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Decree No. 9,589 – Liquidation of companies owned and directly controlled by the federal government

6Dez2018Dec6,2018
Administrative Law; Infrastructure and Energy

​On November 30, 2018, Decree No. 9,589/2018 ("Decree No. 9,589") was published in the Federal Official Gazette (Diário Oficial da União – DOU), establishing procedures for the liquidation of companies owned and directly controlled by the government. Decree No. 9,589 came into force on the date of its publication and is applicable to ongoing liquidation proceedings, as appropriate. 

Among the procedures established in Decree No. 9,589, we highlight the following:

Proposal for inclusion in the National Privatization Program (Programa Nacional de Desestatização – "PND"). The responsible ministers will propose to the Council of Investment Partnerships of the President (Conselho do Programa de Parcerias de Investimentos da Presidência da República) the inclusion of a company in the PND. Such proposal must include studies and be supported by compelling reasons that demonstrate that the dissolution of the company would be the best alternative (article 1, paragraph 1).

Deliberation and approval of the dissolution. A Resolution duly approved by the ministers responsible for the proposal shall express the decision on the proposed dissolution of a certain company. Subsequently, the President is required to approve the measure (article 1, paragraphs 2 and 3).

Liquidation procedure. A general meeting shall be scheduled by publishing a notice in the official gazette in the case of liquidation of a mixed-capital company or by sending a notice to its shareholders if the company being liquidated is public (article 3, main heading / "c" article 3, paragraph 1, I and II).

Purpose of the general meeting. The main purposes of the general meeting are as follows: (i) to appoint the liquidator and establish the total amount of the liquidator's remuneration; (ii) to establish deadlines for the termination of the activities of current administrators with the consequent extinction of the company's executive board and board of directors; (iii) to appoint members of the fiscal council which will operate during the liquidation and which will be composed of representatives of the Ministry of Planning, Development and Management (Ministério do Planejamento, Desenvolvimento e Gestão – "MP"), the National Treasury and the ministry of the sector involved, and to establish the amount of their monthly remuneration; (iv) to establish the deadline for the conclusion of the liquidation process, which may be extended by means of a declaration of the MP (articles 3, I to VI).

Liquidator's obligations. Among other obligations, the liquidator is required to: (i) present to the MP the liquidation plan, containing the liquidation schedule with dates for the execution of activities and the financial and budgetary resources for executing the planned activities; (ii) set up a team to advise the liquidator on his activities; (iii) terminate employment agreements of the company under liquidation with the immediate payment of the employees severance payments, if any; (iv) carry out the necessary procedures for the formalization of the transfer to the government of any remaining assets, rights and obligations (articles 8, I, II, III and IX).

Completion of the Liquidation process. Upon the extinction or dissolution of the company, the government will receive the company's remaining assets, rights and obligations. The Attorney General's Office (Advocacia Geral da União – AGU) will be responsible for the representation in any legal and administrative proceedings in which the company owned and controlled by the government is a party. The MP's Secretariat of the Government's Patrimony (Secretaria do Patrimônio da União) shall maintain the documentation and information regarding fixed assets of the extinguished company that are transferred to the government. The National Treasury Department of the Ministry of Finance shall be responsible for managing minority equity interests in the liquidated company, its financial assets and credits owed by third parties and financial obligations arising exclusively from credit transactions entered into by the extinguished company with national and international institutions (article 12, I to V).

Transfer of assets and credits to third parties. A statement of assets, receivables and debts due by the company must accompany the transfer, as well as the original contracts or other supporting documentation and a declaration of the liquidator, certifying the certainty, liquidity and enforceability of the assets and amount of the credit (article 12, sole paragraph).

MP's obligations. The MP shall be responsible for providing to the liquidator the resources for budgetary appropriations, as established by law, in the event of exhaustion of the company's own resources. Furthermore, the MP shall be responsible for adopting the necessary measures to liquidate the company, including: (i) preparation of a statement of work; (ii) monitor the liquidator as he undertakes his work; (iii) monitor the execution of the approved work plan each quarter; and (iv) monitor and evaluate the budgetary and financial condition of the company (article 9, caput, IV, VII, VIII and IX).

Obligations of the sector specific ministry. The sector specific ministry shall be responsible for providing to the liquidator and the MP the necessary information for the liquidation process; receiving and maintaining files and documentation; submitting to the AGU information and documents it requests regarding lawsuits and extrajudicial matters under its responsibility for the purpose of representation of the government (articles 11, I to III).

For more information, please contact the professionals of the Infrastructure Practice.

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