Article 17, paragraph 5, of the Italian Crisis Code is one of the most significant provisions for the Expert. This applies both at the start of the assignment: “The expert, having accepted the assignment, shall promptly summon the entrepreneur to assess the existence of a concrete prospect of restructuring [...]” and for evaluating the continuation of the negotiated crisis composition: “If the expert believes that the prospects for restructuring are concrete, he shall meet [...]” as well as in relation to the procedure’s closure: “If the expert determines that there are no concrete prospects for restructuring, following the meeting or at a subsequent time, the Expert informs the entrepreneur and the general secretary of the chamber of commerce, who will order the filing of the petition for negotiated crisis composition within the following five working days.” The determination of the existence of “concrete prospects” falls within the scope of the Expert’s overall assessment. This concept primarily derives from an analysis of the Plan and, consequently, the feasibility of the assumptions underlying it. In practice, the main assumptions underlying the Plan, usually, go beyond industrial and/or managerial actions (such as improvements in production, commercial operations, etc.), but also from extraordinary events requiring agreements with creditors, shareholders, or third parties.
Notwithstanding more evident cases, such as the interruption of negotiations with the sole investor capable of enabling the implementation of the Plan, practice reveals more intricate situations in which the existence of concrete prospects must be duly assessed, and consequently, the Expert’s consent for the continuation of the negotiated crisis composition.
The difficulty in qualifying the “concrete” prospects lies in the assessment of their feasibility, which must be evaluated within the specific phase of the negotiations and contextualized within the recovery process undertaken by the company. To clarify, consider the case in which the company requires the intervention of an investor to achieve recovery; therefore, it is necessary to develop a detailed process which, in summary, involves the selection and identification of the partner, as well as the negotiation and definition of the agreements, a process that inherently requires an appropriate timeline. Obviously, this process must take place in accordance with deadlines compatible with the negotiated crisis composition.
Therefore, it is necessary for the Expert to assess the prospects in terms of “concreteness” in relation to the identified course of action (i.e. third-party investor) within the context of the duration of the negotiated crisis composition. “Concreteness”, therefore, has different subtleties depending on the moment during the negotiated crisis composition. At the beginning of the negotiated crisis composition, the definition of a solution (and, thus, the need for a third-party investor) and the identification (or existence of a process that is nearing completion) of the selection of the investor might be considered as a “concrete” prospect. However, the same situation, if “positioned” after a few months or at the end of the negotiated crisis composition period, qualified the presence of prospects but no longer indicate the existence of a reasonable “concreteness” given the passage of time. Therefore, as time passes, in the absence of progressive advancements, the credibility of the assumptions in the plan (prospects) weakens, and thus the notion of “concreteness” diminishes.
To give a practical example, concreteness in the initial phase of the negotiated crisis composition could be assessed based on the identification of the investor; after a few months, the evaluation would rely on the progress made (i.e. commencement of due diligence, letter of interest, definition of term sheets, non-binding agreements, etc.). If, within a time frame deemed reasonable by the Expert, there is no advancement in the expected steps (for example, the execution of due diligence or the release of a binding offer after due diligence), this leads to a weakening of the concept of concreteness. Indeed, although the “prospect” of recovery still seems to be in place (given that negotiations are ongoing), it no longer appears to qualify as “concrete”. This evaluation of the negotiation progress must also be contextualized within the company's situation and its ability to sustain itself. In fact, the reduction in concreteness could carry more weight the less the company is able to self-finance, even possibly with support from shareholders or creditors, thus increasing liabilities while awaiting a recovery that is delayed or shows no signs of concrete achievement within the time frame set by the negotiated crisis composition.