After years of excellent results, Brazilian agribusiness has faced an unprecedented crisis, driven by a combination of economic and environmental factors. The significant increase in input prices, added to the fall in the value of commodities due to the increase in world stocks, as well as a prolonged drought affecting several regions of Brazil, has compromised productivity and worsened the financial situation of rural producers.
This complex and unfavorable scenario has culminated in a significant increase in requests for judicial recovery among rural producers, with a 523% growth in the last year, according to data from the sector, highlighting the critical situation that Brazilian agribusiness is currently facing.
However, despite the considerable increase in requests for judicial recovery compared to the previous year, they only represent 0.000025% compared to the total number of Brazilian producers. In other words, in a country with around 3.5 million individual producers, approximately 30,000 could use judicial recovery as an appropriate and necessary means of financial reorganization. However, only 127 filed for judicial reorganization in 2023, representing around 0.4%.
Despite this, the alert was sounded after AgroGalaxy filed for judicial reorganization, with a debt of R$4.6 billion covering banks, suppliers and employees, and Portal Agro, with a debt of R$700 thousand. These companies, important in the sector, have accumulated significant liabilities due to unfavorable economic and climatic conditions, and have resorted to judicial reorganization to avoid bankruptcy.
In general terms, judicial reorganization is a legally admissible recourse that allows heavily indebted rural producers the chance to restructure their debts, protecting their assets and guaranteeing the continuity of their activities, thus avoiding bankruptcy.
In Brazil, Law No. 11.101/05 regulates judicial reorganization and bankruptcy, the former of which is designed to prevent the latter by allowing the company to present a plan for restructuring its debts, including a renegotiation with creditors and employees, in order to establish a payment schedule that allows it to continue operating.
As was the case with AgroGalaxy, it is not uncommon for companies to file for judicial reorganization and, among their debts, there are amounts to be paid as labor debts.
In order to settle these amounts, several characteristics must be observed, such as, for example, labor creditors are allowed to qualify their claims already recognized in court before the trustee in the civil lawsuit. In addition, ongoing labor lawsuits will continue before the Labor Court, until the right is recognized and the amount owed is quantified, and then the amount can be claimed in the civil court, respecting the reorganization plan.
There is also, in general, a one-year deadline in the judicial reorganization plan for the payment of labor claims and those arising from accidents at work, due up to the date of the request for judicial reorganization. However, exclusively wage claims of up to five minimum wages, due in the three months prior to the request for judicial reorganization, must be paid within thirty days.
There are several other important aspects in relation to judicial reorganization and labor relations, which is why this process can generate uncertainty for employers and employees, since the legislation establishes the priority of labor credits in the reorganization plan, meaning that, in the event of default, workers have priority over other creditors. However, they face the possibility of delays in payments, benefits and terminations, because during the judicial reorganization process, lawsuits and executions are suspended for 180 (one hundred and eighty) days, counted from the time the judicial reorganization is granted.
In addition to the risks of default, judicial reorganization has a direct impact on maintaining jobs. In many cases, employers are forced to reduce their workforce or renegotiate working conditions, which can be complex, especially in a sector that depends on temporary and seasonal labor, such as agribusiness.
Judicial recovery, when used strategically, can be the difference between bankruptcy and the continuity of a rural business. For rural producers who are facing financial difficulties, the sooner they seek expert advice, the better their chances of reorganizing their finances and ensuring the continuity of their activities.
Given this scenario, implementing preventive strategies is essential if agribusiness companies are to face periods of crisis more resiliently.
If you have any questions on the subject, our Labor team is at your disposal.
