THE FACTORY

The Trust

Liquidation Trust

A liquidation trust is set up by a person, whether an individual or a company, in order to settle its debts vis-à-vis creditors who could apply for bankruptcy. A trust can be a key factor in providing reassurance to creditors, thus preventing enforcement actions against the entrepreneur.

Liquidation trusts can be “protective” when the entrepreneur’s financial situation is in bonis. Their aim is to prevent possible enforcement by creditors by placing assets in trusts dedicated specifically to meeting creditors’ claims. For the company, being able to use the assets in the trust, despite serving as security against third-party creditors, is very important, at times crucial for the continuity of the business activities.

Liquidation trusts can be “rescue” trusts and “purely liquidation” trusts. In the first case, they are set up when the crisis is still reversible and their purpose is to prevent the entrepreneur from being subject to bankruptcy and at the same time promote the settlement of the crisis with the creditors. In the second case, they are used as an alternative to liquidation as governed by art. 2847 of the Italian Civil Code. In this situation, the trustee handles all the liquidation operations as well as cancellation of the liquidated company.