Government measures in key jurisdictions 3rd edition final - Flipbook - Page 18
Brazil
For the period of 60 days following the Legal Suspension, the debtor that proves that its revenues
have decreased at least 30% due to the COVID-19 crisis, upon presentation of a certified document by
an accounting professional, is entitled to file for a newly created voluntary remedy called “Preventive
Negotiation", during which the prohibition on action mentioned above will be maintained for an
additional 90-days period.
It is important to mention that the list of debtors entitled to file for Preventive Negotiation has been
expanded, adding to the enterprise and business owner categories, the rural producer and the selfemployed professional. However, the list for those entitled to request judicial reorganization and prepackaged reorganization remains unchanged, benefiting only the enterprise and the business owner
that observes the criteria already established in the Brazilian Bankruptcy Law.
During the 90 days non-extendable period of the Preventive Negotiation, the debtor must try to reach
a settlement agreement with its creditors to avoid insolvency. However, creditors’ participation in this
proceeding is optional.
In case a settlement with its creditors is not reached and the debtor files for judicial reorganization or
pre-packaged reorganization within the 360 days following the execution of the agreement in the
Legal Suspension and/or in the Preventive Negotiation, the creditors’ rights and guarantees will be
restored under the terms of the original obligations and credit instruments. In other words, the
individual settlement agreements reached during the Legal Suspension and/or the Preventive
Negotiation will be disregarded, and the parties will return to the status quo ante. The provision to
restore the debtor’s obligations and the creditors’ rights prior to the settlement agreement aims to
stimulate extrajudicial negotiation, which brings more speed to the procedure and legal safety to
creditors.
In case of a filing for judicial or pre-packaged reorganization, the period of legal protection granted
during the Legal Suspension and/or the Preventive Negotiation will be deducted from the 180-day
stay period that ensures the suspension of lawsuits and enforcement actions against the debtor.
The Bill also waives certain requirements provided for in the Brazilian Bankruptcy Law for companies
that may need to use insolvency procedures during the period in which it is in force, such as:
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the debtor can file for a judicial reorganization proceeding, even if they have not regularly
performed their activities for more than two years, have already filed for a liquidation proceeding
or have filed for a judicial reorganization proceeding in less than 5 years from the prior filing;
the debtor can file for a prepackaged reorganization proceeding even if a judicial reorganization
request is pending or if they have obtained a judicial or prepackaged reorganization proceeding in
less than 2 years;
the minimum amount to declare bankruptcy is now considered BRL 100,000.00;
the quorum for the approval of the prepackaged reorganization plan will be reduced to half plus
one of all credits; and
the stay period will be applicable to the credits subject to the prepackaged reorganization
proceedings.
In addition, all obligations provided under judicial or prepackaged reorganization plans will be
suspended for 120 days, and the debtor may, during this period, submit a new plan for voting, which
will bind all claims that have materialized after the filing of the proceeding up to that date, except for
the debtor-in-possession financing carried out with the express consent of the court of the judicial
reorganization proceeding.
Finally, despite being approved by the House of Representatives, the Bill is still subject to the approval
by the Federal Senate and, subsequently, a Presidential signing statement.
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Government measures in key jurisdictions