Extraordinary Administration: the Italian Way of Managing Large Corporate Crisis in Italy

Abstract

Extraordinary Administration (amministrazione straordinaria), a sort of Italian Chapter 11  was introduced into Italian bankruptcy legislation in 1979, in order to manage large corporate crises. It was reformed afterwards in 1999 and amended in 2003 and 2008 to deal with two of the biggest Italian crises, the Parmalat and Alitalia cases.While there is an ample theoretical framework on the legal aspects, economic issues have not been thoroughly addressed, so the article investigates, how the procedure was put into effect between 1999 and 2008. Sources of information are documents available from the Ministry of Industry, which sets out the procedure and has to approve the restructuring plan and the Court Houses that are empowered to accept filing for EA, in cases of insolvency. The data collected, regarding almost all cases ruled by Act 270/1999 refer to 57 groups composed by 183 companies.Specifically the empirical survey discusses: i) the economic relevance and size of the phenomenon; ii) the characteristics and assets of the companies involved; iii) timeframes and management aspects; iv) safeguarding of the work force.Even if, because of the statistical limits, the analysis can be considered an initial survey, the main conclusion is that the new law is more concentrated on recovering entrepreneurial activities through the sale of companies and not on true restructuring.  This seems correlated to the short timespan for carrying out the process, as well as the excessive indebtedness of companies which file for EA.Under a strictly economic profile, the results of administrator management show operative inefficiency which is difficult to overcome in the time period available for the process.