Publications

Judicial Observers in Judicial Recovery

October 10, 2022

By: Vitor Ferrari and Ivan Kubala

With the approval of the request for judicial recovery made by the judge, the company is obliged to prepare a judicial recovery plan to pay its creditors within 60 days, which, if approved by the General Meeting of Creditors, begins to be put into practice.

In order to monitor the faithful fulfillment of the plan and the debtor's activities, the judge appoints a Judicial Administrator, a long hand who will take control of the process and will inform you through monthly reports about the most important events of the Judicial Recovery. With his appointment, it is common for creditors to lose much of their autonomy regarding the administration of the company under recovery and the approved judicial recovery plan.

Therefore, some judges, in order to maintain the prestige arising from the “freedom of the debtors to conduct their own business”, as Judge Azuma Nishi said, opt for a non-radical measure: the adoption of a judicial observer.

Popularly known as watchdog, Its function is to guarantee the safety of the company's assets under recovery, in addition to monitoring and supervising all its activities regarding the judicial recovery, guaranteeing it greater freedom of action and preventing it from being sidelined at crucial points in the process.

Basing the decision on this thought, the 1st Reserved Chamber of Business Law of the Court of Justice of São Paulo ratified the appointment of a judicial administrator for the judicial recovery process of the Itapemerim Group, easing the intervention in the administration of the company.

Its prerogatives are in the areas of inspection, and it must openly monitor all financial transactions of the company under recovery; investigation, in order to guarantee the probity of the actions of the administrators and partners regarding the execution of the approved plan; and prevention of damage to assets, which may occur both due to fraud by the administrators and due to poor management of the company.

If he notices something that goes beyond the limits of what is permitted, the judicial observer must inform the judge of what happened, so that he can take the necessary precautions and apply the necessary sanctions. In short, the adoption of a judicial observer is very positive in cases where the recovering party has all the means to self-manage and apply in an exemplary manner what was agreed in the judicial recovery plan. In this way, it is not necessary to appoint a judicial administrator who will restrict the autonomy of the judicial recovery plan; a judicial administrator is sufficient. watchdog who will monitor and investigate their actions.

With the collaboration of Luiz Felipe Simões

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

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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