Company Liquidation: What It Is and How the Process Works

Until 2022, Italian law called it “fallimento”, the word for bankruptcy. Since 15 July 2022, the Codice della crisi d’impresa e dell’insolvenza (Legislative Decree 14 of 2019) has used a new name, “liquidazione giudiziale”, for the same underlying idea: a court takes charge of a business that can no longer keep up with its debts, sells off its assets, and uses the proceeds to repay creditors as far as possible.

When the process opens

The 2019 decree describes insolvency as the condition of no longer keeping up with one’s debts. It’s a condition that surfaces over time, through missed payments or other signs visible from the outside, rather than through one isolated late payment.

Not every insolvent business ends up in company liquidation. Italy’s Codice della crisi d’impresa leaves out the smallest businesses, defined as “impresa minore”: those that, for three straight years — or since they started, if younger — stay under all three of these thresholds.

A small shop that has held an asset base of 180,000 euros, yearly revenue of 90,000 euros and debts of 120,000 euros for three years stays under every threshold: even if it couldn’t pay its suppliers, it couldn’t be declared in liquidazione giudiziale. The procedure applies to commercial businesses that sit above these thresholds and are insolvent.

Worked example: picture a limited liability company selling industrial machinery, with 400,000 euros owed to suppliers and banks and two years of revenue that hasn’t covered them. If it sits above the small-business thresholds and the court declares it insolvent, the liquidazione giudiziale can open: under the Codice della crisi d’impresa, a limited liability company is a commercial business like any other, with no separate treatment for its legal form.

Who runs the process

In Italy, the competent court is the one covering the place where the business has the centre of its main interests, usually its registered office. That same court chooses the administrator in the act that opens the procedure: the appointment and the opening arrive together, in a single ruling.

Administrator appointments go into a national register kept by the Ministry of Justice, digital and open to public searches.

Alongside the administrator sits the creditors’ committee, which can check the procedure’s accounts and records at any time and can ask both the administrator and the owner for explanations. When the committee is missing or can’t function, its decisions pass to a judge delegated by the court.

What happens to the company’s assets

From the day the court opens the liquidazione giudiziale, the owner loses control and management of their own assets. Assets the company receives while the procedure is under way also become part of it: a payment that arrives after the opening, for instance, still ends up in the pool the administrator manages.

The administrator has some discretion over each asset. One can be left out of the process when managing or selling it would cost more than it would bring in, once the sums are done.

What happens to the debts

Once the liquidazione giudiziale opens, every creditor is grouped together against the available assets, instead of each pursuing payment on their own as they could beforehand. Italian law calls this the “concorso dei creditori”: no one can act alone against the debtor or its assets any longer, because the available assets now answer to everyone together, under the procedure’s own rules.

Every debt the company owes, including those with payment priority, must go through a formal check set out by the procedure before it’s settled. Even a creditor who would normally be paid first doesn’t receive anything automatically: their claim is checked first, and only then, if confirmed, paid in the order the law sets.

Anyone tracking the health of a country’s economy often finds these numbers next to other indicators, such as the labor market or a recession: openings of company liquidation, alongside other signals, help read how businesses are faring.

The recent numbers

According to the CRIBIS observatory, Italian courts opened 9,795 company liquidations in 2025, more than the 9,162 opened in 2024. A wider figure comes from Cerved, which counts company liquidations together with controlled liquidations under the label “severe insolvency procedures”: by the end of 2025 that combined count stood at 10,171, up 10.6% from 9,196 in the same period of 2024. The two figures measure different things — the first only company liquidations, the second a broader category — and shouldn’t be mixed together.