Court accepts request from football club.

The Judiciary has shown itself to be increasingly flexible in deciding who can enter into judicial reorganization proceedings. The most recent case involves Figueirense, a football club from Santa Catarina, which obtained this right in a decision by Judge Torres Marques of the State Court of Justice (TJ-SC).

This is the first decision in the country in a case involving a football club. Prior to this case, however, at least two other non-profit organizations from other sectors had already obtained favorable rulings: Candido Mendes University, in May of last year, and the Evangelical Hospital of Bahia, in September.

This discussion exists because the Bankruptcy and Reorganization Law (No. 11,101 of 2005) refers to "entrepreneur" and "business corporations." The school of thought that defends a more restrictive interpretation of the law argues that associations cannot be classified as businesses. A business, for example, they say, can distribute profits—which is prohibited for non-profit associations.

However, another line of thought is gaining increasing traction in legal circles: the argument that an association can be considered a company if it carries out an organized economic activity, generating revenue, jobs, and socio-economic impact.

Judge Torres Marques, of the TJ-SC (Court of Justice of Santa Catarina), follows this more flexible line in the decision that benefited Figueirense. "The world of football cannot be considered a mere social or sporting activity, essentially because of everything it represents in a community and all the wealth involved (player transfers, sponsorships, image and broadcasting rights, entertainment and brand exploitation)," he says.

Torres Marques points out that the Bankruptcy and Reorganization Law includes a list of excluded entities, those that are barred from the process (financial institutions and insurance companies, for example). In this context, he states that, if the other legal requirements are met, nothing prevents civil associations from being subject to the process.

The judge also cites the Pelé Law (No. 9,615 of 1998). This law stipulates that sports practice entities participating in professional competitions and the sports administration entities or leagues in which they are organized, regardless of the legal form under which they are constituted, are equivalent to business corporations.

Figueirense has filed a request with the Santa Catarina court to expedite the so-called "stay period," a benefit of bankruptcy proceedings that allows for the suspension of debt collection actions. The request had been denied in the first instance. The club's objective is to reach an organized agreement with creditors within an out-of-court restructuring.

With the appeals court judge's decision, the judge is now obligated to analyze the request for the "stay period." The last development in the case occurred last week. Judge Luiz Henrique Bonatelli requested the club's financial statements so that he can assess the situation.

“It is in everyone’s interest that an economic agent, a generator of wealth in the broadest sense, wants and is able to recover,” says Luiz Roberto Ayoub, partner at Galdino & Coelho, which represents Figueirense in this case, adding that this decision will serve as a precedent for new cases. The firm itself, for example, has already been approached by other football clubs.

Ayoub also provides consulting services to Candido Mendes. Ten months after filing for judicial reorganization, the university – the first among the associations to obtain a favorable court decision – is preparing for the general creditors' meeting. It should take place in early April. Approximately R$ 370 million is under negotiation.

Cristiano Tebaldi, the university's pro-rector of teaching, says that this process is essential for Candido Mendes. "The judicial reorganization was adopted for protection, recovery, and continuation. Without this protection, we would be subject to enforcement actions and seizures, and that has the power to paralyze a company," he states.

With creditors knocking at the door, the university gained breathing room to restructure. It hired a consulting firm and worked throughout the year to centralize operations, which reduced costs by R$ 27 million, and managed to reposition itself in the market, increasing the number of distance learning centers and the number of students in this modality.

There was debate in the draft bill that dealt with the reform of the Bankruptcy and Reorganization Law regarding the inclusion of associations among those who could have access to the processes. But the banks, at the time, exerted strong pressure and ended up winning the tug-of-war – this section did not pass.

The new law, in effect since January 23rd, has nevertheless broadened the scope of those who can request bankruptcy protection. Rural producers and cooperatives operating health insurance plans are now expressly included in the law. These cooperatives had been vetoed by President Jair Bolsonaro, but Congress overturned the veto.

Before the new law, however, there were already court decisions allowing the recovery of both rural producers and health cooperatives. Unimed Norte-Nordeste and Unimed Petrópolis, for example, had their recovery requests approved in 2020 and 2018, respectively. Unimed Manaus obtained court approval in December.

Source: Economic Value