Judicial recovery, as defined by Law No. 11.101/2005, is a crucial legal tool during economic crises, focusing on debt restructuring, job preservation, and creditor protection.
Large Brazilian companies like Casa do Pão de Queijo and Americanas have recently utilized this approach, underscoring the significance of conducting the process correctly. In this scenario, the lawyer’s role is crucial, from the initial advice to the ultimate restructuring of the company.
Definition and aims of judicial recovery
The judicial recovery is a legal procedure designed to help a struggling company overcome financial difficulties, ensuring the continuity of its operations, employment of workers, and protection of creditors’ interests.
Your primary objectives consist of:
- Adjusting the financial obligations of a company to ensure their viability is known as debt restructuring.
- Ensure the company remains operational and creates value by maintaining business activity.
- Ensure that employees retain their employment.
- Creditors’ interests involve safeguarding their rights and finding a resolution that reduces losses.
The lawful procedure of judicial recovery in Brazil
Judicial recovery in Brazil adheres to a well-defined process comprising various stages that need to be strictly adhered to in order to guarantee the procedure’s success. The primary phases include:
- The company needs to submit a request for judicial recovery to the court, providing all necessary documents, such as financial information and an initial recovery strategy.
- If the request is approved, the judge will postpone the handling of the judicial recovery and assign a judicial administrator to oversee the procedure.
- The company must present a comprehensive recovery plan within 60 days, outlining strategies for debt repayment and restructuring.
- Creditors are called to a meeting to discuss and vote on the recovery plan proposed.
- If creditors agree, the plan is approved by the judge and implemented under judicial oversight to ensure the company’s reorganization as specified, with possible adjustments to meet the set objectives.
The lawyer plays a crucial role in the process of judicial recovery.
The lawyer has a crucial role throughout the entire process of judicial recovery, being essential for developing strategies, negotiating with creditors, and meeting legal obligations.
Initial consultation and evaluation of feasibility
It is crucial for the company to assess the viability of judicial recovery before commencing the process. An attorney, utilizing their expertise, aids in examining the company’s financial status and identifying potential options.
Determining if judicial recovery is the most suitable option or if alternatives like renegotiating directly with creditors would be more appropriate is crucial during the initial consultation.
Preparing the request for court-ordered financial restructuring.
The process of filing for judicial recovery involves gathering multiple documents and creating an initial recovery strategy.
- Gather the required paperwork, such as balance sheets, financial statements, and creditor and asset ratios.
- To create a recovery plan involves outlining strategies for restructuring the company, proposing payments to creditors, and implementing measures to secure the company’s long-term sustainability.
- To ensure that all legal requirements are fulfilled and the request is clearly and impartially presented to the court, it is important to follow the protocol.
Engaging in transactions with debtors
Trading with creditors during the judicial recovery process is a critical phase where a lawyer serves as a mediator to find a compromise between the company’s interests and those of the creditors.
- Mediation of conflicts involves aiding communication between involved parties and finding solutions to any standstills that may arise.
- Proposal for agreements: suggesting feasible payment solutions for debts that are agreeable to both the company and the creditors.
- Defend the company’s interests in meetings where the recovery plan will be discussed and voted on by creditors.
Process supervision
After the recovery plan is approved, the lawyer remains crucial in monitoring the process.
- Ensure that the actions outlined in the recovery plan are carried out as scheduled.
- Prepare reports for the judicial administrator and the judiciary, showing the recovery progress.
- Resolve any conflicts that may occur during the plan’s implementation by maintaining communication between the company and creditors.
Reorganizing and recuperating
The final phase of the legal recovery procedure focuses on successfully reorganizing the company. Attorneys work together with managers and advisors to enforce operational, financial, and strategic alterations, with the goal of fully restoring the company.
- Revise contracts and agreements to align with the company’s updated financial terms.
- Developing and executing new policies to enhance long-term efficiency and sustainability.
- Track the outcomes of the changes that have been put into place and make any necessary adjustments through ongoing monitoring.
Advantages of a successful legal recovery
A successful legal recovery can offer numerous advantages to the company, its workforce, and creditors. Key benefits include:
- Maintenance of business operations enables the company to sustain its activities, generate income, and uphold its competitiveness in the market. This also enables the company to persist in innovating and competing efficiently.
- Workers retaining their positions help maintain economic and social stability, making job preservation a valuable advantage.
- Debt restructuring involves rearranging financial commitments to make payments manageable and reduce the company’s financial burden.
- A successful recovery can rebuild the confidence of creditors, investors, and customers in the company by enhancing credibility.
- Long-term sustainability can be reached by implementing internal changes and new policies to secure the company’s future viability and growth.
Judicial recovery is a valuable resource for struggling businesses, enabling debt restructuring and sustaining economic operations. Yet, its effectiveness relies on meticulous and strategic oversight, with the lawyer playing an essential role.
The lawyer plays a crucial role in guiding the company through various stages, ensuring a balanced approach that protects both the company and its creditors. Successful legal proceedings can help companies overcome financial difficulties and secure a stable future with job preservation.
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