Company reverses bankruptcy in unprecedented case in SP Justice – 06/28/2023 – Market

The Justice of São Paulo reversed for the first time a case of decree of bankruptcy in the state. In all of Brazil, cases in which judges go back on a decision of this type are rare.

The process is underway at the 3rd Bankruptcy and Judicial Recovery Court and the decision was taken last Friday (23). In the action, to which the Sheet had access, Armco do Brasil filed for bankruptcy of CJA Indústria Metalúrgica due to a debt, and the decision for bankruptcy came out in February of this year. At the time, CJA’s defense confessed that the company would not be able to meet its obligations.

In May, however, the company changed its defense, which filed an appeal, choosing to sign an agreement with Armco. According to CJA’s lawyer, Marcelo Alvez Muniz, the agreement was supported by the Public Prosecutor’s Office, Itaú bank —one of the company’s creditors— and the trustee. “Everyone realized that it would be better for everyone to reverse the bankruptcy.”

Judge Maria Rita Rebello Pinho Dias then changed the previous decision, even with the company already sealed and the administrator appointed. “I joke that the defense revived the company, because declaring bankruptcy in the corporate world is comparable to losing a life”, says Muniz.

“The Justice realized that the company is viable, has a portfolio of clients, produces wealth and creates and maintains jobs”, argued the lawyer, who added that the judge also took into account the economic situation in Brazil.

Muniz says that it is common for American courts to take into account the macroeconomic scenario in these cases. “It is necessary to look at whether it is possible to keep the company alive, generating wealth and jobs for the country”, he says.

According to the lawyer, the agreement signed between the CJA and Armco provides for the total payment of debts, but extending the term and with fortnightly installments.

Specialist in Arbitration and Corporate Litigation, lawyer Romeu Amaral explains that cases like this are rare in Brazil, even because they raise many discussions among jurists. This is because, by law, the partners of the bankrupt company are dispossessed of the company, which would, in theory, make it impossible for them to negotiate an agreement with the other party.

Amaral adds that even the trustee could not act in this sense, because his function is only to liquidate the assets and liabilities of the bankrupt company.

The specialist adds that, in this case, the most correct thing would also be to sign an agreement with all creditors, not just with the one who filed for bankruptcy.

SIMILAR CASES

In 2015, the STJ started to admit that a rescission action could be proposed to deconstruct the decision to declare bankruptcy. But that’s another situation than what happened last Friday. “It’s different from deconstructing it by the judge who decreed it, in the same records”, comments Amaral.

The specialist also points out that there are episodes in which there is a reversal of bankruptcy for non-compliance by the other party with a judicial recovery plan. “This is the case of Ricardo Eletro, whose bankrupt decree was reversed by the Court of Justice of São Paulo”.