Opinion article on Bill No. 39/XII amending the Insolvency and Business Recovery Code
Negotiation, negotiation, negotiation…. This is without a doubt the most suitable word for the various legislative reforms that are underway at present. However, as it is the amendments to the CIRE (Insolvency and Business Recovery Code) that we are discussing here, it is appropriate to make a historical allusion, in particular, to the former CPERF (Special Business Recovery and Insolvency Proceedings Code).
The major amendment that is being discussed here is the revival of the idea which underpinned the CPERF and was its own ratio legis, that is to say, companies and even individuals must, if possible, be recovered and not, in the case of companies, liquidated.
From the outset, there is a radical change in the path taken in Article 1, because the current law states that the insolvency proceeding is a universal enforcement proceeding which has as its end the liquidation of the assets of a debtor. While the bill that is now at the approvals stage views the insolvency proceeding as a universal enforcement proceeding which has as its end the satisfaction of the creditor in the manner provided for in an insolvency plan, normally based on the recovery of the company.
With this aim in mind, the new law introduces the Special Revitalisation Proceedings (PER). These proceedings will begin when the debtor and at least one of his creditors manifest an intention to enter into negotiations, which cannot last longer than three months. During this period, and this is undoubtedly a very significant feature, any actions that are underway will be suspended, thereby affording the necessary calm for reflection and for the creation of a real recovery plan.
This process has the advantage that it may be submitted for the approval of the court with the plan already fully approved by the applicant and creditors, that is, if recovery mechanisms are found during the above-mentioned three-month period, including the appointment of administrators other than those on the judicial administrator list, by agreement of those involved but subject to the majorities provided for in the Code, the judge has the power/duty to approve the agreement reached. In this way, the power of the judge is focused on the tax plan and not on directing the proceedings.
When no agreement has been reached that will lead to the revitalisation of the debtor during negotiations which take place outside of court, there are two possible scenarios: if the negotiations are ended and the debtor is not in a position of insolvency at that particular moment, the proceedings will be extinguished and cease to have any effect; if on the other hand, the debtor is already in insolvent at this stage, the provisional judicial administrator, after consulting the debtor and the creditors, will file a reasoned insolvency application with the court, which the judge must appraise and declare within three working days. It should be stressed that there is a limitation on the use of this PER, that is, in order that the process not be used unfairly, more specifically, not to serve as a delaying tactic for non-compliance with obligations, any debtor who withdraws from the process may not resort to it again for a period of two years.
While this is undoubtedly the most significant amendment in the Bill, there are others. The Bill makes provision for the increase liability of the debtor, as well as its de facto or de jure directors, if these have been at fault in bringing about the insolvency; there is also provision for a more simplified proceeding for claiming credit rights; several of the currently applicable time limits have been shortened, in particular, the time limit for filing for voluntary insolvency has been reduced from 60 to 30 days; the subsequent claim of credit rights may only be filed in the six months following the declaration of insolvency; the time limit for any challenge to the settlement of transactions in favour of the insolvent company is also halved, that is, a time limit of three months as opposed to the current six months; and the time limit for the settlement of transactions to the benefit of the insolvent company assets is cut from the current four years to two years. Another novelty is that the compulsory insolvency proceeding has been transformed into a proceeding which is dependent on evidence filed that the insolvency derives from the fault of the debtor or its de facto or de jure directors. One last word about the amendment is that the vehicle for publishing acts relating to insolvency proceedings will now be Citius as opposed to the electronic version of the Diário da República.
Fernando Antas da Cunha