Law no 14.112/2020 introduced significant modifications to Brazilian bankruptcy and judicial recovery laws with the goal of updating procedures and ensuring increased legal assurance for all stakeholders.
This article will examine the key alterations for those actively practicing law in this field or interested in understanding the new system dynamics.
Discover how these changes impact business recovery and learn how to implement them in your professional work. Check it out!
What does Law No. 14.112/2020, known as the Law of Death and Judicial Recovery, entail?
The aim of the recently enacted Bankruptcy and Judicial Recovery Law (Law No. 14.112/2020) is to maintain a fair balance between creditors and debtors’ interests, with a focus on sustaining economically viable companies.
Its primary goal is to facilitate the financial recuperation of these businesses, ensuring that creditors’ rights are upheld and, when feasible, striving to sustain business operations and employment.
The law sets out distinct procedures for restructuring debts and reorganizing companies, aiming to promote the resolution of financial challenges and the protection of assets and the economy.
What are the modifications introduced by EC 132 regarding tax reform?
Changes to the Law of Death and Judicial Recovery [Law No. 14.112/2020]
Financing options during legal recovery proceedings
Companies undergoing bankruptcy proceedings can secure funding with priority assurance through the implementation of “DIP Financing” (Debtor-in-Possession).
The creditors funding these companies are preferred to receive the payments, even with the current collateral in place.
This action encourages the infusion of resources to sustain the company’s functioning throughout the procedure.
Legal foundation: Article 69-A of Law 14.112/20.
Employing mediation and conciliation
Legislation currently promotes the utilization of alternative conflict resolution methods like mediation and conciliation prior to and throughout legal and bankruptcy proceedings.
These methods decrease operational expenses and accelerate conflict resolution.
Article 20-B of Law No 14.112/20 provides the legal foundation.
Expansion of out-of-court debt collection
The reform made it easier to use extrajudicial recovery by enabling agreements to be made with only a portion of the creditors.
This modification lessens the requirement for court involvement and speeds up the financial reorganization process for businesses.
Legal foundation: Article 163 of Law No. 14.112/20.
Restructuring of tax debt
The new law allows federal tax debts to be divided into monthly installments lasting up to 120 months.
Companies can utilize tax losses they have accumulated to offset debts, thereby reducing the tax impact as they recover.
Legal foundation: Sections 10-A and 10-B of Law No 10.522/2002, as amended by Law No 14.112/2020.
Sale of assets without encumbrances
The new law guarantees that when companies in judicial recovery or bankruptcy sell assets, the buyer will not inherit any labor or tax debts.
This action boosts legal confidence and draws in investors.
Legal foundation: Sections 60 and 66 of Law No. 14.112/20.
Trans-border bankruptcy
Law 14.112/20 introduced particular regulations regarding international bankruptcies to enhance collaboration between domestic and international legal systems.
This is particularly important for businesses that operate on a global scale.
Legal foundation: Sections 167-A to 167-O of Law No. 14.112/20
Tips for attorneys practicing Death and Judicial Recovery Law
Expertise and a strategic approach are essential in the field of bankruptcy and judicial recovery to effectively serve clients.
Here are some suggestions for attorneys looking to enhance their practice in light of recent legislative changes and available resources.
Examine modifications in legislation.
The new Law of Death and Judicial Recovery, Law No. 14.112/2020, has introduced new mechanisms and significant regulations.
Understanding these changes is crucial for providing high-quality service.
Assistance in proactive measures
Preventive measures can stop customers from facing insolvency. Key actions to take include:
- Advice on effective financial management practices and monitoring of cash flow.
- Identify potential hazards and recommend resolutions like renegotiating debt.
- To encourage the development of a backup plan for potential financial challenges.
By foreseeing issues and suggesting remedies, it can lower the risk of bankruptcy and ready the client for potential legal recovery proceedings.
Utilize technology to your advantage.
Technological tools such as Legal AI and other specialized software are valuable assets in legal tasks.
- Automate the creation of requests and documents.
- Assistance with handling procedural deadlines.
- Organize and keep documents related to processes.
- Provide insights based on data analytics to enhance strategies.
The effective utilization of these tools boosts productivity and minimizes operational mistakes, enabling the lawyer to dedicate more time to developing case strategies.
Keep an eye out for chances to participate in mediation.
Mediation is a flexible and efficient method for settling disputes and steering clear of prolonged legal proceedings.
Promote out-of-court settlements whenever feasible, taking into account that:
- Cut expenses for everyone involved.
- Speed up the process of finding a solution.
- They provide more options in discussions.
A proficient attorney should know when to suggest mediation and help with negotiations among the parties.
Jurisprudence Update
Courts frequently encounter new challenges in bankruptcy and insolvency procedures.
Staying informed about recent court rulings and laws is crucial for building strong arguments and finding effective solutions.
Understand the unique aspects of the business.
Each company’s unique characteristics can impact the outcome of the recovery or bankruptcy proceedings.
The attorney needs to conduct a thorough examination of the financial status, the organizational setup, and the interactions with the creditors.
This comprehension enables you to develop a customized and efficient strategy.
Encourage openness and confidence
Inform your customers about each stage of the process, detailing the potential risks and alternative options.
Clear communication enhances trust and ensures decisions are made thoughtfully.
Invest in ongoing education.
Attend courses, seminars, and events focusing on bankruptcy and judicial recovery.
Continuous education is crucial to stay updated with market shifts and provide top-notch service.
By following these suggestions, you will enhance your ability to act ethically and effectively in the field of bankruptcy and judicial recovery, thereby benefiting both your clients and your professional growth.
Modernizing the Death and Recovery Law presents new possibilities for legal professionals.
Law No 14.112/2020 made important improvements to bankruptcy and judicial recovery laws, updating the Brazilian legal system and expanding the options available for companies facing financial challenges.
Changes encourage improved efficiency, legal confidence, and motivation for sustainable business operations, demonstrating a more responsive and harmonized strategy to meet present economic demands.
Lawyers must stay updated and use technology to meet customer demands effectively, as these changes offer both challenges and opportunities.
The new legal regulations, along with preventative measures and customized strategies, will offer efficient solutions and enhance businesses and the country’s economy.
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