Law no 14.112/2020 introduced significant modifications to Brazilian bankruptcy and judicial recovery laws with the goal of updating procedures and offering more legal assurance to all stakeholders.
If you are a practicing attorney in this field or wish to grasp the new system dynamics, this article will delve into the primary alterations.
Read on to learn about the impact of these alterations on business recovery and how you can implement them in your professional work. Check it out!
What does Law No. 14.112/2020, known as the Law of Death and Judicial Recovery, entail?
The Law No. 14.112/2020, known as the New Bankruptcy and Judicial Recovery Law, revised existing laws to maintain a fair balance between creditors and debtors, with a focus on preserving financially viable companies.
Its primary goal is to facilitate the financial recovery of these firms, ensuring the protection of creditors’ rights and, when feasible, aiming to safeguard business operations and employment.
The law sets out specific processes for debt restructuring and company reorganization, promoting the resolution of financial challenges and the safeguarding of assets and the economy.
What are the modifications brought by Constitutional Amendment 132 regarding tax reform?
Changes to the Death and Judicial Recovery Law [Law No. 14.112/2020]
Financing options during legal reorganization.
Companies undergoing bankruptcy proceedings can now secure funding with a priority guarantee through the implementation of “DIP Financing” (Debtor-in-Possession).
Creditors funding these companies would rather receive the payments, even if they have to use existing collateral.
This action encourages the provision of resources to sustain the company’s functioning throughout the process.
Legal foundation: Article 69-A of Law 14.112/20.
Utilization of mediation and conciliation
The current laws promote the utilization of different approaches to resolving conflicts, like mediation and conciliation, prior to and throughout legal and bankruptcy proceedings.
These methods lower procedural expenses and hasten the resolution of disputes.
Legal foundation: Article 20-B of Law No 14.112/20.
Expansion of out-of-court debt collection
The reform made it easier to use extrajudicial recovery by enabling agreements to be made with only a portion of the creditors.
This modification decreases the necessity for court involvement and speeds up the financial restructuring process of businesses.
Legal foundation: Article 163 of Law number 14,112/20.
Restructuring of tax debt
The new law allows federal tax debts to be paid off in installments over a maximum period of 120 months.
Companies can utilize tax losses they have accrued to offset debts, which can help ease the tax burden during the recovery process.
Legal foundation: Articles 10-A and 10-B of Law No 10.522/2002, added by Law No 14.112/2020.
Sale of assets without liability.
The new law guarantees that when companies in legal recovery or bankruptcy sell assets, labor and tax debts are not transferred to the buyer.
This action enhances predictability in the law and draws in investors.
Legal foundation: Provisions in Law No 14.112/20, specifically Articles 60 and 66.
Transnational bankruptcy
Law 14.112/20 introduced particular regulations regarding cross-border insolvency, facilitating enhanced collaboration between domestic and international legal systems.
This is particularly important for companies that work on a worldwide scale.
Legal foundation: Sections 167-A to 167-O of Law No. 14.112/20.
Tips for attorneys practicing Death and Judicial Recovery Law
In-depth expertise and a strategic mindset are crucial in handling bankruptcy and judicial recovery cases effectively for clients.
Tips for lawyers looking to enhance their practice in light of recent legislative changes and available resources.
Examine modifications in legislation
The new Law of Death and Judicial Recovery, Law No. 14.112/2020, has introduced new mechanisms and significant regulations.
Understanding these changes is crucial to providing excellent service.
Assistance with preventative measures
Preventive measures can stop customers from experiencing financial distress. Key actions to take include:
- Advice on effective financial management practices and monitoring cash flow.
- Identify potential dangers and propose remedies like renegotiating debt agreements.
- To encourage the development of a backup plan for potential financial challenges.
By foreseeing issues and suggesting remedies, it is feasible to lower the risk of bankruptcy and ready the client for potential legal recovery steps.
Utilize technology to your advantage.
Technological tools such as Legal AI and specialized software are valuable assets in legal tasks.
- Automate the creation of requests and documents.
- Assistance with handling time limits for procedures;
- Organize and store documents related to the process.
- Provide insights based on data analytics to enhance strategies.
Using these tools effectively enhances productivity, minimizes operational mistakes, and enables the attorney to dedicate more time to developing case strategies.
Keep an eye out for chances to participate in mediation
Mediation is a quick and efficient way to settle disputes and prevent lengthy legal proceedings.
Promote out-of-court settlements whenever feasible, taking into account that:
- Cut expenses for everyone involved.
- Speed up the process of resolving issues.
- They provide more flexibility in discussions.
A proficient attorney should know when to suggest mediation and assist in negotiations among the parties.
Jurisprudence Update
Courts frequently encounter new challenges during bankruptcy and judicial recovery proceedings.
Staying informed about recent court rulings and legal interpretations is crucial for forming arguments and creating successful solutions.
Understand the particularities of the business.
Each business possesses unique characteristics that impact the outcome of the recovery or bankruptcy procedure.
The attorney needs to conduct a thorough examination of the financial status, the company’s structure, and interactions with creditors.
This comprehension enables you to develop a customized and efficient strategy.
Encourage openness and confidence
Inform your customers about each stage of the process, clarifying the possible risks and choices they have.
Clear communication builds trust and ensures that decisions are made purposefully.
Invest in ongoing education
Attend classes, workshops, and activities on bankruptcy and court-ordered restructuring.
Continuous education is necessary to stay up to date with market changes and provide outstanding service.
By following these suggestions, you will enhance your ability to act ethically and effectively in the bankruptcy and judicial recovery field, benefiting both your clients and your professional development.
Modernization and opportunities for lawyers in the Death and Recovery Law.
Law No 14.112/2020 introduced major improvements to bankruptcy and judicial recovery laws, updating the Brazilian legal system and expanding the options for troubled companies.
Changes enhance efficiency, legal certainty, and motivation for sustainable business operations, demonstrating a more dynamic and adapted response to current economic requirements.
Lawyers need to stay updated, utilize technology, and have a strategic approach to address the challenges and opportunities presented.
The new legal regulations, along with proactive measures and individualized approaches, will offer efficient solutions and enhance businesses and the country’s economy.
Explore our guide on the Superinvite Law [Law 14.181/21] to understand its functionality.
What does the Law No. 14.112/2020, known as the Law of Death and Judicial Recovery, entail?
The Law of Falence and Judicial Recovery, Law No. 14.112/2020, updated and expanded the system for company recovery and bankruptcy in Brazil from the previous Law No. 11.101/2005. Its aim is to make it easier for companies to overcome economic crises, safeguarding their operations, preserving jobs, and promoting economic growth.
What are the primary modifications in Law No. 14.112/2020 concerning death and judicial recovery?
The law emphasizes the importance of balancing the interests of the company, creditors, and the economy as a whole, through increased flexibility in negotiations, revised deadlines, new funding options, and enhanced creditor security.
