Tatiane Bagagí Faria
Lawyer at Marcos Martins Advogados
Law No. 14.112/2020, which came into force in January 2021, brought changes to the Judicial Recovery and Bankruptcy Law, presenting, as a significant novelty, the legitimacy of rural producers as individual entrepreneurs to file for judicial recovery, even if they have not been registered with the Public Registry of Commercial Companies for more than two years.
The main point of note addressed by the new legislation is the time requirement necessary for rural producers to be entitled to file for judicial reorganization. This is because, prior to the change in the law, article 48 of Law 11.101/2005 stipulated that a period of two (2) years of regular activity by the rural producer was necessary for the granting of reorganization, without making it clear from when this time would be counted, which generated a great deal of legal uncertainty and divergent case law on the subject.
Before the legislative innovation, the prevailing case law required that, in order to apply for judicial reorganization, the individual rural producer had to prove the existence of a business registration with the Board of Trade of his state for the time provided for in article 48 of the Judicial Reorganization and Bankruptcy Law, as well as demonstrating the regular exercise of rural activities for the same period.
With the advent of the legislative change, the rural producer has the possibility of accounting for a period prior to registration with the Board of Trade in order to prove the period of activity required by law, with the presentation of accounting-financial documentation showing that, regardless of due registration as an individual entrepreneur, they were already carrying out rural activities.
The law specifies the documents that can prove the exercise of rural activity for the purposes of calculating the 2 (two) year period, under the terms of article 48, paragraph 3, of Law 11.105/05:
Art. 48. A debtor may apply for judicial reorganization if, at the time of the application, he has been regularly carrying out his activities for more than 2 (two) years and meets the following requirements, cumulatively:
§Paragraph 3 In order to prove the period established in the caput of this article, the calculation of the period of exercise of rural activity by an individual is made based on the Rural Producer’s Digital Cash Book (LCDPR), or by means of a legal obligation of accounting records that will replace the LCDPR, and by the Individual Income Tax Return (DIRPF) and balance sheet, all delivered in a timely manner. (Included by Law No. 14.112, of 2020)
With the legislative change, the legislator’s intention regarding the possibility of computing the period prior to the individual entrepreneur’s registration with the board of trade for the purposes of meeting the time requirement was evident, since it allowed the presentation of documentation of rural activity as an individual, presenting an understanding in line with the guiding principles that underpin the Judicial Reorganization and Bankruptcy Law, always guided by the recovery of the company in crisis and the social function of business activity.
Another innovative point regarding the judicial reorganization of rural producers concerns the possibility of opting to adopt the simplified procedure, which until then was exclusive to micro and small companies, allowing the presentation of a special plan, provided that the value of the case does not exceed R$ 4,800,000.00 (four million eight hundred thousand reais), under the terms of article 70-A, included by Law 14.112/20.
Despite the positive changes regarding the legitimacy of the rural producer and the time requirement to file for judicial reorganization, the legislative change restricted the concurrent credits of the rural producer’s judicial reorganization. This is because it stipulated that credits arising exclusively from rural activity and listed in the documents referred to in §2 and §3 of article 49 of the law, even if not overdue, will be subject to judicial reorganization. In this sense, financial transactions that are not documented will be excluded from the benefits of credit concurrence in the context of reorganization.
Marcos Martins Advogados is aware of this issue and is prepared to provide qualified legal advice to its clients.
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