Court-supervised Reorganization is a powerful legal instrument (and a breath) for companies in financial distress.
The focal point of the entire process is the Reorganization Plan, whereby the payment term and amount of the company’s debts “existing” on the date of the request for reorganization are renegotiated.
In order to prepare a viable and feasible Plan, one must know the exact amount of the company’s liabilities as well as which debts will be covered by the Plan. And the criterion used by the legislator was “time”: “court-supervised reorganization may cover any existing debt on the date of the request, even though they are not yet due and payable“ (section 49).
Assessing their “existing debts” is not a hard task for companies. They are fully aware of their social and contractual obligations, either due or coming due, and recording the amounts owed to employees, suppliers, tax authorities, etc., as reflected in the accounting books serve as basis to calculate any .
But there has always been a grey area when it comes to amounts payable which are in dispute.
Because the law is silent on the subject, different arguments have been raised as to the exact moment when an amount payable which is in dispute can be considered an “existing” debt. They are: (i) the moment the court decision ordering payment of the amount is rendered – because, until then, the right to receive the amount would not exist, only the expectation of a right; (ii) the moment the court decision ordering payment of the amount becomes final and irreversible; or (iii) the moment the fact triggering the debt occurred – because the sole purpose of the court decision ordering payment of the relevant amount is to declare that the right to receive such amount has existed since then.
This last argument is clearly in favor of companies in court-supervised reorganization for it allows the Reorganization Plan to cover a wider scope of liabilities. The good news is that the Superior Court of Justice has recently ruled exactly that (appeal Resp No. 1793713-DF (2019/0028691-8) filed by Oi S/A). Now, the date of the transaction giving rise to the debt is the moment at which the debt is considered “existing” and, therefore, it can be included in the reorganization plan.
By taking such position, the Superior Court of Justice virtually settles the subject.
