Court accepts Coteminas’ request for judicial recovery | Economy

The textile sector company Coteminas announced this Wednesday (8) that it has entered into judicial recovery.

The company, which belongs to businessman Josué Gomes da Silva, current president of the Federation of Industries of the State of São Paulo (Fiesp), had already been facing financial and operational problems.

“Since the end of the pandemic, the company has had its business negatively impacted by the combination of adverse factors that led to financial difficulties,” said Coteminas, in a statement to the market.

In the document, the company also released an excerpt from the court decision that determined the “suspension of all actions and executions” against the group.

In practice, with the recovery process, the company’s debts are frozen for 180 days, while its operation is maintained. (understand below)

The company’s request was made to the Court amid a dispute with the FIP Ordenes fund, which alleged early maturity of debentures (debt securities) issued in 2022 by Ammo Varejo, part of the Coteminas group.

In the statement released this Wednesday, Coteminas also reported that it had notified the Ordenes fund about the impossibility of executing Ammo’s shares.

“In this context, with the aim of ensuring the preservation of the business activities and assets of the companies and their subsidiaries, which would be subject to irreparable damage, the companies inform that they requested judicial recovery, together with other companies in the group, and obtained approval from your requests”, said Coteminas.

The company also stated that, with the granting of the request, “it will achieve its financial restructuring and that of all group companies”.

What is judicial recovery?

Judicial recovery serves to prevent a company in financial difficulty from closing its doors. It is a process by which the indebted company obtains a period of time to continue operating while negotiating with its creditors, under the mediation of the Court. Debts are frozen for 180 days and the operation is maintained.

Judicial recovery was established in Brazil in 2005 by law 11,101, which replaced the old Concordat Law of 1945. The difference between the two is that, in judicial recovery, the company is required to present a restructuring plan, which needs to be approved by creditors.

In the concordat, extension of term or forgiveness of debts was granted without the participation of creditors.

Who can request judicial recovery?

Private companies of any size and with more than two years of operation can resort to judicial recovery. However, the law does not apply to state-owned companies and mixed-capital companies, as well as credit unions and health plans.

Companies that have already made another request less than five years ago and those run by businesspeople who have already been convicted of bankruptcy crimes (related to bankruptcy proceedings) cannot also request judicial recovery.

How is the request for judicial recovery made?

The request is made to the Court through an initial petition that contains, among other information, the financial statement for the last three years, the reasons why it entered into a financial crisis, and the list of creditors.

After the request is accepted, the company has 60 days to present the recovery plan and foreclosures (debt collections) against it are suspended for 180 days.

The law determines that the creditors’ meeting takes place within 150 days after the process is approved by the Court, but in practice, this period is usually exceeded.

Number of companies in judicial recovery increases in the country