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Relative Priority Rule in Composition with Creditors: the Cassation Turning Point

5 min read · Updated July 2026 · Editorial oversight: Avv. Federico Papa

The regulation of the composition with creditors reached a fundamental milestone with a recent jurisprudential development, when the Court of Cassation solidified the application criteria for the Relative Priority Rule (RPR). According to press reports in recent years, the transition from the rigid hierarchy of Absolute Priority to the flexibility of Relative Priority is the cornerstone of the reform aimed at business continuity. In the following sections, we will analyze how the distinction between liquidation value and continuity surplus has become the pivot for the legal feasibility of recovery plans. By reconstructing the regulatory framework and recent jurisprudence, this article will clarify the boundaries within which a debtor may deviate from the traditional order of privileges. Finally, we will present a didactic twin case to illustrate the practical application of these complex mathematical and legal principles.

Relative Priority Rule in Composition with Creditors: the Cassation Turning Point

In brief

This article examines the evolution of the Relative Priority Rule (RPR) in composition with creditors, starting from the recent Cassation ruling. It analyzes the distinction between liquidation value, subject to absolute priority, and continuity surplus, distributable under relative priority. The piece delves into the debtor's disclosure obligations and the dynamic valuation criteria of business assets, providing operational guidance through a transfigured case study and an analysis of the possible outcomes of the cross-class cram-down procedure.

  1. The facts

    The matter stems from several appeals during the confirmation of concordati preventivi in continuity, culminating in a recent Court of Cassation decision. According to reports from specialized outlets such as Diritto e Giustizia and Il Sole 24 Ore, the Supreme Court intervened to resolve conflicts arising in lower courts regarding the determination of liquidation value.

    Previously, in various first-instance proceedings, judges had rejected proposals because the debtor had underestimated the value of assets in a forced sale to artificially inflate the surplus distributable via the RPR. The Cassation Court, in the interest of the law, has thus established a non-negotiable boundary for the protection of dissenting privileged creditors.

  2. The legal framework

    The regulatory framework centers on the Code of Business Crisis and Insolvency (CCII). Article 84, paragraph 5, imposes the Absolute Priority Rule (APR) for the liquidation value: higher-ranking creditors must be paid in full before lower-ranking ones can receive any distribution.

    However, Article 84, paragraph 6, introduces the Relative Priority Rule (RPR) for the plusvalore generated by business continuity. Finally, Article 112 governs the cram-down, namely the power of the court to confirm the plan even against the vote of certain classes, provided that the RPR criteria are mathematically respected.

  3. What the case law says

    Established case law has determined that the RPR is not a «blank check» for the debtor. Judges have clarified that the plusvalore from continuity is a residual concept: first, privileged creditors must be guaranteed what they would obtain in an efficient judicial liquidation.

    Jurisprudence has also specified that external finance provided by third parties or shareholders can be distributed with greater flexibility. Finally, the failure to disclose purchase offers renders the proposal inadmissible due to a lack of transparency, preventing creditors from casting an informed vote.

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  8. Lessons for professionals

    1. The estimate of the liquidation value must include realistic scenarios of unitary sale.
    2. The RPR does not allow for ignoring privileged creditors.
    3. Every purchase offer must be documented in the report of the certifying professional.
    4. The use of external finance remains the most effective tool to bypass the rigid APR hierarchies without facing inadmissibility rulings.

References: Art. 84 CCIIArt. 87 CCIIArt. 112 CCIIArt. 2741 c.c.

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Avv. Federico Papa
Editorial oversight: Avv. Federico Papa·ICAMContent drafted with AI support and subject to editorial source checks. Despite these controls, inaccuracies may remain: reports and rectification requests are welcome. Report a correction

Frequently asked questions

Do privileged creditors always have to be paid 100%?

No. If the liquidation value of the assets subject to the privilege is lower than the debt, the creditor can be paid partially for that portion (APR), while receiving treatment based on relative priority (RPR) for the excess amount.

What is the continuity surplus in the composition?

It is the additional value that the company generates by remaining in business compared to what would be obtained by selling assets in judicial liquidation. This surplus can be distributed among classes deviating from the traditional hierarchy.

What happens if the debtor hides a purchase offer?

The composition risks being declared inadmissible or revoked. Case law requires the liquidation value to be benchmarked against actual offers to prevent the debtor from manipulating figures to the detriment of creditors.

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