I ARTICLE 233(5) OF THE CODE OF INSOLVENCY AND RECOVERY OF COMPANIES

In the scope of the interim measures provided for in the Code of Insolvency and Recovery of Companies (Código da Insolvência e da Recuperação de Empresas- CIRE), article 149(1) thereof prescribes that, after delivery of the insolvency decision, the accounting information of the insolvent person and all the assets of the insolvent estate must be seized and handed over to the administrative receiver. However, some argue that, if the administration of the insolvent estate is entrusted to the debtor, the accounting information should not be handed over to the administrative receiver, but should rather remain in the possession of the debtor, to enable compliance with the duty to present and deposit the accounts pursuant to the provisions of article 226(6) and (7) of the CIRE.

Upon the closure of the insolvency procedure, the administrative receiver has a 10-day period, in accordance with article 233(5) of the CIRE, to deliver to the court, to be filed there, all the documents he holds in his possession relating to the insolvency procedure, as well as all the "accounting information of the debtor that need not be returned to the same".

In light of this legal provision, there immediately arises the question of which is the accounting information that must be returned by the administrative receiver to the debtor and which the information that must be handed over to the court to be filed instead.

Additionally doubts arise as to the destination to be given to the accounting documents, namely, whether the debtor’s directors are responsible for their custody or not.

This dispute, which has arisen often in practice, is extremely important and pertinent, considering the common incapacity of courts to keep in their files all the documentation relating to insolvency procedures plus the accounting information that need not be returned to the debtor, in particular due to logistic constraints and lack of means to guarantee compliance with the duties associated to the obligation to keep the documents in custody.

The difficulty encountered by courts has been made considerably worse, due to the obligation to keep those documents in custody over a 10-year period.

Given the incapacity of courts to ensure custody of the accounting documents, on the one hand, and faced with the refusal by administrative receivers to assume the responsibility and costs implied by keeping the debtor’s accounting documents in custody, on the other, courts have been trying to attribute to debtors’ directors the obligation to keep the accounting documents in custody after the conclusion of insolvency proceedings.

It would seem, however, that such position lacks legal grounds and may, often, appear to be devoid of meaning.

Indeed, we do not see that debtors’ directors have any legal obligation to keep the accounting information in custody, since the provision in question clearly establishes that accounting documents must be handed over to the court, with the exception of those that must be returned to the debtor, all the more so as, with the closure of the insolvency proceedings, the persons who used to be the debtors’ directors may even not be in office any more, namely, as a result of resigning their positions. Thus, the provision in question, rather than imposing a duty, establishes the right of the debtor to recover its accounting elements in certain circumstances, after the closure of the insolvency proceedings.

Moreover, if the documents are to be returned to the debtor, the latter must exist in order to receive them and keep them. In those situations in which the insolvent company is liquidated and terminated, it becomes, in actual fact, impossible to hand over the documents to the debtor, since the latter ceases to exist with the liquidation and then the termination. It should be noted that, even where the liquidation of the company follows the steps of the administrative procedures of winding up and liquidation of commercial companies, if the insolvency proceedings are closed due to the insufficiency of the insolvent estate, the company is terminated and ceases to exist.

It is our opinion that article 233(5) of the CIRE should be read in conjunction with article 234 thereof, which specifically establishes the effects of the closure of the insolvency proceedings on commercial companies.

Thus, the restitution of the accounting information to the debtor and the corresponding duty of their directors to keep them in custody only exist in case of approval and authorisation of the recovery plan to which article 234(1) of the CIRE refers, but not in the situations referred to in numbers 3 and 4 of the same legal provision.

Indeed, in case of recovery of the insolvent company, where the same continues to operate and pursue its business, it is necessary and, therefore, justifiable to deliver the accounting information relating to such business to the debtor’s directors. On the contrary, we believe that no such reason exists in the cases of number 3 and 4 of the said article 234, that is, where the debtor company is terminated.

Finally, the possibility that the accounting documents of the debtor should be, under specific circumstances, be handed over to third parties, should also be taken into account; this might occur, for instance, in the case of restructuring by transfer, that is, where the insolvency plan approved and authorised provides for the incorporation of one or several companies engaged in the operation of one or more establishments acquired from the insolvent estate, in accordance with the provisions o article 199 of the CIRE.