In our last article published in “NordicLight”, we tried to explain how foreign investors may get out of a Brazilian business, should their project not prosper. In this article, we would like to make Nordic investors aware of the possibility to restructure their business without needing to get out of it, in case they wish to try again under more beneficial financial conditions.
Law 11.101 from 2005 already enabled companies facing financial difficulties to file a restructuring application before judicial courts. The purpose of this matter is to seek a judge’s order to negotiate with all creditors at once, thus allowing the company to reestablish its financial capacity under the extension of all its debts, already overdue before the lawsuit is brought to court by the company.
This legal procedure covers both labor and commercial debts, the latter also comprising suppliers and other business partners. The debtor should present a list of pending debts, carefully describing its general financial situation as well as presenting its financial statements. The judge will analyze the request also after the State Attorney’s appraisal.
When granting the initial request, a General Assembly of the creditors shall be called in order to appoint a Creditors’ Committee. This committee will supervise the compliance of the restructuring/payment plan also to be presented by the debtor. Tax debts are further subject to installment application and the managers may further operate the company.
Nordic investors, also joint venturing with their Brazilian partners, should be aware that this legal tool can be very helpful to protect their business and assets, thus avoiding a sudden bankruptcy, should the creditors put too much pressure to renegotiate their credits. Of course this varies from case to case, but it is worth knowing.
This short contribution does not intend to replace any specific legal advice but rather wishes to raise awareness of some important elements for restructuring a Nordic business in Brazil.
Renato Pacheco e Silva Bacellar Neto is partner at Pacheco Neto Sanden Teisseire Law Firm.
