Judgment No. 10039 of 2024: Securitization and Bankruptcy Avoidance Action

Judgment No. 10039 of April 15, 2024, by the Court of Cassation provides important clarification on securitization, particularly regarding exemption from bankruptcy avoidance actions. This aspect is crucial not only for financial institutions but also for investors involved in the securitization process.

The Regulatory Framework

Law No. 130 of 1999 governs the securitization of receivables, introducing mechanisms aimed at ensuring investor security. In particular, Article 4, paragraph 3, provides for a subjective exemption from bankruptcy avoidance actions, thus guaranteeing the protection of the interests of those who subscribed to the assignee's bonds. However, the Court has clarified that this exemption applies only on the condition that the securitization is completed, with the issuance of the necessary financial instruments.

The Judgment and Its Interpretation

In the case examined, the Court confirmed the decision of the Court of Appeal of Rome, which had denied the exemption from avoidance. This refusal was based on the fact that the bank had only demonstrated the bulk assignment of receivables, without providing evidence of the issuance of securities and their placement on the market. This underscores the importance of adhering to the necessary procedures to ensure the validity of securitization, as the mere assignment of receivables is not sufficient to guarantee protection from bankruptcy avoidance actions.

Generally, the subjective exemption from the exercise of bankruptcy avoidance actions, provided for by Article 4, paragraph 3, of the aforementioned legislation, being aimed at not harming the interests and expectations of investors who subscribed to the assignee's bonds, operates on the condition that the securitization is completed.

Conclusions

Judgment No. 10039 of 2024 offers food for thought on the delicate balance between investor protection and the need for transparency and completeness in securitization operations. It is essential for financial sector operators to understand the importance of strictly following current regulations to ensure not only the legality of their operations but also investor confidence in the system. Only in this way will it be possible to avoid legal issues that may arise from procedural gaps.