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Date: April 6, 2019
Posted by: CPDMA Team

Judicial recovery is slow in São Paulo

The Justice of São Paulo takes about 57 days to grant a request for judicial recovery. Companies, on the other hand, need a median period of 517 days to approve a recovery plan at the meeting and three years to leave the Judiciary (monitoring period). 

The numbers show that, on average, a recovery process is slow and even more time-consuming when considering the deadlines set by Law No. 11,101, of 2005, which deals with the country's recoveries and bankruptcies. Even so, the mechanism is considered efficient by experts.

The data are part of the "2nd Phase of the Insolvency Observatory", a study developed by the Nucleus of Insolvency Proceedings Studies (Nepi) of PUC-SP and the Brazilian Association of Jurimetry (ABJ). The survey analyzed 906 cases distributed between January 2010 and July 2017, in the two specialized courts in the capital and interior of the state.

For the professor at PUC-SP and research coordinator, judge Marcelo Sacramone, in relation to the deadlines seen in the survey, the granting of a request for judicial recovery is still very long. "The average of 57 days is very time consuming. During this period, the company can lose assets", he says.

Another data from the study shows that companies take well over 180 days to get a recovery plan approved. This is the period of protection, granted by law, during which companies cannot be charged and enforced. After this period, the protection in theory would cease to exist. Today, however, jurisprudence accepts extending the "shielding" time until the plan is approved at a creditors' meeting.

"The numbers show that the period of 180 days is not reasonable to negotiate a plan and usually takes twice as long," says the study. According to Ivo Waisberg, who is also a professor at PUC-SP and coordinator of the study, the ideal would be for the assembly to be convened shortly after presenting the plan to the judge (60 days after publication of the decision with approval) as a way of reducing these deadlines.

According to the study, the median time until the final deliberation on the plan is 517 days. In common courts, the period corresponds to 567 days. In the specialized branches of the capital, the time is 407 days.

As for the plans, of those taken to deliberation, 72% were approved. Already 17% of the companies were declared bankrupt before the first meeting of creditors took place.

The president of ABJ and also coordinator of the study, Marcelo Guedes Nunes, says that from the survey it is clear that the approved recovery plans, in general, are aggressive. According to him, there are discounts of up to 80%, payment terms of 20 years, without interest and correction by the Referential Rate (TR).

"The creditors only accept these conditions because bankruptcy is a horrible alternative, which does not pay anyone. Research shows that to solve the problems of judicial recovery we have to improve bankruptcy", says Nunes.

Among the payment conditions evaluated, the shortest are labor conditions. Present in 84.5% of the plans, they took an average of one year to settle.

Nunes adds that from the survey it was possible to verify that the law has a bias against small business owners. According to the coordinator, they represent more than 90% of active companies in the country, but appear only in 30% of recovery requests. "It's strange because they are more vulnerable to crises, but they don't see the law as a solution to their difficulties."

In addition to these points, the study also addresses issues such as the remuneration of administrators and the use of prior expertise in the process. Statistician Fernando Corrêa is also one of the observatory's coordinators.

Source: Zínia Baeta via Valor Econômico.

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