Restructuring and Insolvency Newsletter: November updates

Deadline for including credits in bankruptcy proceedings prior to Law 14,112/2020

The Third Panel of the Superior Court of Justice (STJ) has determined that, for bankruptcies declared before the enactment of Law 14,112/2020, the three-year limitation period for including or reserving credits in bankruptcy proceedings should be counted from January 23, 2021 – the date on which the reform of Law 11,101/2005 came into effect. In the trial of REsp 2.110.265/SP, the Justice Rapporteur Ricardo Villas Bôas Cueva overturned a decision rendered by the São Paulo State Court of Appeals, which had rejected a request for credit inclusion by considering the date of the bankruptcy in 2002 as the starting date of the limitation period. The rationale was that, for bankruptcies declared before the reform, the starting date for the limitation period for the inclusion of credits in the proceeding should not result in the elimination of the creditor’s right.

Judicial reorganization for medical cooperatives

The Supreme Federal Court (STF) decided, by six votes to five, on the constitutionality of Article 6, §13, of Law 11,101/2005, introduced by the reform of Law 14,112/2020 to authorize requests for judicial reorganization by medical cooperatives. Most of the justices rejected the argument that the legislative process had not been regular, as the final part of the provision was not in the bill approved by the House of Representatives, and it was argued that the additional amendment should have returned to the House of Representatives for further consideration after approval by the Senate. The authorization for medical cooperatives to be subject to the reorganization regime will allow the restructuring and continuity of service provision by medical cooperatives facing financial difficulties.

Possibility of applying a haircut to labor credits paid within one year

The Third Panel of the STJ validated a clause in a judicial reorganization plan that provides for a haircut on labor credits paid within one year, considering its approval by the general meeting of creditors. In the vote that reversed the decision of the São Paulo State Court of Appeals (REsp 2.104.428/SP), the Justice Rapporteur Ricardo Villas Bôas Cueva pointed out that Article 54, caput, of Law 11,101/2005, which establishes the payment of labor creditors in judicial reorganization within one year, does not prohibit the application of a haircut. According to the STJ, considering that Article 54, §2º, of Law 11,101/2005 allows the extension of the payment of labor credits for up to two additional years only if there are no haircuts, if the payment is made within the period of up to one year, the haircut should be permitted.

End of the ring-fenced requires loan settlement

The Fourth Panel of the STJ has decided that the obligations to the financing agent of a real estate project must be settled for the termination of the ring-fenced. In the analyzed case, the bankruptcy court suspended an extraordinary general meeting convened by a financial institution to sell units belonging to the ring-fenced of a bankrupt developer, accepting the argument presented by the trustee that the ring-fenced had been terminated when the occupancy permit (“habite-se”) was granted. The Paraná State Court of Appeals overturned the decision to authorize the sale of the units in favor of the creditors of the ring-fenced to the detriment of the other creditors of the bankrupt estate. By upholding the Court’s decision, Justice Antonio Carlos Ferreira emphasized that the ring-fenced can only be terminated with proof of full settlement of the financing, as the institute aims to ensure that the resources allocated for construction are used exclusively for this purpose, as provided for in Article 31-E of Law 4,591/1964.

The Paulista Agreement for companies under restructuring proceedings

In 2023, the enactment of Law 17,843/2023 introduced the Paulista Agreement, whose main goal is to bring the tax authorities closer to taxpayers who wish to regularize their tax situation. Recently, the third notice of the Paulista Agreement was published by the government of São Paulo to negotiate BRL 50 billion in ICMS (tax on the goods and services) debts with 3,100 companies undergoing judicial reorganization, out-of-court reorganization, judicial liquidation, and bankruptcy. The eligible credits are those registered as active debt (excluding those guaranteed by deposit, letter, or surety bond of lawsuits that have not been definitively ruled), which can benefit from haircuts of up to 100% on interest, fines, and attorney fees, and installment payments in up to 145 installments.

For more information on these topics, please visit Mattos Filho’s Restructuring & Insolvency practice area.