Nathália Guedes Brum
Lawyer at Marcos Martins Advogados
With the current national economic scenario, the number of companies filing for judicial reorganization in Brazil is increasing, as can be seen in the Serasa Experian Bankruptcy and Reorganization Indicator[1].
Law 11.101 of February 9, 2005 – the Bankruptcy and Corporate Reorganization Law (hereinafter “LFRE”), which regulates the matter, provides for various alternatives to be adopted by the company to overcome the crisis, including the possibility of a judicial sale of the debtor’s subsidiaries or Isolated Production Units (UPI), which has proved to be very attractive.
This is because companies usually have poorly managed and/or unprofitable assets in their structure and, through the sale of IPUs, they can be transformed into revenue to continue their business activities and pay creditors in the judicial reorganization.
Although it is possible, as a means of judicial reorganization, to sell other assets in isolation, the difference in the case of the sale of UPI is that the acquirer can develop or continue with business activities free of any burden and the succession of liabilities existing in the previous establishment, as stated in article 60 of the LFRE:
Art. 60. If the approved judicial reorganization plan involves the judicial sale of branches or isolated production units of the debtor, the judge shall order them to be carried out, subject to the provisions of art. 142 of this Law.
Sole Paragraph. The object of the sale shall be free of any encumbrance and the winning bidder shall not succeed to the debtor’s obligations, including those of a tax nature, subject to the provisions of Paragraph 1 of Article 141 hereof.
The lack of succession to past obligations makes the sale of the UPI more attractive, which tends to increase the number of interested buyers, as well as the sale value of these assets.
This is because, under normal conditions, when a company acquires another, it inherits all the labor and tax liabilities of the acquired establishment[2] and, in the case of a company in a state of reorganization, the negotiation would be greatly impaired.
Specifically with regard to tax liabilities, article 133 of the CTN was amended by Complementary Law 118 of February 9, 2005, which inserted the first, second and third paragraphs, which provide for the absence of tax succession by the acquirer of a subsidiary or UPI in the process of judicial reorganization, which gives even more legal certainty to the deal.
With regard to labor liabilities, there was initially a divergence of opinion as to the absence of succession in judicial reorganization, but the Federal Supreme Court settled the issue with the judgment of ADI 3.934/DF[3] and RE 583.955-9[4], both of which were reported by Justice Ricardo Lewandoswski, declaring that the articles of the LFRE that establish the absence of labor succession for the sale of UPI in judicial reorganization and bankruptcy are not unconstitutional.
As a result, labor jurisprudence has established that the sale of a company in the process of judicial reorganization does not make the acquirer a successor to the labor liabilities, ruling out its joint and several liability for obligations arising from previous employment contracts.
In this case, the LFRE establishes that the debtor’s employees who are hired by the acquirer of the UPI will be hired under new employment contracts[5].
In order not to allow the sale of UPI to be used for illicit purposes, the LFRE establishes that there will be succession when the bidder is a partner in the company under reorganization or in bankruptcy or in a company controlled by it; a relative in a straight or collateral line up to the 4th degree, consanguineous or affinal; or identified as an agent of the bankrupt with the aim of defrauding the succession[6].
In order to avoid emptio a non domini, the legislator established that if any of the assets that make up the UPI are encumbered in real estate, the creditor holding the guarantee must expressly agree to the suppression or replacement of the guarantee prior to the sale [7].
Under the terms of the aforementioned article 60 of the LFRE, provision must be made for the sale of the UPI in the Judicial Reorganization Plan, which can also be done later by means of an amendment, so that creditors are informed about its possible sale, its composition and how the amounts obtained from the sale will be used.
In order for the sale of the UPI to go ahead, the Plan must be approved by the creditors at the General Meeting. Often, a new meeting is also required for specific approval of the proposal to sell the assets by the creditors, and the procedure itself can be carried out by means of a judicial auction or closed bids.
For these reasons, the sale of assets by means of the sale of Isolated Production Units is one of the most efficient and secure ways of raising funds for the company under reorganization, since, as well as being covered by legal certainty, it allows the company in crisis to obtain revenue to meet its debts and capitalize its operation, thus achieving the legislator’s objective of preserving jobs and business activity.
[1] SERASA. Serasa Experian bankruptcy and reorganization indicator. Available at: <http://www.serasaexperian.com.br/release/indicadores/falencias_concordatas.htm>. Acesso em: 02.02.2016
[2] Conforme disposto nos artigos 10 e 448 da CLT, artigo 133 do CTN e artigo 1.146 do Código Civil.
[3] STF – ADI 3934/DF – Ação Direta de Inconstitucionalidade, Relator: Min. Ricardo Lewandowski, Julgamento: 27.05.2009, Órgão Julgador: Tribunal Pleno.
[4] STF – RE: 583.955-9, Relator: Ministro Ricardo Lewandoswski, Julgamento: 28.5.2009, Órgão Julgador: Tribunal Pleno.
[5] Artigo 141, § 2o da LFRE.
[6] Artigo 141, § 1o da LFRE.
[7] Artigo 50, § 1o da LFRE.
