The recent global pandemic of the coronavirus (Covid-19), policies of social distancing and the economic effects of the crisis have led the House of Representatives to urgently propose amendments to Bill 6229/05, which seeks to modify several provisions of the Bankruptcy and Judicial Recovery Law (Law 11101/05).
The proposal involves the establishment of a transitional system (articles 188-A to 188-L), and contemplates, in summary, the creation of a system for prevention of company crises and the suspension or amendment of certain provisions of Law 11101/05 (articles 188-F to 188-K). The application would be for a fixed period of 360 days.
In order to qualify for the benefit, a drop of more than 30% in the company's revenues must be demonstrated, giving the company, in this case, the possibility to formulate a collective bargaining request, with the involvement of the Judiciary. Once the request is granted, the company will benefit from a 90-day stay of enforcement proceedings filed against it by its creditors. The purpose of this period of time is to ensure a breathing space so that the debtor, harmed by the economic crisis resulting from the pandemic, can renegotiate its debts with its creditors, who are prevented, for the 90-day period, from filing for bankruptcy of the company.
Collective bargaining can only be requested once and must be terminated after the expiration of 90 days, regardless of the outcome of the negotiations.
We present below a summary of the provisions that may come into force, should the transitional regime be approved by the House of Representatives.
During the 360-day transitional period:
- express resolutive clauses, based on the default of the company, may not be enforced by creditors.
- The provisions of articles 49, paragraphs 1, 3 and 4, 73, IV and 199, paragraphs 1 and 3, of Law 11101/05 shall not apply.
- creditors will be prevented from collecting debts against co-obligors of the company (joint debtors, guarantors or sureties), and also from claiming their right of ownership, whether from real estate owners, leasing or fiduciary alienation creditors.
- non-compliance with the judicial reorganization plan already ratified will not result in a decree of bankruptcy.
- the rights and prerogatives arising from aircraft leasing agreements cannot be exercised by lessors against airlines under judicial reorganization or bankruptcy.
- suspension, for 90 days, of all obligations established in judicial or out-of-court reorganization plans already approved.
- possibility of submitting, within 90 days, an amendment to the plan already ratified, including to subject credits constituted after the request for judicial or out-of-court reorganization, which must be approved at a meeting of creditors.
- release in favor of the rehabilitating companies of all credit rights of their original ownership, regardless of the date of their constitution and the existence of guarantees of any nature, with the progressive recomposition of the guarantee between the 6th and 36th months after the release request.
- homologation of out-of-court reorganization plans by approval by simple majority, and no longer by 3/5 of the credits subject to its effects.
- increase in the minimum amount for filing for bankruptcy from 40 minimum wages to R$ 100,000.00 (article 94, I of Law 11101/05).
For further information, contact our civil team: Armin Lohbauer [email protected] and Rachel Tucunduva [email protected]
