Government sends a bill to Congress to speed up the bankruptcy process

The federal government sent a bill to Congress this Wednesday (10) to speed up bankruptcy processes. The proposal foresees the amendment of the 2005 Bankruptcy Law. President Luiz Inácio Lula da Silva (PT) forwarded the text with constitutional urgency. The order was published in the Official Gazette of the Union (DOU).

According to the document, the project intends to increase the powers of creditors, “as they are the main stakeholders in the efficient liquidation of the active assets of companies that have become unviable”. According to the Ministry of Finance, the measure should increase the transparency of bankruptcy processes and modernize the administration of the bankrupt estate.

Although the Bankruptcy Law was reformed in 2005, most of the current rules date from the 1980s, reported the Brazil Agency. In some cases, the ministry explained, the processes take up to 11 years.

New plan for bankruptcy proceedings

One of the main changes proposed is the authorization for the creditors themselves, by mutual agreement, to choose a manager to manage the bankrupt estate (fiduciary manager), as an alternative to the judicial administrator appointed by the judge, as is currently the case.

The project also creates the “bankruptcy plan”, which must be prepared by the fiduciary manager and submitted to creditors. To speed up the bankruptcy process, the proposal waives court approval for the sale of assets and payment of liabilities after the plan has been approved by the general meeting of creditors and ratified. The bill also intends to waive the process of evaluating assets for auction, which currently takes, on average, five years.

The project also aims to reduce disputes and speed up payment to creditors after the sale of assets. Creditors whose priority is unquestionable, such as workers (by law), will receive first. Then, creditors will be able to approve a plan by majority, without everyone’s agreement, to establish a payment queue.

The proposal intends to extend provisions similar to judicial recovery processes to bankruptcy. According to the Ministry of Finance, the fiduciary manager will be able to sell the assets of the bankrupt estate more quickly and obtain more resources to pay off the debts.