolo II Del fallimento, Art.56
18.25 Article 56 of the Bankruptcy Law has been held to provide for a particular form of legal set-off which is not subject to avoidance.
Source Id: law-9780198808589-chapter-18-div5-930ReferencesBankruptcy Act (Italy [it])Titolo II Del fallimento, Art.67
18.26 On the contrary, where set-off is exercised on the basis of a contractual provision prior to actual admission to insolvency proceedings, it is possible that a challenge (p. 278) could be made on the basis of the fact that Article 67 of the Bankruptcy Law provides for revocation of:
Source Id: law-9780198808589-chapter-18-div5-931ReferencesDecision concerning contractual set-off, 25th October 1985, Italy; Lombardy; Milan; Court of AppealDecision concerning contractual set-off, 30th April 1984, Italy; Lombardy; Milan; Court of Appeal
18.27 While contractual set-off has been considered an ‘abnormal means of payment’ in abstract, the risk of revocation under (i) above is limited as long as one can show that the relevant contractual provision is typical or customary in the relevant market, which should normally be the case in respect of financial transactions. This is because the case law has held that the ‘normalcy’ of a given means of payment must be evaluated on a concrete basis in respect of the applicable commercial practice, such that, if the means in question represents an established business practice in respect of the type of transaction in question, it cannot be considered an ‘abnormal means of payment’.4 There is also case law of the Supreme Court which states that the reason for allowing a means of payment which, although ‘abnormal’ in abstract, is usual in commercial practice is that in this case there is no presumption that the means in question was used because of a suspicion as to the solvency of the one of the parties, but we do not believe that this necessarily prejudices an arrangement entered into for practical as well as credit risk reduction purposes.
Source Id: law-9780198808589-chapter-18-div5-932ReferencesJudgment of September 1986, No 5612, September 1986, Italy; Supreme Court of Cassation
18.28 With respect to (ii) above, there would not be a risk of clawback as long as the contract for set-off itself was executed within the six-month period preceding the date of the insolvency, with the liquidator required to prove that the solvent party was aware of the insolvency at the time the agreement was entered into rather than at the time the set-off actually occurred. Italian courts distinguish between the agreement to set off and its effect in extinguishing reciprocal claims, recognizing that only the former embodies an ‘act by the debtor’, which is a necessary precondition for challenge of a transaction as a preference.5
Source Id: law-9780198808589-chapter-18-div5-933ReferencesDecree relating to banking and credit (Italy [it]) Legislative Decree No 385Directive of the European Parliament and of the Council on the reorganisation and winding up of credit institutions (European Parliament) (Council of the European Union) 2001/24/EC,  OJ L125/15Regulation of the European Parliament and of the Council on insolvency proceedings (recast) (European Parliament) (Council of the European Union) 2015/848/EU,  OJ L141/19Ch.I General Provisions, Art.9Ch.I General Provisions, Art.16
18.29 Where either the Insolvency Regulation or the Winding-up Directive applies,6 a further defence to an insolvency clawback action is available, since both allow the creditor a defence to any challenge of an ‘act’ as a voidable preference where it can be proved that the ‘act’ is subject to the law of another Member State and that law does not allow any means of challenge in the relevant case. It is worth (p. 279) noting that the defence against avoidance of set-off is therefore limited to cases where the contract providing the set-off is governed by the laws—in particular the insolvency laws7—of an EU Member State.