Small and medium-sized enterprises lead the requests for judicial reorganization in Brazil.

The growth in requests for judicial reorganization by companies is indicating a new trend in Brazil, with an alternative to face the economic crisis caused by the Covid-19 pandemic. The greatest demand for reorganization is among micro and small businesses. According to the "Bankruptcy and Reorganization Indicator" from Serasa Experian, in a year-on-year comparison, requests from these companies grew by 34%.

Lawyer Thierry Phillipe Souto, who specializes in this area, predicts that the demand for judicial reorganizations will grow even more. He explains the reasons: "The economy has once again been seriously impacted by the growth of the pandemic. And the entry into force of the amendment to the "Judicial Reorganization and Bankruptcy Law 11.101/2005" this year has created more opportunities for companies in financial crisis to continue operating. One possibility is the encouragement of financing for these companies, which now have legislation providing greater security for businesses and investments."

According to the lawyer, the new bankruptcy law will help entrepreneurs overcome difficulties more easily. He adds: "The change in the law has created possibilities that were impractical under the old version. And the expectation of companies at risk is that this new path will make it simpler to obtain loans, lines of credit, and suppliers to face the crisis."

Another obstacle in the old legislation was the lack of mechanisms to facilitate the resolution of tax debts with the tax authorities, recalls the lawyer: "Now, the change in the law has effectively established concessions and special payment plans, exclusively aimed at companies in recovery. Thus, the law has created more facilities so that these entrepreneurs can effectively protect and maintain their business."

Thierry Phillipe Souto says that judicial reorganization is a normal solution, used preventively by companies to continue their business by reorganizing their debts: "Companies that are concerned about the possible worsening of their situation take proactive legal measures to protect themselves from the crisis, ensuring their survival in the market."

The lawyer also warns that, with the prolongation of the crisis and the failure to take legal action, the possibilities for a solution are diminishing for companies in deficit: "An example of the current situation is in the most recent survey by the CNC, the National Confederation of Commerce. The confidence index in this area fell 6.4% from March to April of this year. And this was the fifth consecutive drop in the indicator, which reached its lowest level since September of last year. This situation is further compounded by the growing difficulty in obtaining credit to renegotiate bank debts and to raise working capital," he concludes.

Source: Terra.com