In the last few years, the Italian Government reformed the Italian debt market with the aim of facilitating access by Italian businesses to financings. Going along this reformation path, the Italian Council of Ministers enacted Law Decree No. 18 of February 14, 2016 (the "Law Decree"),1 which, inter alia, completed the set of "level one" rules applicable to direct lending in Italy by Italian and EU non-Italian alternative investment funds.
The Law Decree sets the conditions at which Italian and EU non-Italian alternative investment funds may operate in Italy as alternative direct lenders.
Italian Alternative Investment Funds
Italian investment funds may carry out direct lending activities in Italy toward borrowers other than consumers, provided that:
- They qualify as alternative investment funds pursuant to the AIFM Directive2 as implemented into Italy;
- They are formed as closed-ended funds;
- They cannot employ leverage in excess of 1.5;
- The aggregate amount financed by the fund to the same borrower cannot exceed 10 percent of the total assets of the fund; and
- They cannot grant financings with a duration exceeding the fund's term.
Italian alternative investment funds participate in the Central Credit Register (Centrale Rischi) managed by the Bank of Italy. The Bank of Italy may allow such a participation on an indirect basis as well, through authorized banks or financial intermediaries acting as service providers.
EU Alternative Investment Funds
EU non-Italian alternative investment funds may carry out direct lending activities in Italy toward borrowers other than consumers, provided that:
- They are authorized to carry out direct lending activities in their home country by their home country competent authorities;
- Their basic structure of operation is substantially similar to that of Italian closed-ended funds; and
- They are bound by the same limits on leverage and risk diversification as the Italian funds (see above), based on either their home country law or their bylaws.
EU non-Italian alternative investment funds intending to carry out direct lending activities in Italy must notify the Bank of Italy and may start lending after the following 60 days if no objection is raised by such authority.
The Bank of Italy may require EU non-Italian alternative investment funds to participate, directly or indirectly, through authorized banks or financial intermediaries acting as services providers, to the Central Credit Register managed by it.
The contractual documentation relating to financings granted by both Italian and EU non-Italian alternative investment funds will be drafted in accordance with the transparency requirements applicable to banks and financial intermediaries under the Italian Banking Law and the relevant implementing regulation.
 The Law Decree was published in the Italian Official Gazette No. 37 of February 15, 2016, and it has been in force since the day immediately following its publication (i.e., February 16, 2016). Please note that the Law Decree must be converted into law within 60 days from the date of its publication in the Italian Official Gazette; otherwise, it will cease to be effective with retroactive effect. In this respect, please note that amendments to the Law Decree may be made by the Parliament during the conversion process.
 Directive 2011/61/EU of June 8, 2011 on alternative investment funds managers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.