Judicial Recovery (RJ) is a legal procedure that seeks to preserve the continuity of business activities in times of financial crisis, temporarily suspending the collection of debts by creditors in order to enable them to be renegotiated. This process aims to allow companies to restructure their financial obligations, avoiding mass layoffs, defaults and the closure of operations.
Unlike bankruptcy, the aim of which is to liquidate the company's assets in order to pay off its debts, the priority of judicial reorganization is to recover the company's financial health. To apply for Judicial Recovery, the company must meet certain criteria and cannot be a state entity, financial institution or consortium.
The Judicial Recovery process comprises several stages, from the company's legal representation to the drafting and approval of a recovery plan within a set timeframe. After that, the company has a period, usually up to two years, to resolve its financial issues.
As far as the shares of companies in judicial reorganization are concerned, they can suffer significant impacts on the market value and trading of the shares. RJ can lead to the exclusion of shares from stock exchange indices, affecting liquidity and share prices.
Some notable cases of Brazilian companies that have gone through RJ include a well-known coffee maker, which filed for reorganization after discovering more than R$40 billion in debts, and a telephone operator, which ended its judicial recovery process after more than 6 years, involving a series of asset auctions and debt renegotiation agreements.
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