On December 24, 2020, the President of the Brazilian Republic signed the Law 14,112/2020, which alters the Brazilian Reorganization and Bankruptcy Law (Law 11,101/2005 – BBL), with vetoes to 6 provisions of the Bill of Law 4.458/2020 (Bill) approved by the Federal Senate (as detailed in a previous alert).
One of the main vetoes was related to the inclusion of §10 to article 6 of the BBL, which provided the stay of labor foreclosures brought against a subsidiary or jointly liable person to the debtor under judicial reorganization until the judicial reorganization plan is ratified or the judicial reorganization is converted into bankruptcy.
The President also vetoed alterations proposed in the Bill in relation to the following provisions:
(i) sole paragraph of article 60 and §3rd of article 66 of the BBL, which would expressly provide, in cases of sale of assets within the judicial reorganization or bankruptcy, the non-succession of the buyer in relation to the debtors’ obligations, including, but not limited to, the environmental, regulatory, administrative, criminal, anti-corruption, tax and labor obligations;
(ii) article 6th-B of the BBL, which would grant certain advantages to the restructuring or bankrupt company in the calculation of taxes associated with the sale of assets or rights in judicial reorganization or bankruptcy proceedings;
(iii) article 50-A of the BBL, which would grant tax benefits to the restructuring company in connection with renegotiation of debts within the judicial reorganization proceeding;
(iv) article 11 of Law 8,929/1994, which would provide for the exclusion from the judicial reorganization of the credits and guarantees related to the certificate of rural products (the so-called “CPR”) with physical liquidation, in case of full or partial early payment, among other related points; and
(v) §13 of article 6 of the BBL, which, among others, would allow medical cooperatives operating a health care plan to apply for judicial reorganization.
Law 14,112/2020, with the vetoes described above, was published in the Official Gazette on December 24, 2020, and, pursuant to its article 7th, shall be effective 30 days after its publication.
Finally, according to article 66, §4th of the Brazilian Federal Constitution, the presidential vetoes shall be considered/reviewed by the Brazilian National Congress, within 30 days as of its receipt thereby, and can only be rejected by the vote of the absolute majority of the Representatives and Senators.