At a vote held yesterday, the Senate approved the Bill of Law # 4.548/20, that changes several articles of the Law 11.101/05, that regulates the institutes of the Judicial Restructuring, the Extrajudicial Restructuring and the Bankrutpcy proceedings.
The final text will follow for presidential sanction. Among the main changes brought by the Bill of Law 4.458/20, we may highlight the following:
- The stay period of the lawsuits filed against the Debtors (“stay period”) of 180 days may be extended for the same period only once and in exceptional cases, as stablished in the Bill of Law;
- Creditors are allowed to present a plan without the debtors’ prior consent, provided that (i) the JR plan presented by the Debtors is not approved by the General Meeting of Creditors and (ii) the JR plan presented by Ceditors meet certain requirements sets forth in the Bill of Law;
- the possibility of General Creditors Meeting being taken by electronic means;
- the acquisition of assets of companies (including the possible M&A of the Debtor) undergoing a JR is protected so that the buyer does not take over any liabilities from the debtor (including tax, environmental and labor debts).
- The Bill of Law regulates the institutes of the Substantial and Procedural Consolidation, stablishing not only their requirements, but also the voting mechanism, and consequences of the non-approval of the JR plan of part of the Debtors that applied for bankruptcy protection;
- the Bill of Law replicates part of the UNCITRAL rules for cross-border insolvency proceedings, creating mechanisms of international cooperation for proceedings that involves debtors with branches headquarter and/or assets in other Jurisdictions;
- The Bill of Law prohibits the Debtor to distribute profits and dividends during the course of the JR Proceeding.
- The Legitimate Parties to apply for bankruptcy protection were changed, including the concept of economic agent that can apply for bankruptcy protection and expressly including the rural producers as legitimate party to apply for bankruptcy protection
- the Bill regulates in detail the DIP Finance for companies facing an insolvency proceeding, establishing not only the requirements for its concession, but mainly its priority regarding the collateral granted and ensuring the enforcement mechanisms in case of default of the DIP Finance or the decree of bankruptcy of the Debtor;
- Although the Bill of Law improves the possibilities to negotiate tax liabilities, increases the use of accumulated tax losses and waive the Debtors from the payment of income tax in certain cases, it also creates severe consequences for the Debtors that are not in compliance with its tax obligations during the course of the judicial restructuring proceeding;
- The Bill of Law reinforces the use alternative dispute resolution methods in the Judicial Restructuring Proceeding, mainly the institutes of Conciliation and Mediation;
- The Judicial Trustee received new duties and responsibilities, acting more proactive in supervise the information provided by the Debtors, as well as to incentive discussions and negotiations regarding the JR plan;
- The bankruptcy proceeding was changed to make the sale of assets more expedite and efficient; and
- The Extrajudicial Restructuring Proceeding may involve labor credits and the payment deadline of the labor credits in a Judicial Restructuring proceeding, that had a maximum of 12 (twelve) months; may be extended in certain cases.
Santos Neto Advogados continues to monitor the most relevant issues in Brazil and remain available for any clarification.