There are several mechanisms created to face the impacts of the Covid-19 pandemic, from support to families and companies, moratorium, suspension of terms and lines of credit.

But the truth is that the solutions now found will not be enough to prevent an economic crisis, thus making it possible to foresee an increase in default in the coming months.

Creditors must also be prepared for this situation and know their rights in order to see their claims recognized.

Below, we present you with some solutions already provided for in the law and to which companies and individuals who are prevented from fulfilling their obligations may resort.

Special Revitalization Process (PER)

PER allows companies that are proven to be in a difficult economic situation or in a situation of merely imminent insolvency, but that is still subject to recovery, to enter into negotiations with their creditors with a view to entering into a payment agreement.

Through this mechanism, and with the approval of the recovery plan by the creditors of the company under revitalization, it will be possible for companies to restructure their liabilities.

The initiation of this process prevents the initiation of any actions to collect debts against the company. During the negotiations, ongoing actions for the same purpose are also suspended.

Creditors must claim the credits they hold over debtors with the Interim Judicial Administrator appointed within twenty days of the publication of the appointment order of the Interim Judicial Administrator on the CITIUS portal.

Extrajudicial Business Regime (RERE)

This extrajudicial procedure aims to allow companies or individual entrepreneurs to negotiate with their creditors in order to approve a restructuring agreement.

The agreement will aim at changing the composition, conditions or structure of the asset or liability, or any other part of the debtor's capital structure, including the share capital, with the aim of allowing the company to survive all or in part.

It is, together with the PER, also a regime for entities that are in a difficult economic situation or in a situation of imminent insolvency. However, it is an extrajudicial procedure since it runs terms in the Commercial Registry Office and not in the courts.

Creditors' adhesion to the negotiations and the agreement is voluntary.

Special Payment Agreement Process (PEAP)

PEAP is intended to allow a natural person who is proven to be in a difficult economic situation or in a situation of merely imminent insolvency to enter into negotiations with the respective creditors with a view to concluding an agreement.

It is a solution for natural persons to restructure their liabilities.

Insolvency

In the current legal framework, a debtor is considered insolvent if he is unable to fulfill his overdue obligations. The debtor must apply for his declaration of insolvency within 30 days after the date of knowledge of that situation.

The insolvency process may result in the liquidation of the debtor's assets, or, if it proves feasible, the approval of an insolvency plan that allows the debtor's recovery.

Creditors who are aware of the declaration of insolvency of one of their debtors must claim the claims they hold on that company with the appointed Insolvency Administrator. The deadline for claiming credits is determined by the judge in the sentence and is stated in the notice that will be published on the CITIUS portal.

FAQs

1.  My company is in a difficult economic situation, since it already has some payments to suppliers in arrears and I anticipate that in the short term it will not be possible to continue paying to suppliers or employees. What can I do?

Companies that are in a difficult economic situation or in a situation of imminent insolvency, may resort to one of the schemes mentioned above, namely PER or RERE, in order to try to restructure their company's liabilities.

2.  Has a special regime been created for the recovery of companies due to the crisis that is anticipated as a result of the Covid-19 pandemic?

So far, no special regime has been approved.

3.  I have a customer who has reported that he will not be able to pay the service invoices that my company provided. How do I know if you are in PER or Insolvency?

PER and Insolvencies are published on the CITIUS portal, which is publicly accessible. Through that portal, by entering the name or the NIF of the debtor company, it is possible to check if any advertisement has been published regarding its entry in PER or declaration of insolvency.

4.  I understand that a customer has been declared insolvent. What should I do?

You must proceed with the claim of the credit that you hold on that customer with the Insolvency Administrator, within the period that the judge has determined in the sentence.

The identification of the Insolvency Administrator and the deadline to complain can be found in the announcement of the insolvency declaration, published on the CITIUS portal.

5.  In what situations should I request the insolvency of my clients who are in default due to non-payment?

The declaration of insolvency can be requested by any creditor, with any of the following facts:

a)  General suspension of payment of overdue obligations;

b)  Failure to comply with one or more obligations that, due to their amount or the circumstances of non-compliance, reveals the debtor's inability to meet all his obligations on time;

c)  Escape from the business owner or the debtor's administrators or leave the place where the company has its headquarters or carries out its main activity, related to the debtor's lack of solvency and without designation of suitable substitute;

d)  Dissipation, abandonment, hasty or ruinous liquidation of assets and fictitious constitution of credits;

e)  Insufficiency of pledged assets for payment of the creditor's credit verified in an executive process filed against the debtor;

f)  Failure to comply with obligations under an insolvency plan or a payment plan, under the conditions provided for by law;

g)  Widespread default in the last six months of debts of any of the following types:

      (i)    Tax;
      (ii)   Social security contributions and contributions;
      (iii)  Debts arising from an employment contract, or from the breach or termination of this contract;
      (iv)  Rent of any type of lease, including financial, installments of the purchase price or loan guaranteed by the respective                                mortgage, in relation to the place where the debtor carries out his activity or has his headquarters or residence;

h)  If the debtor is a company, the liability is shown to be higher than the asset according to the last approved balance sheet, or a delay of more than nine months in the approval and deposit of the accounts, if legally obliged to do so.

Text prepared in accordance with the legislation in force on March 29, 2020.