At the beginning of October, the 3rd Panel of the STJ, by majority vote, issued a decision in four special appeals (REsp 2.026.250, REsp 2.036.410, REsp 2.038.048, and REsp 2.155.284) ruling against the active legitimacy of nonprofit foundations to request Judicial Reorganization. This unprecedented decision appears, at first glance, to resolve a latent controversy in the country’s main Courts. However, problems remain unresolved for the recovery of significant entities not classified as companies, such as educational institutions and hospital associations.

The decision, reported by Minister Ricardo Villas Bôas Cueva, states that, in contrast to the benefits provided by business activity, judicial reorganization is a form of societal sacrifice, primarily by employees and suppliers, to support the entrepreneur or business company with the goal of maintaining jobs and generating wealth. However, it argues that this logic cannot be applied to associations and foundations, as these provide public utility services, and the societal exchange is the granting of tax benefits by the State.

Additionally, the decision addresses the legal uncertainty for creditors who contract with these associations and foundations, who, at the time of entering contracts, do not take into account the possibility of these entities requesting judicial reorganization. It concludes by stating that Article 1 of Law 11.101/05 is clear in providing that only entrepreneurs and business companies can seek to overcome a crisis through judicial reorganization, and that the absence of this issue in the 2020 legislative amendment was already a deliberate choice.

That said, although the decision may serve as a precedent for other cases on the matter, it is important to remember that, even under summary judgment, in 2022, the 4th Panel of the STJ decided, by majority vote, to allow the continuation of the judicial reorganization of the Instituto Metodista de Educação – IMED (TP No. 3654 / RS), with the Special Appeal still pending.

On that occasion, Minister Luis Felipe Salomão delivered an extensive opinion, emphasizing that, despite the lack of profit distribution by associations, many end up structuring themselves as true companies from an economic standpoint, engaging in organized economic activity for the production and circulation of goods and services, and committing to the maintenance of activities of significant economic and social relevance, involving fundamental social rights such as education and health, areas in which the State is often absent.

In addition to the aforementioned decision, the legislator took steps to legitimize football clubs, even if constituted as civil associations, to file for judicial reorganization under Law 14.193/21^[1], known as the Football Corporation Law. In other words, associations are allowed to seek judicial reorganization, provided they are engaged in football activities. Conversely, educational institutions or hospital associations do not have this same legitimacy due to the lack of legal provision.

In this same vein, among the changes introduced by Law 14.112 of 2020, the final part of paragraph 13 of Article 6 was included. This modification allows medical cooperatives that operate health plans to benefit from the judicial reorganization regime, equating them with companies. The matter was recently analyzed by the Supreme Federal Court (STF) through the Direct Action of Unconstitutionality (ADI) 7442, in which the constitutionality of this amendment was recognized.

Thus, stating that the recent decision by the STJ has put an end to the controversy regarding the legitimacy of associations and foundations to request judicial reorganization would be premature for several reasons: (i) due to the existence of conflicting opinions among the Ministers themselves; (ii) due to the existence of legislation legitimizing entities established in the same form; and (iii) due to the existence of numerous Special Appeals on the matter pending judgment, including important philanthropic hospitals and educational institutions, such as Santa Casa do Rio Grande, Irmandade Santa Casa de Misericórdia de Fernandópolis, Maternidade de Campinas, and the Instituto Metodista de Educação – IMED, among others.

What is undeniable, regardless of the position taken, is that these entities have significant social and economic relevance, create jobs and income, and contribute to the country’s social growth and development. Like business entrepreneurs and companies, they are subject to the constant economic and financial instabilities generated by the management of their activities or by the market itself. And what alternatives do these entities have to resolve a potential crisis?

The Civil Code, in Articles 1,102 to 1,112, provides for the possibility of liquidation, which means ending the activity. In other words, under the law, there is no possibility for these entities to overcome a crisis; the solution is the closure of activities, which, in many cases, means shutting down philanthropic hospitals that serve thousands of people and dozens of municipalities.

The alternative strategy adopted by some institutions, such as Ulbra and the São Judas Tadeu Educational Institution, was to transform civil associations into business corporations. However, this does not seem to be an option in all cases, given the need to find potential investors and the fact that it involves the privatization of institutions that receive public funding, such as hospitals. 

Finally, following the example of the SAF Law, developed specifically for football clubs, the alternative that would indeed put an end to the controversy and provide legal certainty for all parties involved would be the enactment of a law that includes these entities and regulates their ability to use judicial reorganization, with conditions and requirements suited to the market and organizational structures of these institutions, in order to enable the crisis resolution of significant economic agents.

^[1] Art. 13 in conjunction with Arts. 25 and 1, §1, I, of the aforementioned Law.

By: Jamile Beck Eidt
Reestruturação de Empresas | Equipe CPDMA