Physical CPRs (Certificates of Receivables from Receivables) can be included in judicial reorganization proceedings.

Physically settled Rural Product Certificates (CPRs) can be included in judicial reorganization processes. When enacting the new Bankruptcy Law (Law 14.112/20), President Jair Bolsonaro vetoed an article that would have altered the CPR Law (Law 8.929/94). This article, present in the text approved by the National Congress, would have excluded the possibility of including physical CPRs in judicial reorganizations, except in cases of "force majeure" to be defined by the Ministry of Agriculture. With the veto, the law remains unchanged and, therefore, the certificates can be subject to negotiation.

Lawyer Euclides Ribeiro explains that the law regulating judicial and extrajudicial reorganization and bankruptcy already covered agribusiness securities in negotiations. "Article 49 of Law 11.101 lists all credits subject to reorganization. The exceptions provided for in the law are only fiduciary assignment, leasing, commercial leasing, and advances on foreign exchange contracts."

“CPRs have always been included in all judicial reorganizations, this understanding is already settled by the STJ [Superior Court of Justice], like any bank loan. CPR is a credit instrument. The attempt was made because the trading companies wanted to exclude CPRs, also placing CPRs as an exceptional instrument, but Bolsonaro understood that this exception should not occur. CPRs, like any credit instrument, should remain in judicial reorganization,” adds the lawyer specializing in Tax Law and Judicial Reorganization of Companies.

Thiago Brás Rocha, Agricultural Policy consultant at Aprosoja Mato Grosso, agrees with Ribeiro's view. “It was an attempt to reverse a judicial understanding through the legislative process. It was a movement by creditors to try to shield the CPR (Rural Product Certificate). And what was the main obstacle? The productive sector said, 'You're going to shield the creditor who has a credit established in a CPR, but what about the product of the activity? When the producer delivers it and the company goes into receivership? Aren't you going to shield this product?', because that would create a huge imbalance. Another point is that from the moment you treat a title as special, you weaken all the others. In a judicial recovery, you have the tire repairman, the mechanic, the outsourced company that does the planting; these people would have a very high probability of not getting paid, of being at the mercy of all the discounts. This didn't sit well even with the Ministry of Economy and it didn't pass.”

Rocha further explains that, with the veto of the article proposed by Congressman Alceu Moreira (MDB-RS) through an amendment, the CPR law remains unchanged. “Now it is up to the judiciary to analyze each case individually. Today, the understanding is well established that CPRs can be negotiated; there is no prohibition against them. But the judge of the bankruptcy and judicial reorganization court has the authority to evaluate each case individually.”

Changes for agriculture

Despite the veto, other points approved by the National Congress remained in the new law. Individual rural producers are now guaranteed access to judicial reorganization. To do so, they must present a digital cash book or proof of accounting records – demonstrating activity in rural production for at least two years – in addition to their annual income tax return and balance sheet.

Only debts exclusively related to rural activity, with supporting documentation and not yet due, may be included in the judicial reorganization process. Debts from rural credit that have not been renegotiated between the debtor and the financial institution prior to the filing for judicial reorganization may be incorporated into the process. Debts incurred within three years prior to the filing for judicial reorganization, related to the acquisition of rural property, cannot be included.

Farmers with total debts of up to R$ 4.8 million may submit a special judicial reorganization plan. Under this option, the debt can be spread over up to 36 monthly installments adjusted by the Selic rate. The first installment must be paid within 180 days of the judicial reorganization request. This regime is a faster process, as it does not require a creditors' meeting to approve the reorganization plan.

The new Bankruptcy Law will come into effect in the last week of January 2021.

Source: Canal Rural