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Italy | Update | March 2020
As a consequence of the epidemiological emergency caused by COVID-19 (coronavirus), the Italian Government and the Italian Banking Association (ABI) have approved a number of measures to support micro, small- and medium-sized companies (SMEs) (as defined by the European Commission Recommendation No. 2003/361/EC of May 6, 20031), facing the economic impact of COVID-19. Some of those measures may have an impact on loans, financial leasing and other financial arrangements between lenders and borrowers. This briefing focuses on:
On March 17, 2020, the Italian Government approved Law Decree March 17, 2020, No. 18 concerning measures to strengthen the National Health Service and economic support for families and workers and companies related to the epidemiological emergency of COVID-19.
This Law Decree came into force immediately after its publication in the Official Italian Gazette (which took place on March 17, 2020), but must be enacted into law by the Italian Parliament within 60 days of publication, otherwise it will lose effectiveness from the date of approval. As a result of parliamentary scrutiny, the Law Decree may still undergo both formal and substantial changes.
Article 56 of the Law Decree concerns financial support measures for SMEs which are established in Italy and are affected by the COVID-19 epidemic. In particular:
a) For uncommitted credit facilities and credit facilities committed but not yet fully advanced entered into before February 29, 2020 or, if later, the date of publication of the Law Decree, the facility (both in respect of amounts already drawn and undrawn), cannot be revoked in whole or in part until September 30, 2020.
b) For bullet loans with contractual maturity before September 30, 2020, the loan tenors will be extended, and any related security will remain in place, in each case without any formalities, until September 30, 2020 on the same terms.
c) The repayments under mortgage loans and other loans repayable in instalments, including those executed through the issuance of agricultural bills of exchange (cambiali agrarie) or lease payments, falling due before September 30, 2020 will be suspended until September 30, 2020 and the repayment schedule will be extended without any formalities, in a manner that ensures that there are no new or increased charges for either party; note that companies may request the suspension of capital repayments only and not amounts of interest.
The 2019 ABI Access to Credit Agreement (Accordo per il Credito 2019) was approved on November 15, 2018 by the Italian Banking Association (ABI) and some Italian companies associations (e.g. Confidustria, Coldiretti, Confedilizia, Confcommercio and Confesercenti) and, after the spread of COVID-19, a new addendum has been adopted on March 6, 2020 to extend the scope of application of the 2019 ABI Access to Credit Agreement to loan agreements executed up to January 31, 2020.
According to the 2019 ABI Agreement and its Addendum:
Terms and conditions of Suspension
Terms and conditions of Extension
The aim of both the 2019 ABI Agreement and its Addendum and the Law Decree is the same: to reduce the negative effects that the COVID-19 pandemic is having on the national socio-economic fabric by providing support measures for SMEs. Indeed both the 2019 ABI Agreement and the Law Decree are addressed to SMEs as defined by the European Commission Recommendation No. 2003/361/EC of May 6, 2003 which are established in Italy and both allow for a suspension and/or extension of the repayment terms of specific kind of loan agreements.
The Law Decree provides, for now, for only a minimum extension period (i.e. until September 30, 2020), while the Suspension or the Extensions pursuant to the 2019 ABI Agreement may potentially last for a longer period.
However, the scope of application of the Law Decree is wider if we consider that:
In both cases it is hoped that some respite will be provided to the SMEs of Italy in surviving the COVID-19 pandemic.
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