The Digitorney Crisis Navigator
Covid-19 in Brazil:
Legal Framework for Companies
The Corona Crisis leads worldwide to critical situations for companies. In light of this, Digitorney has asked lawyers from various countries specialized in restructuring law for recommendations on what needs to be done and which solutions are at hand to weather the Corona Crisis. This part of our series focuses on Brazil.
Luis Antonio Semeghini de Souza, lawyer and founding partner at Souza, Mello e Torres based in São Paulo gives more colour on this topic for our “Digitorney Crisis Navigator”.
When does a company need to file for insolvency in Brazil?
Pursuant to the Brazilian Law, a company should file for judicial reorganization in order to overcome its economic-financial crisis and keep its production, employments and creditors’ payments. The company shall submit the reasons which led to its financial crisis situation. Thus, the company should attach to its request:
1) evidence of the financial situation including the accounting assessment related to the last 3 years, balance sheet, net income statement, income statement since the last fiscal year and cash flow management report; 2) list of creditors, including labor, secured and unsecured creditors; … >> READ MORE
What liability risks exist in Brazil in a corporate crisis?
In light of the current situation we identify the following liabilities’ risks of managing directors in Brazil: 1) Due to the current situation and imposed lockdown of several business, it may be difficult to comply with and execute all obligations (for instance: to obtain and fulfill all the required information in the business documents), which may impact, reduce or prevent the company to do its regular business;
2) Due to the decrease of business and cash flow, payments of contracts and obligations in general may be delayed or even suspended; 3) Increase in the requests to renegotiate contracts and obligations, as well as the termination of commercial relationship in case of obligations become impossible or very expensive to be fulfilled and/or paid; >> READ MORE
Is there any public support for distressed companies in Brazil?
The Brazilian Government has already issued support measures aid for business in Brazil, as follows: 1) Flexibility of some labor regulations to allow: (i) employees to change the onsite work regime to remote working and (ii) the removal by employers of employees from their daily work activities through the grating of vacation, holidays anticipation and offsetting with periods of rest of any overtime;
2) Suspension of the Severance Indemnity Fund’s collection (Fundo de Garantia por Tempo de Serviço – “FGTS”) and payments to the Federal government of “Simples” during 3 months; 3) Release of more than R$ 5 billion to be loan for public banks to micro and small business; 4) Measures to make easier the renegotiation of credits operations between companies and banks; >> READ MORE
Ad hoc solutions
What should Brazilian companies do in light of the Corona crisis?
We recommend that the following measures be taken by a company affected by the Corona crisis: 1) Putting together a response team with members of different areas of the company (production, supply, commercial, corporate, legal) responsible to centralize information and decisions and coordinate the effects and actions in connection with this crisis;
2) Preparing an emergency plan to operate during this crisis; identifying costs that can be eliminated according to the escalation of the crisis; 3) Confirming what are the city and state regulations issued in connection with the COVID-19 that may affect the conduction of your business and be sure to be … >> READ MORE