Bolsonaro approves new rules for judicial reorganization and bankruptcy of companies, but with vetoes.

President Jair Bolsonaro signed into law this Thursday (24) a bill that changes the rules for judicial recovery and bankruptcy of companies.

According to the government, the bill "modernizes the legislation dealing with judicial and extrajudicial reorganization and business bankruptcy, introducing important points for companies." The law was published in an extra edition of the "Official Gazette of the Union" this Thursday.

Bolsonaro vetoed the section of the law that would allow the suspension of labor court enforcement. According to the General Secretariat, the government believes that this change "could harm the interests of workers and create problems within the Labor Courts, as well as generate legal uncertainty for creditors."

The president also vetoed sections related to the tax and collection aspects of the text. The government argues that "although meritorious," the provisions "failed to observe budgetary rules or specific provisions of the National Tax Code."

The changes

The bill approved by the Senate authorizes debtors, provided they are undergoing judicial reorganization, to obtain financing using their own personal assets or those of others as collateral. Permission for the loan will require a judge's approval.

Banks stop lending money to companies in this situation due to the high risk of non-payment. According to the bill, if bankruptcy is declared before the full amount of the financing is released, the contract will be automatically terminated.

Judicial reorganization serves to prevent a company in financial difficulty from closing its doors. It is a process by which the indebted company obtains a period to continue operating while negotiating with its creditors, under the mediation of the courts. Debts are frozen for 180 days and operations are maintained.

Current legislation also suspends, for the same period, legal actions against the company, including the statute of limitations for lawsuits and any potential court-ordered executions. The proposal adds a prohibition on the retention or seizure of the debtor's assets.

The bill allows for a single, exceptional extension of this 180-day period. According to the government's announcement, the extension of the suspension of judicial enforcement was vetoed.

The proposal approved in the Senate also includes more advantageous rules for companies when paying federal debts, whether tax-related or not. The government did not detail which of these rules were vetoed by Bolsonaro.

The government celebrated the approval.

In an interview when the bill was approved in the Chamber of Deputies in August, the Secretary of Finance of the Ministry of Economy, Waldery Rodrigues, stated that the text could stimulate the recovery of delinquent credit and allow companies that would otherwise enter judicial reorganization or bankruptcy to avoid going down that path.

"We are talking about a significant number of companies, several thousand. It is essential for maintaining employment and income," he stated.

Judicial conciliation

According to the text, before the request for judicial reorganization is authorized, the company may request the suspension of judicial executions against it for 60 days. During this period, the debtor company will attempt, through mediation and conciliation, to reach an agreement with the affected parties, which may include, for example, workers who have not received their salaries.

Today, the law states that any creditor has the right to oppose the judicial reorganization plan proposed by the company. In response, the judge convenes a meeting with those who suffered losses from the company to discuss the plan's text. If they fail to reach an agreement with the debtor company, the judge will declare the business bankrupt.

The proposal introduces a new element and allows the creditor to also present an alternative judicial reorganization plan.

"The bill creates a safeguard mechanism in case the debtor's plan is rejected by the creditors, in order to prevent the debtor's bankruptcy in that case. The bill authorizes creditors to present and approve their own plan, even against the debtor's wishes," explains the rapporteur, Senator Rodrigo Pacheco (DEM-MG).

The text also:

• It is expected that the rural producer, as an individual, will file for judicial reorganization.
• It prohibits the company from distributing profits or dividends to shareholders during judicial reorganization or bankruptcy proceedings.
• This makes the conversion of debt into equity a means of judicial reorganization.

Source: G1.com