Business lawyer explains what are the requirements to make an extrajudicial recovery

Keeping business finances healthy has its challenges, especially when it is necessary to take into account external values, such as the economic condition of the country. And to solve the situation with creditors, an alternative to long and bureaucratic processes can be the extrajudicial recovery, Direct negotiation procedure between company and creditor. 

According to the report of Brazilian Observatory for Extrajudicial Recovery (OBRE), from consultancy Biolchi Business2021 To date (july 2024), have been identified 100 cases of extrajudicial recovery in Brazil, and 157 since the validity of Law 11.101/2005, whose text was amended by the Law 14.112/2020, effective from 2021. A recent example was the extrajudicial recovery of the Bahia Houses, which in 2024 restructured a debt of R$ 4.1 billion that had as creditors the Bradesco and the Bank of Brazil.  

Extrajudicial recovery, unlike judicial recovery, does not have direct intervention of the judiciary. Through a mediator, which may be the figure of the lawyer who will draft the document, both parties (businessman and one or more creditors) need to reach an agreement for the payment of the debt. The duration of the process is usually much shorter than a judicial recovery. It is as explained by the corporate lawyer Cristina Wadner, from the office Cristina Wadner Advogados Associados:

“It is a much more agile and less complex alternative, because in the case of judicial recovery, the process is submitted to a judge, who will supervise the debt payment plan, in addition to appointing an administrator. And assuming that there are twenty creditors involved, everyone has a deadline to speak in the files. Therefore, in some cases, extrajudicial recovery can be a more beneficial way out for the” business, exemplifies the lawyer.

These cases, he explains Wadner, involve companies with more punctual and less complex debts. Among the criteria of companies that fit the tax requirements, are:

• Business activity must be carried out for more than two years;
• Not to have a pending judicial recovery request and not to have requested judicial recovery two years ago;
• Must not have declared bankruptcy;
• Not to have been convicted or not to have as administrator or controlling partner a person convicted of fraud crimes (fraudulent acts). 

Already according to a Law 11.101/2005, public companies and mixed-capital companies; public or private financial institutions; credit cooperative; consortia, supplementary pension entity; health care plan operator company; insurance company; capitalization company and other similar entities cannot open an extrajudicial recovery process.

“There are also credits that cannot be subject to extrajudicial recovery, which are labor credits, those arising from an accident at work, tax, credit arising from a lease, purchase and sale credit or property promise with irrevocability clause and exchange contract. These are the credits that are excluded. If the criteria are met, the company can make the extrajudicial recovery”, he recalls Cristina Wadner's.