Aline Cavalcante de Souza Sanches
Lawyer at Marcos Martins Advogados
On January 23, 2021, Law No. 14,112/2020 came into force, amending and including several provisions in Law No. 11,101/2005, in order to update the legislation on judicial and extrajudicial reorganization and bankruptcy of entrepreneurs and companies.
The amendment in question brought numerous changes aimed at modernizing restructuring procedures for companies in crisis, which involve various spheres of law, especially tax and labor law.
One of the main changes enshrined in the legislation, with regard to the judicial reorganization procedure, is contained in article 6, items I, II and III, which consolidated the understanding that had been applied by case law to protect the assets of the company under reorganization.
Subsections I and II of the aforementioned article state that the granting of judicial reorganization has the effect of suspending the running of the statute of limitations on concurrent obligations, executions filed against the debtor, including those of the private creditors of the joint partner, relating to claims or obligations subject to judicial reorganization or bankruptcy.
Subsection III, on the other hand, defines the prohibition of any form of retention, seizure, attachment, sequestration, search and seizure and judicial or extrajudicial constriction on the debtor’s assets, arising from judicial or extrajudicial claims, whose credits or obligations are subject to judicial reorganization or bankruptcy.
Here we can already see a significant change in relation to what had been applied by case law based on Law 11.101/05, since the new legal provision limited the suspension of the statute of limitations and executions, as well as the prohibition of constrictions, to debts in competition, continuing normally with those not subject to the reorganization process.
Further altering the understanding consolidated by the Courts, the amendment brought in by Law 14.112/2020 defined, in paragraph 4-A, item II, of article 6, that all the guarantees outlined above will only last during the so-called stay period, which previously applied only in relation to the statute of limitations and suspension of executions, extending the period to prohibit seizures.
The stay period consists of a period of 180 (one hundred and eighty) working days, counted from the time the request for judicial reorganization is granted, in which companies in crisis enjoy the suspension of the statute of limitations and of executions against them, and now includes the benefit of a prohibition on carrying out acts of asset constriction during this period.
Until then, the prohibition on carrying out constrictive acts against companies undergoing judicial reorganization, consolidated by the Superior Court of Justice, was not subject to this time limit, lasting throughout the restructuring process, and this prohibition also included creditors in and out of court.
However, the new law innovated by restricting the measures to credits subject to the reorganization procedure, authorizing out-of-court creditors to continue with their enforcement proceedings against the debtor, including seizures.
Finally, the legislation also defined the possibility of extending the stay period, which was considered non-extendable in Law 11.101/2005, for another 180 (one hundred and eighty) days, as long as there is no evidence of negligence on the part of the reorganized company, thus allowing the protections to last for a total of one year.
The recent Law No. 14.112/2020 brought major changes to judicial reorganization proceedings, especially as regards the limitation and better delineation of the guarantees granted to the company in judicial reorganization, with the aim of balancing protection for the debtor with the rights of creditors, and its provisions will still be interpreted by case law, in order to comply with the principle of preserving companies in crisis.
Marcos Martins Advogados is attentive to the application of the new Law 14.112/2020 by the Higher Courts, in order to provide the best alternative for restructuring companies via judicial and extrajudicial reorganization, as well as enabling the satisfaction of claims against such companies.
