Downgrading of shareholders’ loans

On the subject of the downgrading of the shareholder’s credit for loans to the company, the Court of Milan, Specialized Business Section, with its ruling no. 8577 of 21/12/2020, stated that the legal downgrading deriving from the impairment of the loan in a situation of company distress as defined by art. 2467 of the Italian Civil Code, including during the life of the company, translates into a real cause of non-recoverability of the shareholder’s claim towards the company until all other creditors have been satisfied, but the financing shareholder may demand repayment from the company, even before all creditors benefiting from the downgrading have been satisfied, if the company has overcome the situation of economic and financial difficulty that had made the loan impaired.

For the purposes of assessing the validity of the downgrading exception, it is necessary to verify the existence of the conditions for legal downgrading at the time of the loan disbursement as well as their persistence up to the time of the repayment request.