Italy

1    Can I terminate a franchisee for entering into insolvency proceedings (in the event that the agreement does not contain an ipso facto clause or, if it did, such clause would not be valid), or pre-emptively terminate them if I know an insolvency practitioner is about to be appointed?

In general, it is not possible to terminate a contract because of an insolvency proceeding.

In the event of bankruptcy, the general rule is that contracts that are still unexecuted or not fully executed as of the date of bankruptcy are suspended, pending the decision of the bankruptcy practitioner whether or not to take over.

In case of a composition with creditors, the general rule is that contracts continue; the debtor can file a petition to terminate or suspend the contract only when particular conditions exist.

2    Am I obliged to continue to supply a franchisee that is in insolvency proceedings? How does this process affect my contractual rights?

As for answer 1, it depends on the type of insolvency proceeding: in case of bankruptcy, no because the contract is automatically suspended until the decision of the bankruptcy practitioner. In a composition with creditors, the contract continues and creditors cannot unilaterally refuse the fulfilment.

3    Can I retrieve products for which the franchisee has not yet paid? If so, how and when?

In general, if the contract cannot be terminated for non-performance, in is not possible to ask for the return of the products.

In case of bankruptcy, it is not possible to retrieve any product unless it is proved, with a certain date, that the title vests with the creditor. If there has been a non-performance, this may not be sufficient grounds to retrieve the products, some specific steps are needed to avoid the risk of a revocation action by the bankruptcy practitioner.

In case of a composition with creditors in continuity, the general rule is that the contract continues, without the possibility of early termination.

4    Does a post contractual non-compete clause remain in force after the franchise agreement has ended by or because of insolvency proceedings?

It depends on the type of clause included in the contract and could also depends on the type of proceeding: if the procedure is a composition with creditors in continuity, the buyer also takes over this obligation if the franchise agreement is part of the company; if the procedure is liquidation, there will be no party who can violate the clause.

5    Is the franchisee entitled to goodwill in case of termination of the agreement and if so, does this still apply in an insolvency situation?

In Italy there is no specific mandatory rule about the goodwill. It is a contractual matter.

6    A franchisee is in financial difficulties and is going to sell its business (as an asset sale) to a new franchisee. Do I have any legal duty to the purchasing franchisee?

No legal duty for the franchisor to inform the buyer of the business.

7    A third party wishes to buy the franchisee's business from the insolvency practitioner - to what extent do my contractual rights to approve the sale, if any, clash with the insolvency practitioner's duty to realise value for franchisee's creditors?

It depends on the type of clause included in the contract and could also depends on the type of proceeding.

8    An insolvent franchisee operates at a key location – how can I ensure there is business continuity and a transfer of the lease/business, either back to the franchisor, or to a third party of its choosing?

The parties should check what the franchise agreement says in this regard. It is possible there will be a bidding process for the lease, which the franchisor or its nominee may wish to participate in.