CHANGES TO THE INSOLVENCY AND RESTRUCTURING COMPANIES CODE

The changes to the Insolvency and Restructuring Companies Code, as established in Decree-Law No. 79/2017 of June 30, entered into force on July 1 2017.

Noteworthy changes

A. Special revitalization proceeding (Processo Especial de Revitalizao "PER")

1. This proceeding is now only available to companies.

2. Requirements for this proceeding were revised.

a. For every company:

i. The written declaration to initiate negotiations, must now be jointly subscribed by creditors, although not related to the debtor company, holding at least 10% of non-subordinated credits. If certain requirements are met, the court may reduce this percentage.

ii. The recovery plan proposal must be attached to the PER application, as well as a statement describing the company's assets and financial situation.

b. For companies legally required to have their accounting books revised:

i. Along with the PER application, the company must submit a statement issued by a certified accountant or an auditor asserting that the company is not in a current situation of insolvency.

3. The consolidation of several special revitalization proceedings for companies within the same group is now admitted. The judge may admit said consolidation of proceedings ex officio, or following the provisory judicial administrator's request.

4. The appointment of the provisory judicial administrator stays all prescription and limitation periods that the company may invoke.

5. Public service companies, including water, electrical power, natural gas, and telecommunications suppliers, are now prevented from suspending their services while negotiations are ongoing.

6. If negotiations fail, a new PER can no longer be started within two years of the initial PER's termination.

7. The moment of termination of the proceedings has now been clarified. Termination may occur (i) when the judicial decision that homologates the recovery plan becomes res judicata, or (ii) if the recovery plan is rejected, after the provisory judicial administrator has presented the report regarding the company's situation (whether of solvency or insolvency).

8. It is now clear that the provisory judicial administrator will maintain its duties (i) until the judicial homologation of the recovery plan is issued; or, if the recovery plan is not approved, (ii) until the report on the company's insolvency has been presented; and, if this is the case, until the insolvency request has been filed.

B. Insolvency proceedings

1. Concerning a natural person's insolvency proceedings, the Creditors' Assembly can now be dismissed.

2. The provisory list of creditors and the list of approved creditors must point out the value of the insolvent estate assets affected by in rem guarantees regarding credits for which the debtor is not personally liable.

3. The possibility of credits' compensation must be indicated in the provisory list of creditors.

4. The insolvent estate's structure must be published in portal Citius.

5. The sale of assets of the insolvent estate shall be made through electronic auction.

6. Clarification of the staring date to file the incident of insolvency qualification.

C. A new recovery proceeding (Processo Especial para Acordo de Pagamento "PEAP") was created, which only applies to debtors that (i) are not companies, (ii) which are in a difficult economic situation or in imminent insolvency situation, (iii) and aim to negotiate with their creditors in the view of reaching into a payment agreement.

D. The judicial administrator's acts, or the ones to be made before them, must now be done through an electronic platform that the government defines.

E. The Insolvency and Restructuring Companies Code is now adapted to (EU) 2015/848 Regulation on Crossborder Insolvencies of the European Parliament, of May 20, 2015.