Previous
Examination – An analysis of its Applicability
by Felipe
PUSTILNICK, Law Degree at UniBrasil, Lawyer and Specialist in Civil Law, Alexandre
NASSER DE MELO, Graduation degree at
PUC/PR, Lawyer, Trustee and Specialist in Business Law, Nailia AGUADO RIBEIRO FRANCO, Law Student at PUC/PR and Nicolas MACEDO DE RICHTER, Law
Student at UP.
The objective
of this article is to demonstrate, besides the phatic crisis of the Brazilian
economy, the function, the applicability and limits to the power conceived by
Law to the Judge when designating the Previous Examination on the proceedings
of Judicial Reorganization and also to demonstrate the influences that this may
cause in its factual and legal aspects.
Before
entering the practical aspects of the Previous Examination, it is necessary a
brief contextualisation about the economic crisis in Brazil and also an
analysis of the Judicial Reorganization as a mechanism to overcome the economic
and financial crises which are affecting Brazilian Companies.
Using a
historical and legal background, this article analyzes practical aspects of the
Previous Examination and its effectiveness in improving the proceedings by
verifying the empirical data when deciding whether to rule in favor of the
Judicial Reorganization.
§ 1 – Contextualization of the brazilian economic scenario since 2014
The Brazilian
economy, due to numerous political factors and wrong applicability of public
policies, plunged into hyperinflation occurred in the late 1980s and early
1990s, affecting especially basic commodities. After a long period of time, the
hyperinflation was controlled by the so called “Real Plan” in 1994, which, in
addition to establish “Real” as the currency in Brazil, also imposed other
measures on the economic level.
Since then, no
other crisis has been as severe as the one faced by Brazil since 2014.
The Brazilian
economy started to demonstrate a timid recovery only in the second semester of
2018, after several periods of retraction of the Gross Domestic Product (GDP),
especially with the existence of approximately 13 million unemployed, in a
country with a total of 208 million inhabitants[1].
Like any other
crisis, this one is an“(...) crise
économique [que] se produit lentement, se développe pendant des années, et ne
cesse que peu à peu”, or, “an
economic crisis that occurs slowly, grows throught the years, and do not cease
but only little by little”. (PARETO, 1909 p. 536)[2].
In this
interregnum, many other social and legal phenomena emerged because of the
crisis. Therefore, its effects must be observed and analysed from the
perspective of the results obtained with its application in the legal system in
order to improve this very legal system and obtain experiences that, if well
analysed, could lead to the premature overcoming of the crisis that has been
affecting the Brazilian nation.
The genesis of
the most recent crisis was triggered by successive political and economic
factors over the last years, as public knowledge, which resulted in economic instability
and business insecurity, culminating into a decline of the Brazilian GDP,
causing many companies either to terminate their activities or to opt for using
legal mechanisms related to Insolvency Law, like the Judicial Reorganization.
There are three
types of economic crises that can affect a company: (i) the economic crisis,
when the sale of products or services does not occur in the volume necessary to
keep the company running; (ii) the financial crisis, when there is insufficient
cash flow or when there is no viable resources to meet the obligations of the
company; and (iii) the patrimonial crisis, which occurs when the sum of the
assets of the company is less than the sum of liabilities, resulting in
illiquidity of future obligations [3].
Any of these
crisis models can affect a company, preventing it from generating jobs or
producing more goods and services, activities that generate tax collection,
and, therefore, threatening the fulfilment of its social purpose[4].
After the
experience of the crisis in the beginning of the 90s and inspired by the
comparative law, it was created in Brazil the Law on Judicial Reorganization
and Bankruptcy (Law nº 11.105/2005), which is based on the principle of the
preservation of the company, aiming to protect the wealth-producing sources,
jobs creation by entrepreneurial activity and creditor´s interest in receiving
their credits and collective interest, with the collection of taxes and other
social benefits that create the business activity.
A)
Crisis Panorama Presentation in Real Numbers
In the order
to understand the economic, political and social context of the recent period
of the economic crisis (2014-2018), it is necessary to introduce the study of
numbers and data that, in a clear manner, present the panorama of the Brazilian
entrepreneur, the Multinational entrepreneur and also the Macroeconomic aspect
which generates a direct influence on the use of insolvency mechanisms.
According to
the data provided by the Brazilian Institute of Geography and Statistics (IBGE)[5],
there was an abrupt deceleration of the Brazilian economic growth in 2014,
whose results were perceptible in the measurement of the negative GDP since
2015.
This macroeconomic factor has been creating many negative effects on the
market, triggering a lot of economic-financial-patrimonial crises in Brazilian
companies of the most diverse sectors of the economy and branches of the
market.
Note the
variation of the GDP from the year 2008 to the year 2017:
Image 1[6]
At the same time, due to the economy recession, the
inflation and the basic interest rate, according to the following indexes,
showed not only that the stimulation of the economic activity has slowed down,
discouraging investors from making loans but also that it created difficulties
for the purchase of new goods by people and companies:
Image 2[7]
Image 3[8]
In addition,
the next data show the number of defaulters in the partial period of 2018, that
totalizes around 40.3% of the economically active population, totaling a debt
of R$ 273.4 billion (two hundred seventy-three billion and four hundred million
reais).
This figure
continues to grow, due to the country's slow economic recovery and the absence
of new jobs and companies, justifying such record levels of delayed debts by
the private sector.
Image[9]
It does not
need a complex economic reasoning to conclude that this systemic default, added
to the high interest rates, has put too much pressure on the companies in the
productive aspect, due to the decrease in sales and the need to inject
strategic funds, some of them urgent to its operating dynamics, aiming to
maintain its cash flow.
It is not
surprising that the number of defaulting companies reached its record in
January 2018, presenting a total number of approximately 5.4 million (five
million and four hundred thousand) CNPJs (Company Taxpayer Number that
identifies the company before the Internal Revenue Service of Brazil, whose
records agglomerate all the companies, associations, foundations and
organizations in national territory) with negative clash flow reported in the
most diverse services of credit protection.
The amount
reached by the debts of companies has also no historical paradigm in the national
territory, reaching an unprecedented amount of R$ 122.9 bi (hundred and
twenty-two billion and nine hundred million)[10]
in January 2018.
But it's not
just that. As one can notice in the balance sheet disclosed by the Credit
Protection Service (SPC), there is a constant increase in the rate since that
date:
“Corporate defaults have
gained momentum in recent months. In the comparison between June 2018 and the
same month of the previous year, the advance was 9.41%, the highest growth
observed in the last 21 months.”[11]
Thus, due to
logical and inevitable consequences, there is a decline in the number of active
companies in the years studied, as there is a very small number of new firms.
Between the
years of 2013 and 2016, Brazil lost about 341 thousand (three hundred and
forty-one thousand) companies.
Image 4[12]
The notorious
sentence by the economist PARETO, mentioned at the beginning of this paper,
could not present a greater measure of the reality witnessed in the recent years
by Brazilian firms. There is a limitation of economic capacity of several
individuals and organizations due to the lack of capital, the fall in the
generation of wealth, with the consequent decrease of the purchasing power.
These two factors, when added to the increase of interest rates, make it
unfeasible even to purchase using payment methods in installments, discouraging
the market of primary products and services, which are the true maintainers of
the country's industrial and agricultural activity.
Immediately
after these effects, the process of indebtedness and the consequent delinquency
of both individuals and legal entities begin. Thus, it is not long before such
a default reaches the cashflows of companies, placing them in a situation of
economic crisis because of the many different problems created by the national
crisis.
Therefore,
looking at the greater picture of the Brazilian economy and observing the
reflexes of Judicial restruturation from the perspective of the New
Institutional Economics, which was headed by NORTH (1992, p.1), there “is an attempt to incorporate the theory of
institutions into economics” [13], aiming to exemplify that the continuous
growth of countries is the result of the stability of its institutions and law,
which are the great delimiters of human action, acting as real systems of
incentive and disincentive to the right or wrong attitudes of private agents in
the commercial field.
1) Analysis According to the School of the New
Institutional Economics
The New
Institutional Economics (NIE) is a school that analyses the economical view,
focusing on the social and legal norms and rules (which are institutions) to
get a better perspective on the economic activity. Starting from this connection between the legal and the economic system,
it is necessary to understand the symbiosis between them. John Maynard KEYNES
says:
“The ideas of economists and political
philosophers, both when they are right and when they are wrong, are far more
powerful than one normally imagines. In fact, the world is governed almost
exclusively by them. Practical men, who deem themselves immune to any
intellectual influence, are often slaves to some deceased economist.” (KEYNES)[14]
Therefore,
since economists have such an impact on life in society and, especially, on
life in society which are based on an essentially capitalist culture where
there is production and transaction of goods, it is of salutary importance to
analyse the human aspect of the economic question. Thus, the order generated by
institutions, has its influence exactly in the reduction of variables of the
human conduct, generating an increase in the economic performance.
According to BARDHAN (1989, p. 1389)[15],
such circumstances are tied to “transaction costs” which are:
“These costs include those of information,
negotiation, monitoring, coordination and enforcement of contracts. When
transaction costs are absent, the initial assignment of property rights does
not matter from the point of view of efficiency, because rights can be voluntarily
adjusted and exchanged to promote increased production. But when transaction
costs are substantial, as is usually the case, the allocation of property
rights is critical.”
For this
reason, it became necessary to create strong institutions to monitor, assist,
process, rule and apply what was agreed between individuals.
In the case of
the Judiciary, such stability is delivered through the predictability of legal
decisions, which is obtained through the standard resolution of legal
situations that have factual similarity.
Starting from
this premise, BARDHAN affirms [16]:
“In Western societies over time, complex
institutional structures have been devised (elaborately defined and effectively
enforced property rights, formal contracts and guarantees, corporate hierarchy,
vertical integration, limited liability, bankruptcy laws and so on) to
constrain the participants, to reduce the uncertainty of social interaction, in
general to prevent the transactions from being too costly and thus to allow the
productivity gains of larger scale and improved technology to be realized.”
(1989, p.1391)
In a similar
vein, NORTH, Nobel economist (1993) and one of the pioneers of New
Institutional Economics, defends that the institutions are the different
between countries in their growth over the time:
“Institutions are the humanly
devised constraints that structure political, economic, and social
interactions. They consist of both informal constraints (sanctions, taboos,
customs, traditions, and codes of conduct), and formal rules (constitutions,
laws, property rights). Throughout history, institutions have been devised by
human beings to create order and reduce uncertainty in exchange. Together with
the standard constraints of economics they define the choice set and therefore
determine transaction and production costs and hence the profitability and
feasibility of engaging in economic activity. They evolve incrementally,
connecting the past with the present and the future; history in consequence is
largely a story of institutional evolution in which the historical performance
of economies can only be understood as a part of a sequential story.
Institutions provide the incentive structure of an economy; as that structure
evolves, it shapes the direction of economic change towards growth, stagnation,
or decline. In this essay, I intend to elaborate on the role of institutions in
the performance of economies and illustrate my analysis from economic history.”(1991, p. 97-112).[17]
In his
perspective the institutions can have incentive effects and also limitations
for the private agents, in order to guide their conduct in a collectively
accepted way. With strong institutions, therefore, NORTH[18] argues that there is an increase in
predictability in the private sector, generating a context of order in the
actions within the possibilities of each one of them and a greater legal
security for individuals.
With the order
established through clear and precise objectives, it is possible to efficiently
grow the economic order and reduce the friction generated by the
individualistic visions upon societies.
AGUILAR FILHO
says [19]:
“Institutions are human inventions created to
structure political, economic, and social interactions over time. A fundamental
condition highlighted by North, though not sufficient to promote economic
growth, is the existence of order. So, in the explanation about the causes of
the economic and social development of countries over the time, in addition to
material factors, it should also count cultural factors.” (2011, p.551-571).
In this way,
it is assumed that the increase in the predictability is one of the real
factors that justify the sustainable growth of nations over the time. Along
with economic growth of any country, there is necessarily an increase of companies
in the market, which will generate more jobs, payment of taxes, among other
consequences that bring social benefits.
In this sense,
the Previous Examination is a skillful instrument to give stability to the
Judicial Reorganization proceedings, preventing creditors and interested
parties, including the Treasury, from being surprised by a fraudulent and
simulated Judicial Reorganization.
Some Judicial
Reorganizations are filed by companies that are relevant in their areas of
activity and in regions of the country.
These
situations have repercussions in several other companies and groups of
companies that have a relationship in the production chain. In this sense, a
single case of Judicial Reorganization of a large economic group is capable of
generating perceptible reflexes even in the measurement of the GDP of a nation.
On the other
hand, to the extent that a country is affected by the crisis, there are more
applications for Bankruptcy and Judicial Reorganization. At this moment, the
principle of the company preservation must be observed from the perspective of
the LRJF[20].
According to COELHO [21]
(2017, p.161):
“The objectives (...) are the same: recovery of
the economic-financial and patrimonial crisis, preservation of the economic
activity and its jobs, as well as the attention to the interests of creditors.
It says that, recovered, the company can fulfill its social function.”
That is why
the principle of the preservation of the company is the most important one. One
major consequence of the approval of Act no. 11.101/505 is that the pendular
dualism, which is going to be explained in more details in the next topic, is
not a practice in Brazil.
2) The Pendular Dualism
Before Act no.
11.101/2005, the Pendular Dualism was a practice in Brazil, and still is in a lot
of countries, to bend during the liquidation of the assets of company in
crisis, once prestiging more the creditors, once pending protection to the
interests of the debtor, but almost always disregarding the main principle that
should be safeguarded, i.e., the superation of the crisis by the company in
questioning, in a way to preserve jobs, tax collection and all the benefits of
a functional company on the market.
In CARNIO’s
understanding:
“The observation of what happens in legislative
reforms throughout the ages reveals the existence of a constant pendular movement that oscillates in the protection of the
poles of the relation of material right. This is what Fábio Konder
Comparato called the pendular dualism in protecting the interest of creditors or
debtors in relation to the insolvency legislation”[22]
And he
countinous to defend that:
“In this sense, it is observed that the law now
protects the creditor more, sometimes the debtor; the consumer and the
supplier, the tenant and the lessor; and so on. This phenomenon is also
observed in relation to the interpreter. Thus, not only does the law takes part
in the protection of one of the poles of the relation of the material law, but
also the interpreter seeks to apply the law always in favor of one of the poles
of the law relationship discussed in the process of solving a concrete case.”[23]
That means
that the intention of Act no. 11.101/2005 is precisely the overcoming of this
dualism, with the search for effectiveness of the guiding principles of the
reorganization procedure.
The Supreme
Federal Court (STF), in the Appeal nº 309867 ES 2013 / 0064947-3, confirms this
understanding:
“The primarly scope of Act no..
11.101/2005, pursuant to art. 47, is to make it possible to overcome the
economic and financial crisis of the debtor in order to allow the maintenance
of the source of production, the employment of workers and the interests of
creditors, thus promoting the preservation of the company, its social function
and the stimulus to economic activity.”[24]
With the same
understanding and wisdom, the Superior Court of Justice has decided recently,
in an Appeal ruled by the Eminent Minister Luís FELIPE SOLOMÃO:
“Because of art. 6 of Act no. 11.101/2005, the
Superior Court has stated that, although the approval of the Judicial
Reorganization plan itself does not imply the stay of executive proceedings,
the acts of constriction will only be adequate if they do not jeopardize the
Company’s activity, since the purpose of reorganization is to make it possible
to overcome the economic and financial crisis of the debtor in order to allow
the maintenance of the source of production, the employment of workers and the
interests of creditors "(article 47 of Law 11.101 / 2005)”[25]
Strenghtening
such understanding, once more the Brazilian Supreme Court itself decided in an
Appeal that:
“(…)Although art. 57 of
Act no. 11.101/2005 establishes the requirement of the negative certificate of tax
credits (CND) for homologation of Judicial Reorganization, case law has been
manifested in the sense that the CND can be waived. That is because the
rejection of Judicial Reorganization, due to the lack of presentation of
negative tax certificates, could make the preservation of the company and its
employees unfeasible; 3. In addition, the Superior Court of Justice has
pacified the understanding in the sense that it is not the burden of the
taxpayer to present certificates of fiscal regularity so that Judicial
Reorganization can be granted.”[26]
In addition to
having pacified the understanding in the sense that it is not a burden of the
applicant to present certificates of fiscal regularity to be granted the
Judicial Reorganization, according to res
judicata formed in Appeal nº 1337989 SP 2011 / 0269578-5, it was evident
that in the Supreme Court prevails the understanding of the primacy of such
principle, since it affirms that:
“In order to avoid possible abuse of the right to
vote [at the stage of approval of the Judicial Reorganization plan], precisely
at the moment of overcoming the crisis, is when the Judge must act with
sensitivity when checking the requirements of the cramdown, preferring an
examination based on the principle of the preservation of the company, often
opting for its flexibility, especially when only one creditor dominates the
deliberation absolutely, overlapping what seems to be the interest of the
creditor’s community.”[27]
In order to
maintain these values, the legal architecture of the Brazilian Judicial
Reorganization System was constructed aiming to seek a simplified way of
containment of damages, not only to creditors, but also to the community that
is directly or indirectly affected by the weakening of that economic agent.
In other
words, the clear intent of the legislator with the creation of the Law on
Judicial Reorganization and Banckruptcy is to keep jobs, to collect taxes and
to contribute to economic production, since the company in difficulty would not
be able to preserve these benefits without the filing of Judicial
Reorganization.
This is a
clear reflection of the need to preserve companies for the maintenance of the
economy in times of crisis. GALBRAITH, in his masterpiece of economics, already
said that laws are the reflection of what men believe about the power of the
market, in verbis:
“Ideas are important not only for themselves, but
also to explain or interpret social behavior. The prevailing ideas of the time
are those that both, people and governments, follow. In this way, they help
shape the story itself. What men believe about the power of the market or the
dangers of the state has much influence on the laws they enact or fail to
enact-about what they ask the government for or attach to market forces.”
(1980, p.105)[28]
As mentioned
in the beginning, this research aims to demonstrate the panorama of the
Brazilian reorganization system in the recent economic crisis that has been
spread all over the country. For this, the data collected by Serasa Experian[29],
the largest credit protection agency in Brazil, is used, in which the following
historical figures are presented in the time frame from 2011 to 2017, referring
to bankruptcy petitions and Judicial Reorganization plans granted by the
Courts:
Image 5[30]
Image 6[31]
What happens
is the migration of shares of companies that would go bankrupt after the
request of Judicial Reorganization, as if they were complementary and
sequential institutes.
Judicial
Reorganization proceedings should only be filed by companies that still have
economic viability and are not in a situation of phatic insolvency. In other
words, it should only be pleaded in cases in which there is a true possibility
of maintaining the business activity running.
From the
start, it should be noted that Judicial Reorganization is not the proper
process for situations of real insolvency, i.e., situations in which there is
no possibility of overcoming the financial economic crisis and the liability of
the business company outweighs its ability to pay, even through the liquidation
of its assets. In the words of REQUIÃO, "Insolvency
is a fact that is usually inferred from the insufficiency of the debtor's
patrimony for the payment of his debts." (REQUIÃO, 1998, 64) [32].
SIMIATO defines insolvency as:
“Insolvency means the
state of equity in which the imbalance between the asset and the liability,
unfavorable to it, is manifested. The insolvency in the commercial order is not
confused in its concepts and effects with the own bankruptcy. Bankruptcy can,
of course, come from it, but it also arises from numerous other causes.”
(SIMIONATO, 2008, p. 265/266). [33].
The Judicial
Reorganization is not adequate for those cases.
Besides, there
are also requests for Judicial Reorganization with the sole purpose of self
benefit from the Stay Period for the
practice of assets dilapidation, assets misappropriation and other types of
fraud against creditors.
As pointed out
by Dr. Daniel Carnio Costa[34],
Judge of the 1st Court of Bankruptcy and Judicial Reorganization of São Paulo,
companies that pretend to fulfill the requirements of the law cannot be
protected by the Judicial Reorganization:
“These were companies that only existed formally,
on paper, but did not generate jobs, nor did they circulate products or
services, nor did they generate taxes or wealth. In other cases, the processing
of the Judicial Reorganization was based on the purely formal analysis made by
the Judge on the documentation presented by the debtor.”
As it will be
seen below, such situations were identified when applying the Preliminary
Conference to the requests for Judicial Reorganization, thus avoiding frauds
and the birth of Judicial Reorganization procedures that has no chance to
succeed, failing to burden the Judiciary with ineffective processes.
§ 2 – The Importance of the Previous Examination by the Judge to the
Improvement of the Judicial Reorganization
In order to
delimitate the scope of the Judge's action in deciding whether or not to rule
in favor of the Judicial Reorganization, it is necessary to make a systemic
interpretation of norms, principles and provisions of Act no. 11.101/2005, as
well as under the overcoming theory of pendular dualism, as already asserted in
this paper.
There is no
discussion about the sovereignty of the General Creditors Assembly. However, it
is up to the Judge to verify if it is the case to apply and grant the
Reorganization request, in addition to deciding on the occurrence of fraud,
only to verify its legality after the approval of the Reorganization Plan.
Doctrine and
jurisprudence have evolved to establish that the sovereignty of the General
Creditors Assembly has limits and the line is drawn when it comes to the protection
of the public interest, in an institute commonly known as “preservation of the
social function of business activities”.
This current
understands that Judicial Reorganization is a device of Public Law, as Eduardo
Secchi MUNHOZ (2007, p.187) lectures [35]:
“From this we can affirm that the bankruptcy law -
or the company in crisis - corresponds to one of the branches of business law
in which the social function of the company is most clearly evidenced, or the
need to contemplate all the affected interests, which are not summarized
interests of the entrepreneur. External interests, at the moment of the crisis
of the company, come to the fore, alongside with internal interests. The first
directive to be followed, therefore, is that, in addition to the interests of
the debtor and the creditors, the right of the company in crisis should seek an
efficient organization of all other interests, focusing on the pursuit of the
public interest (meaning of the people's interest), expressed in the principles
and objectives of the economic order established in the art. 170 of the
CF/1988. In a word, it is assumed that the right of the company in crisis
constitutes an important instrument of implementation of public policies,
constituting one of the chapters of economic policy.”
Another
current construes the Judicial Reorganization as being an institute of Economic
Law.
Jorge LOBO
(2012, pp. 171-172) [36]
defends that:
“Even though as a 'complex act' and a
'constitutive action', Judicial Reorganization has the nature and characteristics
of an institute of Economic Law, as I will demonstrate. I join the doctrine,
led by Orlando Gomes, which supports (a) that Economic Law is located in an
intermediate area between Public and Private Law, (b) has a threefold unity:
'spirit, object and method’ and (c) the rule of law is not guided by the idea
of justice (principle of equality), but by the idea of technical efficacy
due to the special nature of the legal protection that emerges, in which
general and collective, public and social, which it collimates in a way to
preserve and serve as a priority, hence the public nature of its norms, which
are materialized through 'prince fact', 'legal prohibitions' and 'exceptional
rules'. In fact, Judicial Reorganization of an enterprise is an institute of
economic law, because its rules do not aim to achieve the idea of justice,
but above all to create conditions and impose measures that allow companies in
a state of economic crisis to restructure, even if with partial sacrifice of
its creditors (…)”.
LOBO is
accompanied by Sérgio CAMPINHO[37]:
“Therefore, in our view, the institute of Judicial
Reorganization must be seen as the nature of a judicial contract with a new
feature, realizable through a Reorganization plan, obeyed by the debtor, with
the determination of objective and subjective order conditions for its
implementation.”
In fact, the
most important decisions during the course of Judicial Reorganization are
responsibility of the creditors (possibility to qualify their credits, to
challenge credits, to challenge the Reorganization Plan).
However, it is
common to file a request of Reorganization that, for reasons of fact or law,
are not applicable or would be vitiated by motivation vices, and therefore, it
becomes necessary to elucidate the legal instrument that ensures the correct
analysis for the decision of processing the request for Judicial
Reorganization.
The
aforementioned Law on Judicial Reorganization and Bankruptcy, in its article
51, states that the ruling of the process must be positive in the formal
analysis of a list of documents: (i) the reasons for the economic and financial
crisis, (ii) the last three-year balance sheets, (iii) the list of creditors,
(iv) the list of employees, (v) the formal regularity of the company, (vi) the
assets of the partners and administrators of the company, (vii) financial
investments and (viii) other documents.
Therefore, the
formal analysis of the documentation regarding the size of the benesse that
will be granted at the time of the initial order is not enough. This
verification must be carried out by a specialized professional, who will
provide to the Judge with information that will help him or her better decide
whether to grant or not grant the request. This institute is named Previous
Examination.
Its goal is to
provide factual information on the request for Judicial Reorganization and it
finds protection in reality. It is a tool that is able to solve the asymmetry
of information in the proceedings, being a true instrument of recovery
governance, able to place the Judicial Reorganization on the rails as soon as
it is born.
Hence, it is
correct the view that before the granting of the reorganization, the Judge
draws the incumbency on itself to have a model of governance over the process,
availing itself of both its longa manus,
the judicial expert, who, in case of granting, may be brought to the position
of Judicial Administrator of the case.
§ 3 – Previous Examination
Due to the
acceleration of the Brazilian economic crisis and the increasing use of legal
methods of insolvency, it became necessary to formulate alternatives that would
grant the Judge a macroscopic view of the lawsuit and the real knowledge of the
company's situation in the market in a short period of time. Based on this,
Preliminary Examination emerged as a tool.
The
preliminary examination is applicable only to the processes of Judicial
Reorganization and is not used in other cases because its raison d'être is the analysis of the legal feasibility of the
request for Judicial Reorganization, with the verification of compliance with
the requirements established by Act no. 11.101/2005.
The Judge of
the 1st Court of Bankruptcy and Judicial Reorganization of the District of São
Paulo, Dr. Daniel Carnio Costa[38]
defines the preliminary examination in a succinct and precise way:
“The preliminary examination consists of an
informal finding determined by the Judge prior to the decision to grant
Judicial Reorganization, in order to ascertain the regularity of the technical documentation
accompanying the initial petition, as well as the actual operating conditions
of the requesting company, in order to give the Judge more adequate conditions
for deciding whether or not to approve the Judicial Reorganization process. It
is a provision that aims to ensure the regular and effective application of
Judicial Reorganization in defense of the preservation of the public, the
social and creditors interests. The judicial order does not derive from an
express article of law, but from the proper interpretation of article 52 of Act
no. 11.101/2005.”
Whatever the
reason for the economic and financial crisis is and that leads to the request
for Judicial Reorganization, we can parallel the lesson of PARETO (1902, p.
536)[39],
which defined:
“The financial crisis occurs suddenly, at the
beginning of the downward period. She is deep; but it passes quickly.
(..,)
The economic crisis
occurs slowly, develops during years, and stops only little by little, when a
new rising period begins”.
Any of these
crisis models can affect a company's ability to generate jobs, products,
services, and the collection of taxes, wealth creation and income, preventing
it from achieving the ultimate goal of the Reorganization process and the Law
on Judicial Reorganization and Bankruptcy itself, which is to safeguard such
institutes[40].
The previous
examination conference lends itself to locate the procedural or formal defects
of the Reorganization procedure. Dr. Daniel Carnio COSTA[41],
in an interview to the journal ConJur, demonstrated that the prior expertise
lends itself to the role of true filter of legality in the Judicial
Reorganizations. He exemplified:
“For example, out of 20 requests for
reorganization received this year here on this Court, three were dismissed
summarily because there was no documentation. One was dismissed after the
preliminary examination because fraud was detected, or the company did not
actually exist. In one case, prior to the preliminary conference, it was found
that the company was not exactly as described in the petition and the company
withdrew after I determined the preliminary conference. In three cases the
preliminary conference found that this was not the competent court, because the
reorganization must proceed at the place of the principal establishment of the
company, which was not here.”
This
procedure, based on the informal primary
examination that already exists in the US Bankruptcy Law, consists of the
use of a qualified professional, to assist the Judge in verifying the
consistency/veracity of the information provided on documents when the request
for Reorganization is filed. It does not intend to analyze the economic
viability of the company, but to verify in the preliminary conference if the
company fulfills with requirements of the Law and if it is not simulating a
crisis through fraud or misconduct.
Even without
express legal provision, the preliminary examiniation is based on the
hermeneutics performed from the caput of article 52 of the Law on Judicial
Reorganization and Bankruptcy, on the overcoming of the pendular dualism, thus
allowing its application, since it is clear that the Court must adhere to the
primary objectives of the legislation and not merely be tied to the unilateral
interest of one or more of the parties.
In fact, in a lot
of cases, Act no. 11.101/2005 gives the debtor benefits and, at other times,
lends creditors with decision-making powers. Such a dualistic relationship can
and should be analyzed by the Judge.
According to
article 52 regarding the terms of documentation, the Judge must mandatorily
approve the processing of the Judicial Reorganization. The conclusion that
follows the spirit of the Law is that the Judge has to guarantee the
effectiveness of the system and not the material law relationships that exist in
between the parties involved. Therefore, one should not seek to defend
creditors or debtors, but rather the validity of the insolvency system in order
to achieve the preservation of the company.
And, according
to the vision obtained through the conclusions achieved with the NWE, this
objective is capable of establishing the necessary conditions for the
continuous development of the nation as a concatenated chain of production of
goods and services.
Before the
Brazilian Law on Judicial Reorganization and Decreee of Bankruptcy, according
to COMPARATO (1970, p. 97)[42],
the legal regulations “alternately
protected the insolvent, or its creditors, from the economic situation and the
political philosophy of the moment.”[43]
According to
the new understanding based on the principle of balanced distribution of the
burden on the Judicial Reorganization of the Company, both the debtor and the
creditors must cooperate in order to maintain the viable productive activity in
order to obtain the social benefits arising from the continuation of the
activity.
As is
understandable from the papper written by Dr. Daniel Carnio COSTA[44]:
“The purpose of the institute and the proper
functioning of the legal system must prevail over the protection of the
interest of one of the poles of the relation of material law. Thus, in a credit
and debt relationship, the focus of the interpretation must be on achieving the
efficiency in the collection system, much more than in the protection of
creditor or debtor. This is because, for example, if the law creates protection
to the debtor, in order to make it impossible to carry out the credit, the
system loses its effectiveness and, in that condition, will no longer be used
by the creditors, who will seek the realization of their credit through
alternative systems, often illegitimate.”(COSTA, 2015,
p.68)
It is worth
noting that, of course, within the activities required for the Judge's
knowledge, there is no deep knowledge of accounting, economics or business
administration. Whenever this occurs, article 156 of the Brazilian Civil
Procedure Code (CPC) [45]
allows the Judge to be assisted by experts. Based on article 481 of the same codex, which provides for the
possibility of the Court to hear testimony from third parties or to inspect
documents and materials to clarify facts that are of interest to the decision,
it may be assisted by an expert in the Judicial Reorganization.
Thus, from the
impartial analysis of this auxiliary of the judgment, it will be possible to
have a macroscopic view that allows a correct decision about whether or not to
grant the Judicial Reorganization.
This procedure
is even more necessary in view of the increasing complexity of business
relations, regarding methods of monetization of services, suppliers, corporate
structures, productive inputs and capital flows.
Although this
concept seems insufficient, it is obtained in only 23%[46]
of the judicial reorganizations granted, according to data analyzed by Serasa
Experian. It shows, therefore, a mismatch between practices usually used and
the present need of the market. Therefore, the objective of the Law, the
judicial practices and the behavior of the agents must be considered.
According to ORLEANS
e BRAGANÇA (2017, p. 102)[47]:
“It is certain that the
rules of the Law on Judicial Reorganization and Bankruptcy do not establish a
formal conduct regarding the duty to inform. But it requires that the
recovering company present its creditors with its real economic and financial
situation to justify the object renegotiation of the Law on Judicial
Reorganization and Bankruptcy.”
On the other
hand, the successful exponent of this scenario is the 1st Court of Bankruptcy
and Judicial Reorganization of São Paulo in about 81.7% of granted Judicial
Reorganizations. This success was shown to be possible based on the realization
not only of the preliminary examination, but also on the deep understanding of
the necessary speed in judicial decisions to keep up with the speed employed in
private sector relations.
It is worth
mentioning that, as agreed by the Brazilian Reorganization institute, the
success of the Judicial Reorganization is configured as: “the continuity of the company’s performance and fulfillment of its
obligations, after approval of the Reorganization plan by the creditors'
meeting, and its not bankrupt within 2 years.”[48]
The practical
experience of the 1st Court of Bankruptcy and Judicial Reorganization of São
Paulo shows that the preliminary examination may reveal four distinct
situations: a) the absence of any business activity; b) document irregularity
or incompleteness; c) fraud; d) and the functional incompetence of the
judgment.[49]
The contrary
position understands that the preliminary examination would be a barrier to the
access to justice, which may delay granting the benefit, causing the company to
be attacked for its assets. However, the Court must determine that the
preliminary conference be held quickly (five to ten days). With this shortened
timeframe creditors do not have enough time to succeed in pursuing their credit
rights.
From all this,
what is seen is that the preliminary conference deserves to be positively
received in the Brazilian legal system, based on what was instituted by the
North Americans.
Studies
presented by the PUC/SP Research Center, called the Insolvency Observatory,
found that the initial petition rejection rate at the 1st Bankruptcy Court and
São Paulo Judicial Reorganization, where the preliminary conference is held
since 2011, is approximately 30%. On the other hand, in the 2nd Court of
Bankruptcy and Judicial Reorganization of the same Region, where the practice
of the conference is not implemented, the initial petition rejection rate is
approximately 40%.[50]
In view of the
analytical support shown, one perceived the full suitability of the preliminary
conference to prove possible fraud to the creditors without generating any
additional hindrance to the applicant company using good faith. Thus, the Judge
must rely on these instruments, even if not expressed in the wording of the law,
to enforce the ultimate goal of the law.
From the
formation of a factual context, ratified by forceful evidence, the analysis of
the veracity of the conduct of the agents, with due removal of any shadow of
simulation or fraud, the Judge should form the bridge between the request of
the Reorganization and the materialization of the effects of such request.
CONCLUSION
Brazil has
been the scene for several turbulences in the recent years and the economy is
no exception. Social and political factors of wide dissemination generated
distrust both among the citizens and in relation to external investors.
Starting from
the premise that institutions and regulations are the mechanisms stipulated for
the formation of order and containment of damages, the role of the judiciary is
transparently observed.
Certainly, it
is not an undertaking that proves to be easy to carry out, taking into account
its various factors that cause instability, as well as the arduous
materialization of actions that can carry out an adequate counterweight.
However, in a
view of the irradiating values expressly set forth in the law dealing with
companies in crisis, there is a duty of the Judiciary that can not be lightly
removed. It is the Judiciary that holds legitimacy to solve disputes within the
society and, of course, the disputes inherent in a Reorganization process must
be protected by a competent Judge.
Thus, the
function of the Judge in the area of corporate restructuring is to enforce
the reasons stated by law that legitimize the Reorganization process and also
to curb the spurious use of the institute with the clear intention of
minimizing the damages caused in the social fabrics that is influenced by that
company.
Therefore,
insolvency instruments are extremely important in the continuous economic
development of a country, since they are formal regulations that protect the
market, contributing to companies that have the potential to continue in the
market, generating jobs, paying taxes, as well as knowing with time,
inevitably, will occur the collapse of a certain business company that no
longer has existential conditions.
Hence, aiming
to institute a sober and efficient order on the delicate legal situation, which
pervades most Judicial Reorganizations and Bankruptcy proceedings, the Judge
must lay all technicals arsenals at his disposal.
The efficiency
of the preliminary conference method was proved by the generated data, since it
minimized the perverse effects of opportunism, which in return is essentially
founded by the information asymmetry between agents. Crystalline, in order to
make it possible, even if it is a narrow possibility of success, the Judge must
take the responsibility of verifying the congruence of the factual support of
the request for Judicial Reorganization and watch in full attention the actions
performed by the partners both in the arrival of the request and during its
course.
There is, of
course, for the validity of the system, the need for a division of functions
asserted in the law, with the Judicial Administrator, the assembly of creditors
and the Judge, forming a plurilaterality of looks. However, the role of the
Judge can not be relegated to mere assistant, as it is truly responsible for
reinforcing the concrete motivations that make that company worthy of Reorganization,
since it will be able to comply with the core values of the law, set forth in
article 47.
In this sense,
given the difficulty found in most Judicial Reorganizations and the growing
need for the use of the institute, there must be a bold conduct of the Judge
that is in tune with the inherent needs of the market, namely: speed, specialty
and efficiency.
In the current
scenario, since the Judge is one of the last barriers to the realization of
rights, which can very well be relegated to mere paper and ink, this must adapt
to the use of measures that have proven to be efficient and, in this area, be
consistent with its premises.
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