The New Reorganization and Bankruptcy Law - Law no. 11.101 of 2005 has recently completed five years of effectiveness. Therefore it is quite opportune to assess its effects on society.
The court-supervised and out-of-court reorganization procedures represented the great innovation brought by such a law.
Such precepts already provided for long ago and on a similar way in other countries, have long been demonstrating to be important tools to prevent that companies with potential for further productivity definitely close down their activities.
The court-supervised reorganization procedure in lieu of composition with creditors, which no longer met the needs of the companies under the pre-bankruptcy stage, allowed such a difficult period faced by the companies to become more agile and practical. For explanatory purposes, the companies with executions levied upon and that could not benefit from the composition with creditors, may now, within the scope of the law, resort to the court-supervised reorganization procedure. Moreover, in order to incept court-supervised reorganization proceedings it is no longer necessary to present net assets superior to 50% of unsecured debts, being incumbent upon the company in debt only to demonstrate the effective feasibility of the economic activity.
Such a provision revealed to be invaluable, especially since the international crisis that swept away the world, which among other aspects restricted credit, therefore hindering the financial standing of the companies. A large number of companies are resorting to reorganization procedures and obtaining positive results with the maintenance of their activities, jobs and credit.
Despite the unquestionable advance brought by the new Bankruptcy Law, the weaknesses thereof can not be ignored.
Some provisions of the law, by inaccuracy or omission, give rise to conflicting interpretations. An example is paragraph 3 of article 49 that excludes the credits secured by chattel mortgage, among others, from the scope of court-supervised reorganization. Due to the fact that such creditors are essentially financial institutions, some consider such an exclusion a protection offered to the banks, in detriment to the reorganization of the own company. Others, on their turn, observe that such measure promoted the progress in the consolidation of the system of guarantees in Brazil, inasmuch as it benefits both the banks, submitted to a lower risk exposure, and the companies facing economic difficulties, that in such a way may easily obtain credit facilities.
Another aspect requiring improvements in the application thereof refers to the universal jurisdiction of the court-supervised reorganization which has raised conflicts of jurisdiction, particularly among the courts specialized in recoveries and bankruptcies and the Labor Court. In some situations, the labor judges determine that the labor executions proceed at the Labor Court without waiting for the homologation of the reorganization plan, hampering the progress and even the feasibility of the company reorganization plan.
As to the out-of-court reorganization, it is worthy mentioning that in practice the utilization thereof is not frequent. For being an attempt for amicable solution for the company in debt with its creditors, without the need of legal intervention, except for homologation of the plan, it is often observed that such a procedure ends up being settled between the parties within the private contractual scope without the knowledge of the Judiciary.
The bankruptcy precept has also been altered by the new law. According to this new law, even if bankruptcy is decreed (in cases where reorganization is not possible), the sale of the activity to other companies is permitted, thus obtaining benefits similar to those of the court-supervised reorganization, however, putting an end to the unfeasibility demonstrated, and avoiding further losses.
The evaluation balance proves positive. Reduction in the number of bankruptcies decreed by the Courts of Justice, from 2,786 in 2005, year the new Bankruptcy Law came into force, to 1,779 in 2009, as well as an increase in the number of companies under court-supervised reorganization in the country, from 53 to 693 in the same period.
What should be stressed is that a discernment by the courts in applying the law should be exercised, in order to avoid that companies without any possibility of economic recovery, further survive at any cost instead of having their bankruptcy decreed. | 
