Italy's government has paved the way for Parmalat to rush into bankruptcy protection while prosecutors widened a probe into an accounting hole at the food group now estimated at €7 billion.
In a bid to stem one of Europe's biggest ever corporate crises, the cabinet approved a decree on Tuesday setting out new rules for rescuing big firms that will take effect on Wednesday.
"The goal of the decree is not to save the controlling shareholder or managers, but small savers, ... suppliers, the integrity and the Italian nature of the firm," Industry Minister Antonio Marzano told reporters.
Parmalat's Chairman and Chief Executive Enrico Bondi, a veteran turnaround expert brought in last week to rescue the group, will be made government-appointed commissioner of the company by Christmas Day, a farmers group said.
Parmalat's board began meeting on Tuesday evening and was widely expected to announce it would file for protection from creditors under the new rules.
Italy's eighth-biggest industrial group had been teetering on the brink of a default on its bonds for weeks before last week's bombshell announcement of accounting irregularities, which raised fears it might collapse.
Parmalat's crisis exploded last Friday week when it said that Bank of America had rejected as false a document purporting to certify that a Cayman Islands unit of the group, Bonlat Financing Corp, held 3.95 billion euros of securities and cash.