By: Vitor Antony Ferrari and Ivan Kubala

Provided for in Law 11,101 (Business Recovery and Bankruptcy Law) and amended by Law 14,112/20, this measure consists of suspending executions so that the debtor can negotiate with its creditors, avoiding the filing of Judicial Recovery.

In this procedure, is it necessary to present documents, and if so, which ones? Are there suspensions of which processes? Who will be the parties involved? What is the position of the Judiciary on the matter? – Look, there are many questions. Let's address the issue that is of interest to the Entrepreneur who may use the procedure to deal specifically with some creditors or groups of creditors.

Initially, it should be clarified that during the pandemic it was thought that the Brazilian judiciary would be flooded with RJ requests due to the financial crisis generated by Covid-19.

In order to mitigate the number of these requests, a change was made to the RJ law, article 20-B, in the search for an extrajudicial solution to these conflicts. However, despite the positive intention, the measure was criticized by the legal community, since it is a precautionary measure carried out within the judiciary itself, which encourages judicial measures, and goes against the need to relieve the burden on the judiciary, especially the Specialized Courts.
But as a precautionary measure, is it necessary to attach all the documents required by law?

Ideally, the documentation should be presented to demonstrate to interested parties that if prior negotiations are unsuccessful, the debtor may still opt for the main process, that is, the Judicial Recovery itself.
This measure is drastic, since it suspends the executive and restrictive acts of the credits involved in the mediation. Therefore, article 20-B must be understood in a restricted way, otherwise there will be a situation in which several creditors will have their credits suspended, even if they are not negotiating with the debtor.

According to the thinking of the São Paulo judiciary, the requirements for granting the precautionary measure must be strictly observed before the protection is granted.

In this sense, the simple need to suspend executions and prevent the company in difficulty from being a defendant in further lawsuits is not enough to grant a stay of execution, since every debtor argues its need based on this fact. Something more is needed, a real risk of irreparable damage.
Again, the device, made in a hurry, is ambiguous, as it left room for debate regarding the effectiveness of the protection that grants the suspension, generating discussions as to whether this applies to all creditors or only to ongoing mediation processes.
The Judiciary has been interpreting the rule literally, applying the suspension to the actions that the company is responding to, thus encompassing credits that are being negotiated or not.

The fact is that the simple suspension of actions against the company is yet another tool to bring creditors to sit down and negotiate with the company before going to court to resolve the issue and respond to a long Judicial Recovery process.

However, the suspension of proceedings involving all creditors would result in the need for collective negotiation in a very short space of time, and given its procedural form, in theory there would be problems in its application, generating a series of appeals and collateral measures, since a precautionary procedure (which aims to guarantee a useful result of a future demand) cannot exceed the limits of the main proceedings, nor limit the rights of third parties who are not participating in the negotiations.

As for the period provided for in the law, there is a consensus that this is insufficient for all negotiations to take place, given that RJ, which is more complex, has 180 days that can be extended by another 180. Just 60 days is too little.
Furthermore, it is understood that there is no possibility of extending the aforementioned term, given the debtor's options to continue with the recovery procedure or extinguish the precautionary measure.
The extension could become a patrimonial shield for the debtor, distorting the resolutive and mediating meaning of the institute.

If a resolution is not possible within the deadline, the debtor must seek help from the RJ or RE.
Finally, regarding the list of creditors, it is necessary to present all those willing to negotiate their credits. However, if there is no agreement and it is then necessary to proceed with an RJ or RE, a new process must be initiated, however, deducting from the “stay period” (suspension of 180 days) the suspension time already elapsed in the precautionary procedure. In addition, it is highly recommended that the list of creditors be updated in the event of a new procedure, in order to avoid problems within the new process.

The idea of changing Law 11.101 was important in order to bring more speed and dynamism to the resolution of these conflicts without the need to involve the Judiciary. However, the legal text was poorly written, creating doubts that threaten the legal certainty of the issue, and it is necessary to settle the controversial points so that the mechanism can operate effectively.

With the collaboration of Luis Felipe Meira Marques Simão.