Casas Bahia requests judicial recovery; understand what it means and how it works

In this report you will understand: What is judicial recovery? Who can request judicial recovery? How is the request for judicial recovery made? What is the difference between judicial recovery and bankruptcy? Why does a company file for judicial recovery? What is judicial recovery? Judicial recovery serves to prevent a company in financial difficulty from closing its doors. It is a process by which the indebted company obtains a period of time to continue operating while negotiating with its creditors, under the mediation of the Court. Debts are frozen for 180 days and the operation is maintained. Judicial recovery was established in Brazil in 2005 by law 11,101, which replaced the old Concordat Law of 1945. The difference between the two is that, in judicial recovery, the company is required to present a restructuring plan, which must be approved by creditors. In the concordat, extension of term or forgiveness of debts was granted without the participation of creditors. Back to top. Who can request judicial recovery? Private companies of any size and with more than two years of operation can resort to judicial recovery. However, the law does not apply to state-owned companies and mixed-capital companies, as well as credit unions and health plans. Companies that have already made another request less than five years ago and those run by businesspeople who have already been convicted of bankruptcy crimes (related to bankruptcy proceedings) cannot also request judicial recovery. Back to top. How is the request for judicial recovery made? The request is made to the Court through an initial petition that contains, among other information, the financial statement for the last three years, the reasons why it entered into a financial crisis, and the list of creditors. After the request is accepted, the company has 60 days to present the recovery plan, and foreclosures (debt collections) against it are suspended for 180 days. The law determines that the creditors' meeting takes place within 150 days after the process is approved by the Court, but, in practice, this period is usually exceeded. Back to top. What is the difference between judicial recovery and bankruptcy? Judicial recovery serves to try to avoid bankruptcy and recover the company, which does not always happen. In bankruptcy, the company completely ceases operations. All of its assets are collected by the courts and sold to pay debts, while in judicial recovery there is a negotiation. Back to top. Why does a company file for judicial recovery? In general, companies file for judicial recovery when they already have overdue debts and begin to be charged by creditors. The reasons that lead a company to financial crisis are diverse. "It may happen that [the company] asks before it defaults, but it is usually when it sees that it is unable to pay and wants to gain time to be able to talk to creditors without foreclosures", says lawyer Clara Azzoni, specialist in judicial recovery at the Felsberg firm. Back to top. Casas Bahia store in a shopping mall in São José dos Campos Sarah Brito/g1 VIDEOS: Economy news