Mediation in Judicial Reorganization
Economic and financial crises rarely respect the timeline of the legal process. When cash flow is tight, each week of litigation means a loss of value, suppliers, and market credibility. Mediation gives back to the business owner exactly what litigation takes away: time, information, and control over the solution.
More than just a formal step in the process, it is a flexible method that can be activated at any point in the company's life: before filing for judicial reorganization, during its processing, or even after its closure, in the plan's implementation phase.
The strategic gains of mediation in restructuring.
- Time and cash flow protection: even in the preliminary phase, it is possible to suspend executions for up to 60 days, negotiating without seizures and blockages eroding working capital.
- Negotiate before voting: arriving at the assembly with a previously discussed plan reduces the risk of rejection and avoids successive suspensions of the conclave, which are costly in terms of time and trust.
- Less information asymmetry: in a neutral and confidential environment, the debtor can safely disclose figures. The creditor, understanding the debtor's true ability to pay, accepts payment terms and discounts that they would reject if done blindly.
- Tailor-made solutions: each group has a distinct interest — the bank wants guarantees, the essential supplier wants to continue selling, the labor creditor wants immediate liquidity. Mediation allows for the design of specific treatments, something that a single proposal rarely achieves.
- Preserving the supply chain: the value of the restructured company lies in its contracts, customers, and suppliers. Dialogue, instead of dispute, keeps inputs, credit, and partnerships functioning.
- Confidentiality: proposals and information discussed are not made public, which protects the company's reputation, customer relationships, and negotiating position.
- Cost and litigation reduction: agreements in credit disputes and parallel lawsuits reduce fees, deposits, and appeals, shortening the path to the conclusion of the process.
- Control over the solution: the outcome is built by the parties involved, and not imposed by a court decision or by the vote of a majority that may not understand the business.
Mediation at each stage of the crisis.
Understanding the right moment to initiate dialogue is what separates a successful negotiation from an unnecessary concession.
Phase | What is being negotiated? | Strategic gain |
Before ordering | Bank debts, contracts with essential suppliers and business partners. | Immediate cash flow relief and a real chance to avoid litigation — or to enter into a plan already supported by a significant portion of creditors. |
| During recovery | Recovery plan, values and guarantees under discussion, conflicts between partners, creditors not subject to the process. | It unlocks the progress of the action, reduces challenges, and increases adherence to the plan. |
| After closing | Installments of the plan in light of the new market conditions. | It prevents non-compliance and bankruptcy, keeping the business operational. |
- Before the order: the preliminary round of negotiations: A company in difficulty does not need to wait for the filing of judicial reorganization to negotiate under protection. It is possible to initiate a preliminary mediation procedure before judicial centers or specialized chambers and request the suspension of executions for up to 60 days — a period that, if reorganization is requested later, is deducted from the general suspension period. This preliminary round usually produces one of two results, both favorable: an out-of-court settlement that makes the process unnecessary, or a reorganization request already backed by a pre-negotiated plan, with a significant quorum of adherence and much less uncertainty.
- During processing: unlock the process: In the course of recovery, mediation acts as a catalyst for procedural progress. The most frequent scenarios are:
- Deadlocks between partners or shareholders that paralyze decisions at a company in crisis;
- Negotiation with creditors not subject to the process, such as those with fiduciary assignment and leasing, especially regarding the essentiality of assets for the operation;
- Partnerships with public service concessionaires, public entities, and regulatory agencies;
- Disagreements regarding values and the assessment of collateral in credit verification;
- Adjustments to the recovery plan before the general meeting of creditors.
- There are limits that preserve equality among creditors: the nature and classification of claims are not negotiable, nor are the voting criteria at creditor meetings.
- After the closing: keep the plan going: Once the plan is approved and the process concluded, the company remains exposed to market fluctuations, often with years of payments still outstanding. In the face of unforeseen operational issues, mediation allows for the amicable renegotiation of installments, preventing default, bankruptcy, and the destruction of the value that the restructuring took years to build.
Examples that prove its effectiveness.
- Oi Group: With liabilities exceeding R$ 64 billion and more than 55,000 creditors, the adoption of an online mediation platform enabled tens of thousands of agreements, extinguishing thousands of disputes and supporting the approval of the plan.
- Saraiva Bookstore: The mediation was structured in two stages, one before the presentation of the plan and the other before the assembly, bringing the demands of the creditor classes closer to the company's actual cash capacity.
- Seven Brazil: The direct agreement with Petrobras preserved contracts essential to the continuity of operations.
- Varig: In the context of bankruptcy proceedings, negotiations between the bankrupt estate and labor creditors resulted in approximately 9,000 approved agreements, with significant gains in speed and cost reduction.
Who leads and who advises
The court-appointed administrator oversees the process and encourages consensus, but cannot act as a mediator in the case, as this would compromise the impartiality required by the role. The process must be led by a neutral third party, trained to facilitate dialogue.
The legal counsel for the parties requires lawyers specializing in restructuring and corporate law: mediation is not about haphazard concessions. It demands legal expertise, a financial understanding of the business, and careful structuring of proposals, with analysis of tax and corporate impacts, and legal certainty in the agreement submitted for approval.
How can our office support your company?
Managing corporate crises demands agility and technical expertise. We act in conducting strategic negotiations and debt restructuring processes, with comprehensive legal support.
- Prior mediation: Structuring the measures necessary to suspend foreclosures for up to 60 days and renegotiating directly with creditors.
- Recovery plan: Drafting, negotiating, and providing technical support in sessions with strategic creditors, financial institutions, and business partners.
- Corporate conflicts: Prevention and resolution of disputes between partners and issues of family and corporate governance.
- Legal certainty: Formalization and approval of agreements, with protection of company assets.
Schedule a technical consultation with our team of experts in Business Law and Debt Restructuring.
Article written by: Vitor Ferrari, Samar Majzoub and Alex Santos.