April 07, 2020
COVID-19 | Restructuring and Insolvency - Recommendations CNJ
Restructuring and Insolvency - updated on 06/04 at 06:26 pm
National Council of Justice approves regulation on Judicial Reorganization and Bankruptcy proceedings during the COVID-19 crisis
On March 31, 2020, the National Council of Justice (CNJ) approved the Regulation No. 0002561-26.2020.2.00.0000 containing recommendations to the Courts with jurisdiction to rule on judicial reorganization and bankruptcy proceedings, by adopting measures to mitigate the impacts resulting from the crisis started with the spread of COVID-19. The new regulation aims to protect the company’s social function, with continuity of business activity, generation of taxes and maintenance of jobs, in addition to modernization measures, focusing on the effectiveness of the Court in these processes.
The text, written by Henrique Ávila, came into force and effect on the date of its publications on April 1, 2020.
The recommendations are not binding to the Brazilian Courts, and it seeks to guide and standardize the treatment of the matter, particularly for judges who are not specialized in judicial reorganization and bankruptcy proceedings.
The six recommendations are, in summary, the following:
- Prioritizing the analysis and decision on collection claims in favor of creditors or companies under judicial reorganization, due to the economic and social importance that such measures have to maintain the regular functioning of Brazilian economy;
- Suspending General Creditors Meetings in person, authorizing virtual meetings when necessary for the maintenance of the companies under judicial reorganization business activities and for the beginning of creditors’ payment. It is up to the judicial administrators to arrange the virtual meeting, if possible;
- Extending the suspension period of 180 days provided in Article 6 of Brazilian Bankruptcy Law called “stay period”, when the postponement of the General Creditors Meeting is needed, until the possibility of a decision ratifying the result of the General Creditors Meeting;
- Authorizing the presentation of any amendment/modification of the Judicial Reorganization Plan, when the decrease in the capacity to fulfill obligations due to the COVID-19 pandemic is proven, and if the current plan was being complied with by March 20, 2020. In addition, to consider in specific cases, the occurrence of force majeure or unforeseeable circumstances before an eventual bankruptcy decree (relativizing the application of Article 73, IV, of the Bankruptcy Law);
- Determining that judicial administrators shall continue to monitor the activities of the companies under judicial reorganization in a virtual or remote manner, and that they keep publishing Monthly Activity Reports (RMAs) on their respective websites; and
- Evaluating, with exceptional caution, the granting of urgent measures, eviction due to lack of payment, and enforcement acts of equity nature in claims that demand the fulfillment of defaulted obligations during the state of public calamity recognized by Legislative Decree No. 6 of March 20, 2020, as a measure to prevent the economic crisis resulting from the social distance measures.
TozziniFreire’s Restructuring and Judicial Reorganization team is available to provide any further details needed regarding the abovementioned and guide you on this and other impacts arising from COVID-19 in judicial reorganization and bankruptcy procedures.