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Importance of Stay Period in judicial recovery

December 26, 2022

By: Vitor Ferrari and Ivan Kubala

According to the Bankruptcy and Recovery Law, among other requirements, only credits existing up to the date of the request for judicial recovery are subject to judicial recovery, even if they are not due. In other words, only credits already constituted will be affected by the judicial recovery.

However, it is common for companies undergoing recovery not to cease their activities after their request for judicial recovery is granted, especially when their judicial recovery plan provides that the revenue will be used to pay off the debts. Therefore, it is common for new debts to arise as a result of the continuity of the business activity, but they are not subject to judicial recovery.

In order to protect the debtor from subsequent enforcement proceedings arising from these and other credits, the legislator created a shielding period, the stay period: During the 180-day period, the company will be protected from any and all executions, even if outside of its judicial recovery process, and there is also the possibility of the term being extended once for another 180 days.

It happens that in many cases new credits arise after the extension period has ended. stay period, which, according to the law, would allow the executions to take place.

Therefore, many companies under recovery petition in the proceedings requesting a new suspension period, which is expressly contrary to the provisions of the law that deals with judicial recovery, which expressly provides for a single extension of 180 days. In this way, the companies under recovery are exposed, being forced to defend themselves in separate proceedings and often having requests for seizure of assets essential to their business activities.

Therefore, in order for such risk to be eliminated, it is of utmost importance that the judicial recovery is conducted by lawyers who are specialists in the matter and have extensive experience in the area.

With the collaboration of Luis Felipe Simão.

If you have any questions about the topics covered in this publication, please contact any of the lawyers listed below or your usual Mazzucco&Mello contact.

Victor Ferrari

+55 11 3090-7310

vitor.ferrari@br-mm.com

Ivan Kubala

+55 11 3090-9195

ivan.kubala@br-mm.com

Louis Philippe Simon

+55 11 3090-9195

luisfelipe.simao@br-mm.com

This communication, which we believe may be of interest to our customers and friends of the company, is intended for general information only. It is not a complete analysis of the matters presented and should not be considered legal advice. In some jurisdictions, this may be considered lawyer advertising. Please see the company's privacy notice for more details.

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