One of the main effects of granting a judicial reorganization request in Brazil is the establishment of the stay period, a period of suspension of enforcement actions against the company undergoing reorganization.
Although it is a crucial mechanism for the company’s restructuring, the stay period can raise doubts for creditors, especially those who are not directly subject to the effects of judicial reorganization (non-concursal creditors).
To assist creditors in this matter, here are 4 key points of attention regarding the stay period:
1. Scope of Effects: The stay period suspends enforcement actions filed by concursal creditors, i.e., those whose credits are subject to judicial reorganization. Enforcement actions filed by non-concursal creditors, such as holders of fiduciary alienation guarantees or those whose credit originates from an advance on an exchange contract, are not affected by the stay period.
2. Possibility of Extension: The stay period has an initial term of 180 days, which can be extended for another 180 days, totaling one year of suspension of enforcement actions. The extension can only occur once, and it is crucial for the creditor to be aware of this deadline.
3. Essential Assets: During the stay period, assets considered essential for maintaining the company’s operations cannot be expropriated, even by non-concursal creditors. Once the stay period ends, the law authorizes the continuation of restrictive measures on essential assets, although there are still conflicting court precedents on the matter.
4. Jurisdiction: After the stay period ends, the jurisdiction to assess requests for seizure of the company’s assets is no longer exclusive to the judicial reorganization court. Non-concursal creditors can submit requests for seizure directly to the enforcement courts, without needing validation from the universal jurisdiction – which tends to be more favorable to companies undergoing reorganization and slower in analyzing requests.
The stay period, while crucial for the company’s judicial recovery, demands heightened attention from creditors, especially non-concursal ones. It is essential to understand the scope of the stay period’s effects, the possibility of extension, the distinction between essential and non-essential assets, and the jurisdictional competence after the suspension period ends.
A correct understanding of these points allows creditors to assess the risks and opportunities involved in judicial recovery and make more informed and strategic decisions to protect their credits.
