Adequate organisational structures: what Article 2086 of the Italian Civil Code requires, and who must have them

12 October 2026, 09:34

"Adequate organisational structures" is the phrase the Italian Civil Code uses to require every business run as a company to notice in time whether it is heading towards a crisis.

The law asks businesses to see the crisis before it arrives

The rule is in the second paragraph of Article 2086 of the Civil Code, added by Legislative Decree 14 of 2019, that is, the Italian Business Crisis Code. It reads: "The entrepreneur who operates in corporate or collective form has the duty to establish an organisational, administrative and accounting structure adequate to the nature and size of the business, also with a view to the timely detection of the business crisis and of the loss of going concern".

Put simply, the structure has three parts:

• organisational: who does what, who decides and who is accountable for it;
• administrative: the path by which data are generated within the business and reach the decision-makers in time;
• accounting: bookkeeping kept so as to deliver reliable figures every month, not only when the annual accounts are closed.

Going concern is the ability of the business to carry on, paying its debts when they fall due.

Every company must have them, in proportion to its size

The duty applies to the joint-stock company as much as to the small limited liability company, and also to partnerships, each in proportion to its size; it is the directors who must build the structure. For the sole trader, Article 3 of the same decree instead requires "suitable measures" to detect the crisis in time and to deal with it.

Adequate means looking at least a year ahead

Article 3 of the same decree states that the structure must make it possible to detect imbalances in the balance sheet and in the economic and financial position, and to check that the debts are sustainable and that the business can carry on "at least for the following twelve months". The same article lists the signals to be picked up before the crisis becomes obvious:

• wages: pay overdue by at least thirty days for more than half of a month's total payroll;
• suppliers: debts overdue by at least ninety days that exceed those still to be paid within terms;
• credit: debts to banks and finance companies overdue, or credit lines exceeded, for more than sixty days, if together they are worth at least five per cent of everything owed to them;
• public bodies: debts above the thresholds beyond which the public creditor must warn the business owner, set by Article 25-novies of the same decree.

The thresholds for the public bodies are four:

• INPS (Italy's social security agency): contributions more than ninety days late, if they exceed both 30 per cent of those due the year before and €15,000;
• INAIL (the workplace accident insurance agency): insurance premiums overdue by more than ninety days, for more than €5,000;
• Italian Revenue Agency: VAT declared and not paid, above €5,000 and equal to at least 10 per cent of the previous year's VAT turnover, that is, the turnover declared for VAT purposes; above €20,000 the warning is sent in any case;
• Agenzia delle Entrate-Riscossione (the state debt collection agency): debts that the public creditors, such as the tax authorities or INPS, have already handed over to this agency for collection, overdue by more than ninety days: above €100,000 for a sole trader, €200,000 for partnerships and €500,000 for all other companies.

For the twelve-month check the law does not write down a number. It does, however, require the resources to be enough to pay the debts, and so, in practice, it requires the DSCR (Debt Service Coverage Ratio) to be at least 1. The DSCR is the ratio between the resources of the following twelve months and what will go out over the same period in interest on debts and capital repayments on loans. The resources are the cash the operations will generate, net of investments, plus the money in the bank accounts at the start of the period and the unused part of the overdraft facility. With a DSCR of 1 the resources cover interest and repayments exactly; below 1 they are not enough, and the check required by the Code is not passed.

An example. A window and door frame manufacturer has a turnover of €17 million. Over the coming year its operations should generate €750,000 of cash, after investments, and at the start of the year there is another €150,000 between money in the bank accounts and unused overdraft. The resources therefore come to €900,000, while €1,000,000 will go out in interest and capital repayments on loans. The DSCR is 0.9: the check is not passed. The Civil Code requires the directors to act "without delay", before the signals listed above appear. One possible route is to ask the banks to extend the term of the loans: each year's instalment falls, the outgoings that the DSCR sets against the resources go down, and the ratio rises.

The typical mistake is taking the structure for a binder

The most common mistake is to think that an organisation chart, job descriptions and a few written procedures are enough, while the figures arrive once a year with the annual accounts. A structure like that is in order on paper and shows the problems only when the delays with suppliers and banks have already started.

The heart of an adequate structure in an SME is controlling done well.

The first test to run on one's own accounts is a question: is there a cash forecast for the following year, updated every month with actual data? Without that forecast, the check required by Article 3 cannot be carried out.