Company crisis and Insolvency: KPMG, Feasibility Study on an Alternative to the Capital Maintenance Regime by the Second Company Law Directive

The business crisis has assumed great importance in recent years, a crisis is a change, sudden or gradual, which gives rise to a problem to be addressed immediately. For a company it means something that can potentially cause sudden and immediate damage to its profit, to its employees and to all the other people involved in corporate life. Today, businesses are facing a moment, perhaps, never experienced in the past: on the one hand, radical changes in taste and habits on the part of consumers, on the other, the pressing economic and financial crisis that has gripped our country for over five years. The effects of the economic situation, the increasing dynamism of the markets and the phenomenon of globalization which have increased the riskiness of economic activities are the main cause of the current situation. The financial crisis, first started in the United States in 2007, was followed by a severe economic and industrial crisis with a heavy reduction in demand, production and, consequently, a fall in turnover and related margins. The present paper aims to investigate the concept of corporate crisis starting from the analysis of the literature. The first part in fact tries to give a definition to the theme of business crisis by analyzing the evolutionary stages and describing the possible causes and anticipatory signals. This type of analysis represents an essential step to better understand the object of the paper, once this is done the attention focuses on the possible paths to take for the management and resolution of a crisis situation. In our country, the extent of the phenomenon in question has reached a size that pushes the legislator to act through a profound evolution of the bankruptcy discipline; for this reason, in particular, some of the most recent institutions provided by the Legislator himself for the management of the crisis will be described, such as the certified recovery plan, the agreements of debt restructuring and the main aspects of the renewed structure of the arrangement with creditors. Fundamental the role, which has always been recognized, of the study of the main financial statement indices. The second part of the paper is dedicated to the analysis of the feasibility of an alternative to the existing capital maintenance regime for public companies, as regulated by the Second Company Law Directive (Second Directive); FEE welcomed this commitment but, in letters dated 31 July 2003 and 10 February 2004, recommended that the proposed study be given higher priority and the timing of the research brought forward. While the synthesis of responses to the EC's Communication did not indicate universal support for the creation of any new system, in May 2005, the Accounting Regulatory Committee1 (ARC) and the EC announced that they had agreed to commission a feasibility study which would look into possible alternatives to the existing capital maintenance regime and also examine the implications of the EU's new accounting rules for companies' ability to distribute profits. This study, which is being undertaken by KPMG ('the KPMG study'), is expected to be published by the EC in the second half of 2007. On 12 July 2007 the EC issued a Consultative Communication containing proposals for a simplified business environment for companies in the areas of company law, accounting and auditing.