A new course for judicial recovery and rural credit market in Brazil

On November 5, 2019 the Brazilian Superior Court of Justice (“STJ”) decided a case that not only outlined rural producers’ judicial recovery, but also the course of credit market in the segment. The decision of Justice Luis Felipe Salomão solved the case after split decision between Justice Marco Buzzi and Justice Raul Araújo of the 4th Group. STJ’s final decision in the case (Recurso Especial No. 1,800,032/MT) was that credits originated before rural producers’ due registry in the Commercial Registry are subjected to the judicial recovery procedure.

Rural producers’ judicial recovery is a source of debate in the legal landscape, including in the the Judicial Branch. Two aspects are especially relevant for the matter: (i) the possibility for the rural producer registered on the Commercial Registry in less than two years to file a request of judicial recovery; and (ii) the subjection of credits originated prior to the aforementioned registry to the referred procedure.

According to article 48 of law No. 11,101/2005, one of the conditions for filing a judicial recovery request is the regular exercise of commercial activities (i.e., registry in the Commercial Registry) for at least two years. For that regard, rural producers bear a distinguishing aspect, for which registry in the Commercial Registry is an option (articles 971 and 984 of law No. 10,406/2002). The dissent intensified with the modification to the judicial recovery law included by law No. 12,873/2013, in which a rural producer may prove two years of regular exercise of commercial activities from an economic and fiscal statement (Declaração de Informações Econômico-fiscais da Pessoa Jurídica).

The matter remained relevant to the legal community in Brazil and was a topic for discussion at the 3rd Conference of Corporate Law (III Jornada de Direito Comercial), organized in June, 2019. Resolutions 96 and 97 were in favor of rural producers and implied that a request may be filed by a person or company dedicated to rural activities whose registry in the Commercial Registry is dated less than two years and, on top of that, all credits would be subjected to judicial recovery. Although the resolutions are not binding, they reflect the solid view to lawyers and judges. STJ’s decision, on the other hand, serves to grant more certainty for the matter, with regards to the second aspect, confirming the Conference’s understanding. Furthermore, it is interesting to highlight that Justice Raul Araújo and Justice Luis Felipe Salomão were also members of the Conference.

The main argument sustaining the decision was that the activities exercised by rural producers were the same after their regular registry in the Commercial Registry, hence there would be no reason for restricting their access to judicial recovery. A side effect of this decision, however, is in the rural credit market, whose main players are financial institutions and trading companies. The possibility of judicial recovery for rural producers, targets of the referred market, may significantly increase the risk for creditors, which are now forced to include the possibility of judicial recovery in credit’s interest rates. Since many of Brazilian rural producers find themselves on a position of non-regular exercise of commercial activities, expectations are that the impact of STJ’s decision may be of considerable proportions.

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