TJ-SP confirms approval of judicial reorganization plan due to cram down

Law 11.101/2005, with the aim of preventing "abuse by the minority" or "individualistic positions" over the interest of society in overcoming the business crisis, provided, in paragraph 1 of article 58, a mechanism that authorizes the magistrate to grant judicial reorganization, even against the decision of the general meeting of creditors.

With this understanding, the 1st Chamber of Business Law of the Court of Justice of São Paulo confirmed the approval of a judicial reorganization plan for a pharmacy chain, approved by cram down, when the judge grants judicial reorganization even if there is a refusal from creditors who have the potential to reject it.

According to the minutes of the meeting, creditors representing R$ 5.2 million of the credits rejected the presented plan, while creditors entitled to receive R$ 2 million voted in favor of the proposal. Regarding the classes of creditors, the plan was approved by 100% of class IV (unsecured micro-enterprise creditors) and by 76.47% of class III (unsecured creditors).

Thus, following article 58, §1, of Law 11.101/05, which provides for cram down, the first-instance court approved the plan. Two creditor banks, which voted against the approval of the proposal, appealed to the TJ-SP (Court of Justice of São Paulo), alleging that one of the requirements for cram down was not observed. However, the appeals were unanimously denied.

According to the rapporteur, Judge Azuma Nishi, there is nothing illegal about opposing the plan, since each creditor votes according to their interests. However, he found abuse in the votes of the appealing banks, which were decisive in the rejection of the recovery plan.

According to the judge, the abusiveness of a creditor's vote is characterized when it is cast outside the limits imposed by economic or social purposes, good faith, or good morals, as provided for in article 187 of the Civil Code. This is precisely the scenario verified in the case in question, according to Nishi.

"The creditor financial institution's passive stance, refusing any kind of negotiation and only seeking the conversion of the debtor's bankruptcy into bankruptcy, is indicative of abuse. It cannot be overlooked that the credit held by the appellant is personally guaranteed by the partners of the companies undergoing judicial reorganization, which corroborates the understanding of abuse of voting rights, since the refusal to negotiate the terms of the plan combined with the bankruptcy petition cannot be used as a mechanism to pressure the joint debtors of the debt," he said.

Case 2122678-85.2020.8.26.0000

Source: Conjur