Camila Vieira Guimarães
Lawyer at Marcos Martins Advogados
In the context of the new coronavirus pandemic , some case law decisions have drawn attention to the possibility of signing amendments to the judicial reorganization plans originally submitted due to the worsening financial situation of the reorganized company.
Article 53 of Law 11.101/2005 (the Judicial Reorganization and Bankruptcy Law) stipulates that, within 60 days of the publication of the decision that processed the judicial reorganization, the reorganized company must present its reorganization plan containing a description of the means of recovery, a demonstration of economic viability and an economic-financial report and appraisal of the debtor’s property and assets.
It so happens that during the course of the judicial reorganization process, even if the judicial reorganization plan has already been approved and ratified, considering that the purpose of the process is to make it possible to overcome the economic crisis and preserve the company’s market potential, atypical circumstances that considerably jeopardize compliance with the plan should make it possible to amend it by means of an addendum.
This is the application of the theory of unforeseeability, contained in art. 478 of the Civil Code, which allows the obligation to be terminated or revised in the event of an extraordinary and unforeseeable event, if the performance of one of the parties becomes excessively onerous, to the extreme advantage of the other.
By way of example, the case law of the São Paulo Court of Justice (TJSP) has accepted requests to modify the judicial reorganization plan of companies whose regular operation has been affected by the pandemic, for example by changing payment schedules.
Recently, an isolated decision by the 2nd Civil Court of the TJSP ordered a company operating in the hospital sector to submit a payment addendum to the creditors of the judicial reorganization plan due to extraordinary gains during the pandemic.
However, this decision confronts basic legal institutes and principles, such as the inertia of the court, the premises of onerousness and advantage, as well as the sovereignty of the general meeting of creditors.
Analysis of the externality factor should be paramount in verifying the need to modify the judicial reorganization plan. The change in market demand and supply must include time and a reasonable cost that justifies altering the original plan, which has been submitted to all the legal requirements for approval.
The modification to the judicial reorganization plan must be published so that the creditors are aware of it, and they will have 30 days to express their opinion on the amendment. If one or more creditors disagree, a general meeting of creditors must be called to decide specifically on the amended plan.
The judicial reorganization plan may also be amended at the request of the Judiciary. Despite the supremacy of the general meeting of creditors to decide on the judicial reorganization plan, the decisions are subject to the control of legality exercised by the Judiciary.
Thus, it is conclusive that the plan can be altered due to supervening circumstances that jeopardize the company’s recovery. This possibility is in line with the principles that govern the Judicial Reorganization and Bankruptcy Law, in particular the principle of preserving the company and its social function, a possibility that is also in line with the flow of the market, which requires urgent adjustments in order to maintain business activities.
In any case, care must be taken to ensure that the modification of the plan is not the result of a temporary externality and corresponds to one party gaining economic advantage to the detriment of the other. The modification must always seek to equalize the relationship between the parties, and the Judiciary plays a solemn role in controlling the legality of the new conditions of the plan, safeguarding good faith and the interests of all those involved in the process.
Marcos Martins Advogados reaffirms its commitment to excellence in the provision of legal services, following jurisprudential understandings capable of ensuring greater security and identification of potential risks and benefits in its clients’ decision-making.
