The impact of the new Italian Early Warning System provided by the IC-Code on SMEs governance

Abstract

The Italian legislator with the Decree-Law No. 155/2017, is being converted into the new Insolvency and Crisis Code (IC-Code), has introduced a compulsory Early Warning System to detect occurring crisis. The Early Warning System is intended as an instrument aimed at driving the directors and the bodies responsible for controlling the companies in the identification of the very first signs of crisis. These are, on the one hand, the corporate control bodies which in Italy are the Board of Statutory Auditors (also known as Supervisory Board or Collegio Sindacale) and/or the Auditors and on the other hand some qualified creditors such as IRS (Agenzia delle Entrate), the national insurance institution and the tax collection agent. Among these subjects it is undoubtedly the Board of Statutory Auditors to play the role of the main recipient of the signs of crisis as a body assigned to monitor and supervision to enforce compliance of management with statutes and by-laws. This is confirmed by the significant extension of the number of companies – particularly SMEs – that will be obliged to change their habits converting their simple entrepreneurial governance by providing for at least some kind of control bodies to cope with the new Code. The paper tries a critical reading of the new IC-Code outlining the significant impacts that it is meant to have on Italian companies Corporate Governance, with special emphasis on SMEs