Floating charge and foreclosure agreements under Italian Law




On 26 April 2016, the Italian government introduced a new reform to shorten the time to recover credit, by approving decree law no. 59 (the Decree, as converted into Law 119/2016 the Conversion Law), which entered into force on 3 May 2016. The Decree aims to foster and facilitate the recovery of credit throughout enforcement and insolvency proceedings.

The Decree introduces into the Italian legal framework some significant changes such as the pegno mobiliare non possessorio (a sort of a floating charge), certain amendments to the discipline of the so-called patto marciano and other relevant changes to Italian enforcement procedures and insolvency law.

Pegno mobiliare non possessorio

According to Italian law, loans can be secured by a pledge over certain assets. Nonetheless, the creation of the security required the dispossession of the asset, save for certain specific exceptions, which could not be utilised by the debtor. The Italian government has now introduced the pegno mobiliare non possessorio, which enables the debtor to keep possession of the asset, which may therefore be used for purposes connected with the business, and which may also be disposed of with an automatic transfer of the pledge.

The pegno mobiliare non possessorio requires that the written form and the agreement must contain the details of the creditor, the debtor, the third party granting the pledge, if any, as well as the description of the secured asset (a general reference to a category of assets would suffice) and the secured amount.

The only formality required for the perfection of the pledge is registration in an electronic register set up by the Italian Tax Authority (Agenzia delle Entrate).

In addition, it has to be noted that the pegno mobiliare non possessorio can only be created following specific subjective and objective criteria.

As to the subjective criteria, the security is only for those debtors who exercise a business activity; whereas, with reference to the objective criteria, the pegno mobiliare non possessorio can only be created over equipment, machinery and other movable assets, excluding real estate and assets filed in public registers such as cars or ships. Furthermore, the Conversion Law clarifies that the pledge can also be extended to intangible assets and to credits arising out of or in connection with a business activity.

In case of enforcing the security, the creditor, following a notice to the pledgor, can, among others: (i) sell the pledged assets (the sale has to be done through competitive procedures and with the assistance of experts); lease the pledged assets (this right must be specifically provided for in the agreement, which must list the criteria according to which the lease can be entered into); or (iii) appropriate the pledged assets (again, the agreement must list the criteria according to which the appropriation can be done).

Furthermore, in relation to the enforcement procedure, it has to be noted that the debtor can oppose the transfer of the asset within five days of receiving notice from the creditor. The court may also inhibit enforcement if ‘serious reasons’ exist.

Notwithstanding the above, unless otherwise agreed between the parties, the pledgor must give the pledged asset to the creditor within 15 days of receiving notification.

Patto marciano

Pursuant to article 2744 of the Italian Civil Code, it is generally prohibited to agree that the ownership of an asset, over which a pledge has been created, is transferred to the secured creditor in case of default. This prohibition, which also applies to mortgages, has generally been known as patto commissorio (foreclosure agreement) and was considered necessary in order to protect the weaker party in a contractual relationship (i.e., the debtor) who has a particular need for protection, to avoid any undue coercion by the secured creditor and therefore to preserve the contractual balance.

However, for many years, the Italian Supreme Court and main scholars have recognised the possibility for the secured creditor to appropriate or sell the secured asset, returning to the debtor the difference between the value of the asset and the outstanding debt (the so-called patto marciano).

The first application of this principle was contained in the decree no. 170/2004, by which the Italian government admitted the possibility, under certain circumstances, to appropriate or sell financial instruments. In this case, however, the patto marciano was only applicable to pledged assets represented by financial securities, because the marketability of such securities ensured that the secured creditor could sell the asset and satisfy the debt without recourse to any court supervised procedure in order to enforce the security.

Another application of the principle has now been introduced under article 2 of the Decree, which has further specified the structure of patto marciano in respect of real estate. In particular, together with the execution of a loan agreement, the parties can, under certain circumstances, enter into a sale agreement by which the ownership of a real estate is transferred to the secured creditor subject to the condition precedent represented by a qualified default of the debtor, thus without the need to go through the burdensome court procedure for enforcement of the security. The court will, in fact, be involved only for the appointment of an expert, who shall appraise the value of the real estate. The patto marciano can be entered into in relation to new or existing loan agreements.

The patto marciano could be increasingly used by lenders in relation to financing (such as short-term financing) that might not be subject to the so-called imposta sostitutiva (levied at 0.25 percent on the secured amount) and in relation to which a mortgage could be taken at a relatively higher costs (2 percent on the secured amount upon creation of the same plus 0.5 percent upon cancellation). Indeed, it could be argued that the patto marciano, being a sale subject to condition precedent, would be subject to a fixed register tax at €200, and that only the subsequent deed of acknowledgment of the occurrence of the condition precedent (i.e., default by the borrower) would be subject to higher registration taxes. In any case, that would mean lenders could initially add the patto marciano to the security package related to such loans, with a negligible cost of €200.

Other changes

In addition to the pegno mobiliare non possessorio and the patto marciano, the Decree also introduced new measures to: (i) improve the efficiency of insolvency proceedings; and (ii) simplify and accelerate credit enforcement.

The possibility of managing hearings and creditors meetings by using an online platform are some of the additional new measures to improve the efficiency of insolvency proceedings. Furthermore, the Decree has modified the Italian Code of Civil Procedure, in order to: (i) amend the form of the pignoramento (seizure); (ii) reduce the procedural term for the opposition to the enforcement actions; and (iii) allow the purchaser of an asset, in the context of a judicial auction, to have the asset assigned to a third party named by the same purchaser.


The Decree is the last of a series of recent innovations in the Italian banking regulatory framework, with the overall aim of facilitating access to financing and enhancing the adequacy and the stability of banks and protecting clients.

In particular, the Decree should shorten court proceedings and, as a consequence, asset recovery times. This will help to encourage investments in the Italian banking sector and in the non-performing loans market, as well as improving the efficiency of related securitisation transactions.


Andrea De Tomas, Matteo Gallanti and Giorgio Telarico are partners at NCTM. Mr De Thomas can be contacted on +44 (0)207 375 9900 or by email: a.detomas@nctm.it. Mr Gallanti can be contacted on +44 (0)207 375 9900 or by email: m.gallanti@nctm.it. Mr Telarico can be contacted on +39 06 678 4977 or by email: g.telarico@nctm.it.

© Financier Worldwide


Andrea De Tomas, Matteo Gallanti and Giorgio Telarico


©2001-2019 Financier Worldwide Ltd. All rights reserved.