Composition Agreement and Procedural Capacity: The Keys to Cassation Ordinance No. 17326/2025

The world of insolvency proceedings is inherently complex and requires constant jurisprudential clarification to ensure legal certainty and correct application of the rules. Among these, the composition agreement (concordato preventivo) represents a crucial tool for managing business crises. Cassation Court Ordinance No. 17326 of June 27, 2025, concerning the dispute between S. C. and Z. P., fits into this context, offering a fundamental interpretation on the procedural standing of an entrepreneur under a composition agreement with asset assignment and the role of the judicial liquidator.

Composition Agreement with Asset Assignment: A General Overview

The composition agreement is an insolvency proceeding that allows a company in a state of crisis or insolvency to avoid bankruptcy by proposing an agreement to its creditors for debt restructuring. One of the предусмотренных (provided) methods is the "assignment of assets to creditors," where the entrepreneur undertakes to assign all or part of their assets for liquidation and satisfaction of creditors. Unlike bankruptcy, the composition agreement does not involve the "dispossession" of the entrepreneur, who retains the management and administration of their assets, albeit under the supervision of the procedure's bodies. This distinction is crucial and underpins the Cassation's ruling.

Procedural Standing and Necessary Joinder: The Cassation's Position

The central issue addressed by Ordinance No. 17326/2025 concerns whether or not it is necessary to join the judicial liquidator to the proceedings when the approval of a composition agreement with asset assignment occurs during an appeal judgment involving the debtor. In other words: must the liquidator participate compulsorily in all lawsuits involving the company under a composition agreement?

The Court of Appeal of Rome had rejected a previous request, and the Cassation, confirming a now established trend, reiterated fundamental principles on the matter. Let's examine the full ruling:

The approval of a composition agreement with assignment of assets to creditors, which occurs during an appeal judgment against the debtor, excludes the need to join the judicial liquidator to the proceedings. The liquidator has procedural standing only in disputes relating to liquidation and distribution matters, but not in those concerning the ascertainment of credit claims and the payment of related debts, even if they influence the distribution following liquidation operations. For these, no necessary joinder can be established, as access to the aforementioned insolvency proceeding does not result in the dispossession of the entrepreneur and the loss of their capacity to stand in court.

This ruling is clarifying in scope. The Cassation states that an entrepreneur under a composition agreement, even after approval and asset assignment, does not lose their capacity to stand in court. The judicial liquidator, in fact, does not become a general "procedural substitute" for the entrepreneur. Their standing is limited to disputes specifically concerning "liquidation and distribution matters," i.e., those related to the sale of assigned assets and the subsequent distribution of proceeds among creditors. Conversely, for disputes aimed at ascertaining credits or paying debts – even if these may have an indirect influence on the final distribution – the entrepreneur fully retains their procedural capacity. In such cases, no necessary joinder is established under Article 102 of the Code of Civil Procedure.

This principle is based on the very nature of the composition agreement, which, as stated, does not result in the debtor's dispossession, unlike what happens in bankruptcy. The relevant legislation (Articles 182 and 185 of Royal Decree No. 267/1942, the old Bankruptcy Law, still applicable to proceedings initiated before the entry into force of the Code of Business Crisis and Insolvency) does not provide for a loss of procedural capacity for an entrepreneur under a composition agreement.

The implications of this ruling are manifold:

• The entrepreneur retains full capacity to defend themselves in court for matters relating to the ascertainment of credits and debts.
• The judicial liquidator has a well-defined role, limited to the liquidation and distribution phases of the assets.
• It avoids the prolongation of procedural times that would result from joining the proceedings in every single case.
• The distinction between insolvency proceedings and their specific regulations in terms of effects on the debtor's status is strengthened.

Conclusions

Cassation Court Ordinance No. 17326/2025 provides an important compass for legal professionals, businesses, and creditors involved in composition agreements with asset assignment. By reiterating the continuity of the entrepreneur's procedural capacity and clearly delimiting the role of the judicial liquidator, the Supreme Court contributes to outlining a more certain and predictable legal framework. This ruling is essential for understanding procedural dynamics in business crises, ensuring that proceedings are conducted with greater efficiency and respect for the rights of all parties involved, without unnecessary procedural burdens.