The Superior Court of Justice (STJ), by overturning a decision from the São Paulo Judiciary, concluded the legality of clauses in Judicial Reorganization Plans that foresee the convening of a new Creditors’ Meeting when the debtor defaults on the obligations of the Plan itself – instead of declaring immediate bankruptcy.

Although such clauses are common in judicial reorganizations, some judges deemed them void, while others upheld their legality. This is because, in addition to the absence of specific legal provision for this clause, Law 11,101/05 explicitly stipulates a direct consequence for the debtor’s default: the conversion to bankruptcy.

As a result, there was legal uncertainty regarding its legality, which led to this debate reaching the Superior Court of Justice (STJ) through Special Appeal No. 1,830,550/SP.

In its ruling, the STJ highlighted that one of the main objectives of Law 11,101/05 is the preservation of business activity whenever feasible. Thus, the creditors’ decision to grant the defaulting debtor a second chance before declaring bankruptcy (a drastic and irreversible measure) aligns with the objectives and principles of the Judicial Reorganization Law.

The STJ also emphasized that in judicial reorganizations, decisions made by creditors are sovereign. In such proceedings, the Judiciary is limited to the legality control of the Plan, intervening only when there are provisions contrary to legal statutes – it is not within the Judiciary’s purview to intervene in the Plan’s business content (a creditor competence).

Although this represents an isolated decision by the Superior Court, it signifies the emergence of a paradigm for similar situations, providing greater legal certainty to the parties involved in judicial reorganization procedures.

By André Starepravo Lubascher and Ana Paula de Lima Garbi