The Brazilian Senate approved Bill 6,229, on November 25, to amend and update the Brazilian Bankruptcy and Judicial Recovery Law, pending only presidential sanction to become effective.
We highlight below 7 relevant changes for Brazilian and foreign creditors:
1. DIP Finance. It regulates the institute of Debtor in Possession (DIP) modality, to give security and priority to lenders of companies in judicial reorganization, guaranteeing them seniority in case of bankruptcy, even before labor credits, in addition to authorizing that DIPs are guaranteed by assets of the company itself, shareholders and third parties;
2. Recovery Plan Prepared by Creditors. The new Bill creates the possibility for creditors to present their own plan if they reject the plan prepared by the company;
3. Deadline for Sale of Assets. Maximum term for sale of company’s assets of 180 days;
4. Creditors General Meetings To Be Held Online. It creates the possibility of Creditors General Meeting to be held online, and not only in person as of today;
5. Economic Group Recovery. It regulates the judicial reorganization of economic groups, requiring list of creditors, plan and individual meeting for each company, unless there is a confusion of liabilities or assets, cross-guarantees, control or dependency relationship, identity of the corporate structure and/or joint performance in the market;
6. CPRs Excluded From Judicial Recovery. Exclusion of Rural Product Notes (CPRs) from the scope of judicial reorganization, in the same way as fiduciary lien, leasing and ACC contracts; and
7. Prohibition of profit distribution. Express prohibition that companies under judicial reorganization pay dividends or profits to shareholders.
The Bill, once effective, should enhance the rights of Brazilian and foreign creditors in judicial recoveries in Brazil.