Judicial Recovery is a legal legal measure used to try to prevent a company from going bankrupt.
When a certain company faces difficulties in paying its debts, it can appeal for recovery court in court, aiming to ensure the restructuring of the business and redefine a financial rescue plan for the institution.
The judicial reorganization is provided for in chapter three of the call "Bankruptcy and Business Recovery Law - LFRE (Law No. 11.101, of February 9, 2005).
"Art. 47. The objective of the judicial reorganization is to make it possible to overcome the debtor's economic and financial crisis situation, in order to allow the maintenance of the source producer, the employment of workers and the interests of creditors, thus promoting the preservation of the company, its social function and the encouragement of activity economic".
It was proposed as a replacement for the bankruptcy, which is also a measure of agreement between the debtor company and its creditors, to restore its income and with this, not to declare the company bankrupt.
How it works
First, the company must apply for judicial recovery in court. After the request, you need to prepare a file on the case and present it to the responsible judge.
If the process is approved by the judge, the judge authorizes the second step: the elaboration of a recovery plan. The company has a 60-day limit to submit the plan, otherwise the judge will declare you bankrupt.
After the timely submission of the plan, the judge must disclose it to all the company's creditors. These have up to 180 days to manifest themselves in favor or against the presented recovery plan. If creditors do not approve the recovery plan, the judge declares the company bankrupt. The negotiation process between the company and creditors is mediated by an administrator appointed by the Court.
Finally, if approved, the company enters into judicial reorganization, following the steps that were previously established in the institution's economic-financial restructuring plan.
During the judicial reorganization, the company's operations follow normally, however, every month it must present a balance to the judge and creditors about the company's progress.
If the company does not follow the agreements signed in the judicial reorganization plan, the judge will declare the institution bankrupt.
Judicial and extrajudicial recovery
Unlike the court, the extrajudicial recovery it is the agreement signed between the debtor company and the creditors, without the intermediary of the Judiciary.
In this case, the legal entity and creditors define a plan together, with the advice of lawyers specialized in this area, and undertake to comply with all stages of the process.
Less bureaucracy and more accessible cost are some of the advantages of extrajudicial over judicial recovery, especially for small and medium-sized companies.
Judicial Recovery and Bankruptcy
In legal practice, bankruptcy was replaced by judicial reorganization. However, their actions have significant differences with regard to the company recovery process.
THE judicial recovery it is very flexible and leaves the preparation and approval of the company's recovery plan in charge of the trustee and the creditors' committee.
already the bankruptcy it is an instrument of agreement between the parties involved to avoid the company's bankruptcy, which stipulates certain deadlines and payments within this period.