De facto partnerships can be declared bankrupt even if partners are corporations
The Constitutional Court (6 December 2017) confirmed that Art. 147, para. 5, of the Italian Bankruptcy Law does not violate the Constitution as long as it is interpreted in a broad sense.
The Tribunal of Vibo Valentia raised the issue before the Constitutional Court regarding Art 147, para. 5, IBL, with respect to Articles 3 and 24 of the Constitution, in the relevant part apparently not allowing to declare bankruptcy of a de facto partnership when the initial partner to be declared bankrupt is not an individual enterpreneur, but a corporation, due to the unreasonable treatment of similar situations and to the limitation of available remedies for creditors of the partnership, if not subject to bankruptcy liquidation.
The issue is whether Art. 147, para. 5, IBL can be interpreted extensively to include also a possible declaration of bankruptcy of a de facto partnership (hidden or evident) following to the initial declaration of bankruptcy of one of the partners being a corporation, due to the fact that the law refers only to individual enterpreneurs.
The decision of the Court
The Constitutional Court rejected the issue raised by the Tribunal, stating that a possible interpretation of the rule of law, allowing a broad construction including also corporations, prevents Art. 147, para. 5, IBL to be considered violating Constitutional principles.
The decision of the Constitutional Court follows a series of decisions by the Court of Cassation according to which the declaration of bankruptcy of a de facto partnership is possible even in case the initial partner to be declared bankrupt is a corporation and, subsequently, it is discovered that it was acting as a partner of a partnership (Cass. No. 10507/2016).
A broader reading of the law is not prevented by its nature as an exceptional rule, because it is just an extension of its own meaning according to the relevant rationale, which is allowed, and not an application to a similar case, which is forbidden.
The content of this article is only for information and does not constitute professional advice.
For further information: Fabio Marelli
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