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    Effectiveness of the Meeting of Creditors

    Effectiveness of the Meeting of Creditors

    Rafael Mariano Araújo Bezerra, lawyer at Tortoro, Madureira & Ragazzi

    There are numerous proposals to change the rules on Reorganizations (No. 11.101/2005), but bill no. 10.220/2018 pending before the House of Representatives is considered the most relevant. Such is its importance that a temporary committee of Justices of the Superior Court of Justice has been set up to examine the proposal and to elaborate suggestions for amendments to the legal text.

    Among the amendments, article 39 stands out, which discusses the possibility of the voting of the Reorganization Plan being done electronically or through an alternative that does not require attending in person, as currently occurs in the Meetings of Creditors, held in two acts. In the first one, the majority of creditors needs to be established in each class of the credits (real, unsecured, labor, etc.), so the meeting is rarely successful. While in the second this requirement no longer exists.

    Data from the Insolvency Monitor, organized by the Brazilian Association of Jurimetrics, showed that in only 3% of the cases the Reorganization Plan was approved in the first stage, which corroborates the almost uselessness of the first Meeting of Creditors. This explains why this Bill in question is being addressed, as well as why several jurists have pondered its extinction. Although it was established as a solemn act, where key points for approval of the Reorganization Plan should be discussed, ideologically it is presented as the opportunity in which creditors, regardless of the amount of their credit, could take the floor and make their considerations. In this format, the law has given great importance to everything that happens in these meetings, to the point that its decision is sovereign and independent of judicial decision. So that the judge only carries out the legal control, monitoring to avoid violations and prevent possible frauds during the process.

    However, what is seen in practice is that all negotiations, especially those involving the largest creditors and the classes that impact the approval or rejection of the plan, are held before the Meetings. Therefore, it is beneficial that the legislator creates alternatives to modernize and simplify the act, in search of greater effectiveness of the procedure.

    As said, the first Meeting of Creditors proved to be totally unproductive, so that the great decisions are concentrated in the second act. However, as it has to be carried out by legal requirement, the creditors, especially the largest ones, do not feel safe in not attending. Thus, there is an unreasonable cost of moving lawyers, airline tickets, car rental, lodging and, perhaps most importantly, working hours.

    In addition, the company under reorganization mostly bears the costs for renting the space where the meetings are held and the publication of a public notice and, likewise, the time of their attorneys and of the trustee are wasted in an activity that lasts less than an hour.   

    Removing the need for this stage can cause a certain strangeness at first. However, not long ago this feeling was the same when electronic judicial auctions were discussed, an act which was previously obligatory in person, and it now sounds unrealistic that this activity should be done in the old way. 

    Thus, in places where technology is available, if the Meeting is electronic, it would be possible for creditors to be absent due to the high costs of travel and still exercise their voting power. It is a fact that the requirement to attend ends up harming, above all, the holders of the lower value credits, and that, most of the time, they are workers dependent on the defaulted amount, who find themselves unable to attend the meetings, which, in some cases, are extended beyond what is foreseen in the regulation.

    This experiment was recently carried out in a Meeting of Creditors, in a simultaneous way in São Paulo (place where the process is pending) and in Amapá (place where the mining company under reorganization has a mine). KPMG, appointed as trustee, sought the participation of as many creditors as possible, especially those from Amapá, many of whom would be excluded due to distance, so that they could question and exercise their voting power, as required by law.

    The flexibility of the procedure for approval of reorganization plans is also already a reality in other countries, such as the USA and Mexico, where time-limits are set for creditors to express their consent in writing to the plan or not.

    It would even be possible to collect the votes by means of specific websites and/or applications, making the procedure faster, and as democratic as possible. Therefore, the accomplishment of only one act through digital means, as the Bill proposes, follows the trend of most of the processes that are already being processed electronically.

    Therefore, the lawmaker must ensure that the Meeting of Creditors is held by any other means more productive and efficient than the current one. Everything in favor of a faster process that aims, in fact, the reorganization of the company in crisis. This should also be the guiding thought of other amendments contained in the various bills currently in progress, which focus should be the elimination of bottlenecks in a procedure that, if well used, can strongly contribute to the resumption of economic growth.

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