By Patrick Avenell
ITALY: The Marzano Law provides an administrator of an especially large company the power to avoid liquidation of assets and traditional bankruptcy through restructure.
The most famous case was that of Parmalat’s collapse after a criminal accounting conspiracy. Rather than the company be declared bankrupt, be liquidated and disappear (as per OneTel, for example), the Italian government declared the company “commissariamento”, which is tantamount to the Italian word for being in administration.
The government did this to protect the trademarks and brand name, which has a presence throughout the world. All the ordinary, or mum and dad, investors in this company lost their money, but the company was eventually revived with new management and was able to continue trading (Parmalat is a dairy products supplier).
In general use, Marzano Law enables an administrator to not offload equity or sell assets, but rather restructure the company so that new managers can continue to fulfil orders. Previous investors will most likely lose their money, but the hope is that new investors will come in. Under clawback laws, provided that transactions are carried out with the creditor knowing that the company is in administration, debt can written off, or at least mitigated.
Parmalat went to the wall because of fraud and creative accounting, but the company was profitable, so it was able to get going again. If a company has gone down because of lack of sales, and the economic downturn, that is, unprofitably, it may be a different outcome.