By Vitor Antony Ferrari, Ivan Kubala and Nicoly Crepaldi Minchuerri*

In order to remain operational, generating jobs, boosting the economy and fulfilling their social function, many companies in financial difficulties opt for Judicial Recovery. This is an extreme measure, the company's last attempt to avoid bankruptcy and, consequently, the cessation of its business activities.

The granting of the judicial recovery requested by the business corporation generates several implications, not only for the corporation, but also for its creditors, who will now appear as parties in legal proceedings with a special procedure.

First, and most importantly, it is necessary to distinguish the type of credit that the creditor holds against the recovering company.

If the credit is of an extra-bankruptcy nature, that is, it is not subject to the effects of judicial recovery, the creditor may execute it normally, obviously respecting the legal precepts of execution provided for in the legal system.

However, if the credit is subject to judicial recovery, and it is likely to be, there will be a series of implications for the creditor.

Firstly, and most importantly, the stay period begins after the judicial recovery is granted, when no credit subject to judicial recovery may be executed by the creditor. During the 180-day period, which may be extended once for another 180 days, the actions against the debtor remain suspended, so that it is impossible to execute the outstanding amounts.

This period is granted to the recovering party so that it can resume, albeit precariously, financial control of its operations, so that it can begin to draw up a payment plan for its creditors; and so that it does not suffer from the loss of assets resulting from requests for seizure, which would certainly make its restructuring impossible.

Furthermore, during this period, the recovering party will present a list of its creditors, in which the credit will be duly described and allocated to one of the existing classes.

At this point, the creditor must register in the judicial recovery proceedings, whether administratively or judicially, in order to, together with the other creditors, deliberate on the judicial recovery plan proposed by the company under recovery. In this document, the company will detail the means it will use to recover and under what exact terms the payment of creditors will occur.

It is important to emphasize that the creditor will only be paid under the terms of the plan, or in direct negotiation with the debtor, and there is no possibility of pursuing the credit through ordinary means.

In short, the granting of the processing of a judicial recovery implies the impossibility of executing the credit subject to judicial recovery through ordinary means, since the amount, renewed with the approval of the plan, is subject to payment under its terms. Therefore, the active participation of the creditor within the process becomes necessary, so that the best forms of payment for the amounts due are adopted.

Due to this complexity, it is important that the creditor be represented by professionals who are experts in the area, otherwise the credit held will be considered lost, either due to poor payment conditions or, worse, the bankruptcy of the debtor.

(with the collaboration of Luís Felipe Meira M. Simão)