By: Vitor Ferrari and Ivan Kubala

According to the unanimous understanding of the 1st Reserved Chamber of Business Law of the Court of Justice of São Paulo, both the supervision and the inspection of a judicial recovery cannot be disregarded in order for it to be closed.

In this specific case, the judging panel overturned the decision to end the judicial recovery of a company in the food sector, and also determined that the process should continue for a period of 2 years under constant supervision, as determined by the Judicial Recovery and Bankruptcy Law.

The judges' decision was motivated by an appeal filed by a creditor who argued that the company under recovery needed to be supervised due to the serious risks of non-compliance with the approved judicial recovery plan.

During the trial, it was highlighted that, following a legal change, it was now possible to terminate judicial recovery by eliminating the period of supervision of the debtor. However, according to the understanding of part of the São Paulo judiciary, such a decision increases the risk of losses to creditors, since supervising the debtor's actions promotes effective compliance with the judicial recovery plan. For this group, the elimination of supervision may also be detrimental to the debtor, since if the debtor fails to comply with the plan, its creditors may file executions and even bankruptcy petitions.

Thus, despite the possibility being expressly provided for by law, many judges believe that the best option is still to closely monitor the company under recovery, and therefore reject requests based on this issue and, in the case of courts, revoke first instance decisions.

Thus, it is understood that part of the judiciary has animus more oversight to ensure that the approved recovery plan is complied with and no party is harmed.

With the collaboration of Luis Felipe Simão