21/01/2021

By Vitor Antony Ferrari and Ivan Kubala

The text of Law No. 14,112/2020 was published in the Official Gazette of the Union on December 24, after being sanctioned by President Jair Bolsonaro with six partial vetoes, and the approved text comes into force 30 days after its publication.

Law 14.112, sanctioned on December 24, has not yet had its vetoes considered (veto no. 57/2020) and remains in progress before the National Congress, given that the Legislature in all its Houses has been in recess since December 23, 2020 and will only return on February 1, 2021. Only after that will the 30-day period for analyzing the vetoes begin, emphasizing that if the vetoes are overturned, the Law will not be retroactive, coming into full force only after the publication of the revocation of the vetoes.

At the end of November we published a note highlighting the most significant changes made to the text of the new Bankruptcy Law, after approval by the Federal Senate:

https://www.mazzuccoemello.com/aprovada-lei-de-falencias/

The text of Bill 4,458/2020 approved by the Senate suffered some presidential vetoes on issues that were seen as relevant in the legislation governing the matter, namely:

I. Suspension of labor enforcement actions against the responsible party, whether subsidiary or jointly liable, until the approval of the plan or the conversion of the judicial recovery into bankruptcy (paragraph 10 of art. 6);

II. Possibility of including medical cooperatives in the rules of the recovery procedure;

III. Exclusion from the list of credits not subject to judicial recovery of those credits and/or guarantees linked to Rural Product Certificates for physical settlement;

IV. Possibility of acquiring assets from companies undergoing judicial recovery free from environmental, regulatory, administrative, criminal, anti-corruption, tax and labor obligations (sole paragraph of art. 60 and paragraph 3 of art. 66);

V. Expansion of tax benefits to companies undergoing judicial recovery.

Regarding item “I” above, it is important to highlight that labor executions will be suspended only during the stay period and there will be no suspension against subsidiarily or jointly liable parties.

Item “III”, which was seen as a setback for limiting the credits subject to judicial recovery, appears to be the only collaborative veto with the advancement of legislation.

Regarding item “IV”, the judicial sale of assets of a company undergoing judicial recovery will continue to be carried out free of charge, but the removal of the vetoed paragraph gives the Judge back the discretion to specify which obligations will accompany the sold assets, in which case the successful bidder will succeed to the debtor’s obligations. It should be noted, however, that case law understands that there is no succession of tax and labor obligations.

In fact, the veto was justified by the contradiction of the vetoed provision with environmental and anti-corruption rules, but it results in a true setback, as it leaves unchanged the issue related to the judicial alienation of the debtor's assets, that is, it does not represent any innovation or legislative advance.

Finally, the President vetoed provisions that represented tax benefits for companies undergoing judicial recovery, such as in the case where it was foreseen that the revenue obtained by the debtor in cases of debt renegotiation would not be computed in the calculation of PIS, Pasep and Cofins, and in the case where a tax benefit was foreseen in the calculation of capital gains due to the sale of assets through a judicial auction.

Notwithstanding the presidential vetoes, the text that was published and comes into force on January 24, 2021 has several significant changes that must be examined rigorously, as they must be observed by all companies that intend to avail themselves of the recovery process, as well as by companies that are already in judicial recovery, since the law must also be applied to pending processes as soon as it comes into force.