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Doing Business in Brazil
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2. Judicial Restructuring
According to the Bankruptcy
Law, may request the Judicial Restructuring the debtor that, at the time of the request, regularly carries out their activities for more than 2 years and fulfill the following requirements cumulatively:
i. have not bankrupt; and if the debtor bankrupt, the proceeding in which the bankrupt was declared must be closed by a final and unappealable decision;
ii. have not obtained a Judicial Restructuring request less than five years ago – such requirement is also applied to microenterprises and small businesses, which are subjected to a special Judicial Restructuring regime;
iii. have not been convicted or do not have, as a manager or controlling partner, a person convicted for any crimes provided in the Bankruptcy Law;
In their request, the must include
a statement of the causes of the financial crisis, their financial statements, a list of creditors and claims and a list of employees and employee claims. All credits existing on the date of the request shall
be included, even if not overdue
yet. However, as the Extrajudicial Restructuring, tax credits and claims are not subject to the Judicial Restructuring.
After the filing of the request, the Court shall analyze its terms
and documents attached. If the judge decides to grant the Judicial Restructuring, a Court Administrator is appointed and the debtor have sixty days – counted from the publication of such decision in Court’s Official Gazette – to present the restructuring plan.
The plan will be analysed by the creditors and then subject to a negotiation phase. If the plan is approved, the judge ratifies it. The creditors subject to restructuring proceedings will be paid according to the approved and ratified restructuring plan.
If the debtor (i) does not present a restructuring plan; or (ii) if the plan is not approved; or (iii) if approved, the restructuring plan is not executed by the debtor under reorganization, in any of these 3 hypothesis the judge of the restructuring proceedings
will declare company’s bankruptcy, as provided for Federal Law no.
11.101 article 73. If the bankruptcy is declared, creditors will be paid in accordance with the legal priority
of their credit’s nature (unsecured creditors, creditors with special or general preference, and subordinated creditors).
In this regard, the debtor shall remain under Judicial Restructuring until
the compliance of all obligations provided for in the restructuring
plan due up to 2 (two) years after the decision that grants de Judicial Restructuring.
Microenterprises and small