Third-party releases in restructuring proceedings: state of the debate and legislation (if any) in Italy (with some lessons from the US?)

The use of third-party releases in bankruptcy proceedings continues to be a hot topic in the U.S. bankruptcy courts. Chapter 11 plans of reorganisation often provide for the release of various non-debtor third parties, including co-debtors, officers, directors, lenders, parents, guarantors, sureties, or insurance carriers. Although such releases have been used for decades—and they have been a condition of approval of the debtor’s plan—they have recently generated significant public controversy as a result of several high-profile mass tort cases (such as Purdue Pharma or The Boy Scouts of America); and hostility to them, particularly when they are non-consensual , has grown. The situation in Italy is quite different. There, the debate is almost non-existent and, with regard to case-law, there is only one decision of the Italian Supreme Court of Cassation regarding the previous legislation, i.e. Article 184 of the Italian Bankruptcy Law , which ruled out the validity of provisions in reorganisation/liquidation plans that release non-debtor parties from liability towards creditors. However, the entry into force of the new legislation (the so-called “Code of Business Crisis and Insolvency”) in July 2022 may provide arguments to change the courts’ opinion, at least with regard to certain types of third-party releases (e.g., releases of intra-group guarantees). These aspects will be explored in this article.