By: Vitor Antony Ferrari and Ivan Kubala

Despite being an important tool to overcome a temporary economic-financial crisis, the judicial rehabilitation is only achieved with much effort and dedication by the companies that use this instrument, which go through a long path of negotiations, planning, projections, in short, full of obstacles to achieve the long-awaited approval of the judicial rehabilitation plan.

Thus, the judicial rehabilitation plan, which basically consists of a collective agreement between debtor and creditors, and that will define the means to recover the company in crisis and, mainly, the payment conditions to its creditors, is prepared considering several factors, being it the main instrument of judicial rehabilitation.

However, before putting it into practice, it is necessary to be approved by the creditors at a meeting and, subsequently, to be ratified by the judge conducting the rehabilitation process.

Therefore, in theory, the plan begins to be complied with only after judicial approval, and it is certain that its rejection or noncompliance may generate drastic consequences for the company under judicial rehabilitation, such as, for example, its bankruptcy.

However, the determination of provisional compliance with the judicial rehabilitation plan has frequently taken place. In this case, despite the plan having been approved by the creditors, Judges have determined provisional compliance with the plan, since they do not see that all the requirements for approval have been met.

The fact is that, on one hand, this situation, besides contradicting the very system of Law 11101/05, according to which the ratification of the plan is indispensable for its effective compliance, has generated real legal uncertainty for all those involved in the recovery process, both creditors and debtor companies, and also potential investors.

This situation consists of a real limbo in which there is an approved plan, not homologated, but whose compliance was determined provisionally by the Judge, generating real distrust in everyone involved and delaying the implementation of the recovery means essential to the company's restructuring plan.

In effect, the incentive to partners and employees who were willing to help in the company's recovery plan can be removed. As an example, this situation is detrimental to the realization of bids for the sale of assets, to the extent that this “limbo” represents a real risk that investors interested in the acquisition of Isolated Production Units – UPIs, for example, tend not to assumes in the face of an uncertain and insecure scenario.

In addition, if the judicial rehabilitation plan is not approved, there is no certainty about the credits novation subject to judicial rehabilitation, so that the payment of creditors in this period of uncertainty generates real insecurity and confusion in the rehabilitation procedure.

On the other hand, this situation may be seen as a chance for the rehabilitation company to correct some pending issue or comply with some requirement without which the plan approval would not be possible.

In any case, this type of situation should be avoided because, in a first analysis, it reflects more negatively than positively.

It is important, therefore, to count on the support of professionals with extensive experience in the area who can foresee these situations, adopting preventive measures, or even suggesting measures to mitigate the harmful effects of a decision such as the one mentioned above.