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How to predict whether recovering companies will have a happy ending

30 June 2021

During a panel on the topic at the VII TMA Brazil Congress, experts point out what can hinder and help the success of requests made in the country.

São Paulo – In the current scenario of political instability and economic crisis, the increase in requests for judicial recovery by companies in Brazil is one of the few certainties.

In September alone, 147 of them applied for the resource – a number 66% higher than a year earlier, by Serasa Experian. But how to predict how many will be successful at the end of the enterprise?

For the experts on the subject gathered in a panel on the subject at the VII TMA Brazil Congress, the system still has a lot to improve to help companies on this path.

“The market is not afraid of a bad decision by the judiciary, but of unpredictability, because it needs to price the business and the assets. Without foresight, there is no way to do that”, said Daniel Cárnio, head judge of the 1st Bankruptcy Court of the District of São Paulo.

For him, it is necessary that companies understand the benefits of resorting to the order so that the company can continue producing and, thus, be able to capitalize and maintain the business.

“Without new money, there is no miracle, the company does not recover and it is all of us (society) who lose,” he said.

Ricardo Tepedino, from Tepedino, Migliore e Berezowski Sociedade de Advogados, Ivo Waisberg, from Thomaz Bastos, Waisberg, Kurzweil Advogados, and Maria Salgado, from Sérgio Bermudes Advogados spoke about the challenges of the judges’ uncertain decisions.

Luiz Galeazzi, responsible for some of the largest restructuring of companies in the country, discussed how companies sometimes file for recovery when, in fact, they are already on the verge of bankruptcy.

“Between filing for bankruptcy or passing the 'key' to the court-appointed administrator, they opt for the latter and drag out a resolution for their business for years and years,” he said.

In his opinion, shareholders and companies are confused in Brazilian laws, unlike what happens in the United States. This removes good specialists from the management of these companies.

“Minimum protection is needed for these people so that they are held accountable for the management they are doing in the business and not for a previous and uncertain liability,” he said.

 

Accurate screening

The lawyers also pointed out the divergence in the time and type of decisions taken in relation to requests in various parts of the country, sometimes in favor of creditors, sometimes in favor of debtors.

One of the solutions for this would be for the Brazilian judiciary to have a limited number of judges specialized in judging requests, with regionalized groups to carry out the analyses.

“We currently have 12,000 judges judging recovery cases in the country, and the vast majority will not have adequate conditions or time to judge the matter as they should,” said the judge.

If focused on the subject, sixty magistrates is enough for the entire country, he believes.

Another initiative that should be expanded, according to Cárnio, is the prior examination of requests, to assess whether or not they should be accepted, as has been the case in São Paulo since 2011.

According to him, since then, 30% of the requests made had their initial petition rejected for fraud or because they were businesses that were unable to operate.

Of those approved, 70% were successful with plans approved and completed within two years.

The VII TMA Brasil Congress, focused on restructuring and recovery of companies in the country, takes place today and tomorrow (24 and 25/10) at the Renaissance Hotel, in São Paulo.

 

Source: https://goo.gl/MQWtqL

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