Bringing Buyers Back to Insolvency AuctionsBY ISSUING CURRENCY TO CREDITORS THAT CAN ONLY BE SPENT AT AUCTIONS, INSOLVENCY PROCEDURES GO MUCH QUICKER AND CREDITORS RECOVER THEIR LOSSES.
In Italy, the economic crisis has contributed to increasing the number of insolvency procedures and their average duration, which is around seven years. The lack of buyers makes it difficult to liquidate the assets, whose prices are knocked down one auction after another. There are about 100,000 pending procedures that involve assets worth 200, if not 300 billion euros.
Five years ago, Pasquale Liccardo, who was then President of the Bankruptcy Court in Bologna, had an intuition when reading the book by Massimo Amato and Luca Fantacci The End of Finance. His idea was to pay back creditors immediately by giving them a reasonably share of their claim in a currency that they could spend only on auctions of insolvency procedures. This complementary currency is called Common, a crasis for competition money. It is regulated by an enabling act approved on October 2017 and waiting to be implemented. “The advance in Commons gives creditors a readily available purchasing power”, Fantacci says. “Given that this currency can circulate only in the insolvency procedures domain, it helps to speed up auction sales and counteract falling prices. At the end of the procedure, the creditor gets the remaining share of the claim in Euros”.
The system is based on two pillars: 1) a register of procedures at the Ministry of Justice, which is already functioning; 2) a certification body whose job is to standardize the credit assessments at national level on the basis of data of a digital marketplace that features all insolvency procedures. This eBay of bankruptcies, so to speak, has a double advantage: it helps to fight connivances, collusion, cartels, and it is universally accessible, thus overcoming the problem of the under-advertising of sales. But what happens when a creditor fails to spend his Commons? “The complementary currency expires after three years. It turns into a shareholding in a fund into which unsold assets are contributed, allowing the procedure to be closed. The Common can help to dramatically reduce the duration of the procedures”.
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by Claudio Todesco