Provided for in Law 11.10/05, judicial recovery is an essential legal procedure for companies in financial difficulties, as it allows for the restructuring of debts while continuing business activities. In this way, while developing a restructuring plan with its creditors, the company remains in operation, ensuring the maintenance of jobs, tax collection and the circulation of wealth in the economy.
A fundamental aspect for a company undergoing recovery to remain operational is the retention of its administrators, who play a crucial role in conducting business during the recovery, and who are known in advance. Prior knowledge means that they are fully informed about how the company operates, making them, in theory, the most capable of managing it. However, the Law provides for situations in which the administrator must be removed from his position, which directly impacts the company's management and the confidence of creditors and potential investors.
The Bankruptcy and Reorganization Law provides for the possibility of removing the administrator if irregularities or illegalities are identified in his/her management that compromise the restructuring of the company, harm creditors or favor him/herself or third parties. This occurs in situations of fraud against creditors, tax fraud, manipulation of accounting balance sheets, misappropriation of funds, failure to comply with the recovery plan and reckless management of the business company. Furthermore, if creditors prove the need to replace the administrator to protect their interests, the Court may order his/her removal. However, this is an exceptional measure that requires robust and clear evidence to substantiate it, otherwise the continuity of the business activity will be compromised.
The removal of a director has numerous negative consequences for the company and the restructuring process. This measure directly impacts the confidence of creditors, influencing their votes for approval of the Judicial Recovery Plan, which, in these cases, is unlikely to be approved with long payment terms and good discounts. In addition, the removal of a director for the aforementioned acts causes supplier creditors to lose confidence in the company, leading to the termination of business relations, which directly impacts the maintenance of business activities. In extreme situations, the consequences of the removal lead to the bankruptcy of the company, if it becomes evident that the continuity of the business is not viable, which may occur in cases of accounting fraud, for example.
The jurisprudence of Brazilian courts, although not unified, reinforces that the removal of the administrator must be an exceptional measure, applied only when there is concrete evidence that his permanence harms the restructuring process.
For business owners, understanding these issues is essential to ensure a successful judicial recovery. The maintenance and good performance of the administrator is one of the determining factors for the continuity of business activities and for compliance with the recovery plan. However, his/her performance must be guided by transparency and good faith towards his/her creditors, in addition to being duly advised by an experienced lawyer in the matter. Therefore, having specialized legal advice during this process is essential to prevent unnecessary risks and ensure the restructuring of the company in a safe and effective manner.