TEORIA GERAL DO PROCESSO

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MAIN FEATURES OF THE BUSINESS
REORGANIZATION PROCEDURE IN
BRAZIL
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THE COMPANY’S CRISIS
- Free market solutions
- disfunctions
- Judiciary will interfere, only on a subsidiary basis, in order to avoid the
damages in consequence of the fail of the companies.
• - Logical assumption: economic viability of the company.
• INSOLVENCY LEGAL SYSTEMS
• - It plays a fundamental role regarding to the orientation of the market
• - Brazil – historicaly, the law always put emphasis on the liquidation, rather
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then the attempt of reorganization of the company in a crisis situation.
- Duality: protection of the creditor’s or debtor’s interests.
- US legal system – chapter 11 – balancing between creditor’s and debtor’s
interests – creditor’s participation in the company’s reorganization process.
THE EVOLUTION OF THE INSOLVENCY LEGAL SYSTEMS IN BRAZIL
•- STATUTORY LAW 7661/45 – rudimentar and narrow system of
reorganization.
•Range: only unsecured creditors; based on two options (payment by
installments and/or discount).
•- STATUTORY LAW nº 11.101/05: create the business reorganization
procedure.
•Wide range; include almost all the creditors (but not taxes and some secured
claims, specially banks credits); emphasis on the negotiations between
creditors and debtors to make it possible the sucessful business reorganization.
•Complain: it’s suitable for big companies and, therefore, unaccessible
to small businesses, which are the vast majority of the brazilian
companies
• Concept: it is the judicial process which aims to facilitate
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the overcoming of the economic-financial crisis of the
debtor, in order to allow the maintenance of the source
of employment of workers and the interests of creditors,
thereby promoting the preservation of the company, its
social function and the stimulation of economic activity
(section 47).
Central points: NEGOTIATION BETWEEN DEBTOR AND
CREDITORS AND CREATION OF AN ENABLING
ENVIRONMENT FOR THE OVERCOMING OF THE CRISIS.
• THE BALANCING OF INTERESTS PRINCIPLE
• - Debtor and creditors should bear the burden of the bankruptcy
reorganization process, joining forces for the practical realization of
the objective of the law: maintenance of productive activity with all
the ensuing benefits (job retention, circulation of wealth, tax
collection)
• Creditors: support the burden of the reorganization plan
• Debtors should guide their conduct to maintain jobs with tax
collection and effective production of products and services
• AUTOMATIC STAY
• -initiated the process of reorganization (granted its beginning), are
automatically suspended lawsuits and foreclosures filed against the
company for a period of 180 days.
• - This is the main legal tool to force creditors to negotiate with the
debtor a plan of reorganization. It enables an environment
conducive to negotiation.
BUSINESS REORGANIZATION PROCEDURE
• Granted the beginning of the reorganization procedure, starts the
phase of verification of claims, resulting in the formation of the list
of creditors subject to the reorganization plan.
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List of Creditors 1 (presented by the debtor)
(Possibility of administrative disputes to be solved by the trustee)
List of Creditors 2 (presented by the trustee)
(Possibility of judicial reviews)
List of Creditors 3 (the final framework of creditors subjetc to the
plan)
• In parallel to the determination of claims, the debtor must submit
the Plan of Reorganization.
• In case of objection to the plan, shall be appointed by the judge to
the Meeting of Creditors, at which creditors will vote on whether to
accept or reject the plan.
• Approval of the Reorganization Plan: The company shall be under
judicial supervision for 02 years. Thereafter, the company will be
under the process of verification of compliance with the plans’s
obligations. If the company is done witlh the compliance, the case
will be closed. If the company fails to comply with the plan, the
reorganizaton will be transformed into a liquidation process.
• Rejection of the Reorganization Plan: it turns into a bankruptcy
liquidation.
• In the Brazilian system, only the debtor may present the plan of
reorganization.
• Creditors can not impose a plan or any conditions on the debtor
company, except with its (the debtor) consent.
• THE POWER OF THE MEETING OF CREDITORS
• Under Brazilian law, the decision of the creditors taken at the
MEETING is mandatory.
• However, this may not mean that the judge is obliged to ratify
decisions considered illegal, fraudulent or abusive taken by the
creditors.
• The economic and social purpose of the process must be
guaranteed by the Judge - decisions that meet the unique interests
of creditors, but that do not generate significant social and
economic benefits should not be judicially approved.
THANK YOU VERY MUCH
Daniel Carnio Costa, PhD
Bankruptcy Judge, sitting in the São Paulo Court,
in Brazil
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