In view of Brazil's current economic scenario, many companies have filed applications for judicial reorganization as a way of renegotiating their debts in order to maintain their activities and carry out their corporate purpose. Often, they must resort to this procedure without prior approval by the general meeting, which is pending further confirmation per the terms of article 122, sole paragraph, of the Brazilian Corporations Law.
In some cases, however, this approval does not happen or there are discussions between, on the one hand, shareholders, interested in protecting their rights under corporate laws, and, on the other hand, the company in reorganization, sometimes accompanied by its creditors.
In recent judicial decisions, our courts have addressed these discussions and tended to protect the decisions reached by the company in reorganization and/or the community of creditors, based on the prevailing interest in the judicial reorganization process.
An example of such a situation is the judicial judicial reorganization of the Renuka Group,[1] especially the interlocutory appeal filed in the case, which debated the decision by the bankruptcy court that dismissed the affirmative vote of the minority shareholder for purposes of a capital increase in the company provided for in the reorganization plan.
In this specific case, the São Paulo State Court of Appeals (TJSP) upheld the decision by the trial court on the grounds of abuse of minority position and conflict between its actions and the company’s interests. According to the TJSP, it would be legitimate to suppress the need for approval by the minority shareholder for a capital increase (rule set forth in the company’s bylaws), as well as to have an arbitration clause on the subject (according to which any corporate dispute should be resolved via arbitration), since the capital increase, through the contribution of the majority shareholder, was allegedly compatible with the economic situation of the company and would not, therefore, mean unjustified dilution.
The TJSP opted to give prevalence to the rules of the reorganization plan and to its fulfillment with respect to the corporate issues relating to the matter since the decision to increase share capital was found to be "the pathway found by the company to overcome the crisis",[2] with economic and corporate justifications explained well explained by the Renuka Group, and that the minority shareholder supposedly only sought to have its interests prevail.
Another relevant case on the subject is the judicial reorganization of the Daslu Group, in which minority shareholders sought to debate via an interlocutory appeal a decision granting an application for judicial reorganization.[3] The Superior Court of Justice (STJ) upheld a decision by the TJSP according to which shareholders cannot seek to fight against a decision that approved the judicial reorganization plan derived from the respective approval of the plan in a general meeting of creditors. The TJSP understood that their interests "do not prevail over the principle of preservation of the company and its corporate function,"[4] nor over that of the community of creditors.
The minority shareholders, in this case, sustained that the effectiveness of the reorganization plan was conditioned on the approval of the shareholders, according to a memorandum of understanding entered into by them. And, moreover, they argued that there was a shareholders' agreement that granted minority shareholders the right to participate in new businesses entered into by the company. Along these lines, according to the minority shareholders' theory, they have an interest in vetoing the reorganization plan since: (i) their approval is said to be a condition of effectiveness; and (ii) the plan was said to provide for the creation of a new company that would receive assets from the Daslu Group, including that its brand, without specifying how minority rights would be satisfied.
The trial court, the TJSP, and the STJ were of the position that such issues would not block approval of the plan. The TJSP further stated that, since these are corporate matters, they should be settled in a separate and autonomous proceeding, and not in the context of a judicial reorganization.
Finally, one of the cases with the greatest repercussion on the subject was the positive finding of conflict of jurisdiction [5]resulting from the judicial reorganization of the OI Group, involving the 7th Business Court of the Capital District of the State of Rio de Janeiro/RJ[6] and the Arbitral Tribunal of the Market Arbitration Chamber of São Paulo/SP.[7]
In summary, minority shareholders sought to challenge the reorganization plan approved in court on the grounds that it provided for a capital increase, through the conversion of OI Group debts into shares, the approval of which should be submitted to OI S.A.'s board of executive officers. The minority shareholders also called an extraordinary general meeting (AGE), whereby they decided to remove from office part of the board of directors of the OI S/A Group and approved the filing of an action of liability against two OI S.A. officers, one of them being the CEO. In view of these facts, OI S.A. submitted a plea at the reorganization hearing seeking to suspend the effects of the resolution passed at the AGE, which was promptly granted. Nonetheless, the minority shareholder Bratel BV, based on the bylaws of OI S.A., instituted arbitration proceedings to challenge the adoption of the measures provided for in the approved reorganization plan, which was granted in limine by the arbitral tribunal. In view of this, OI S.A. raised a positive conflict of jurisdiction before the STJ, seeking to suspend the decision by the arbitral tribunal and to obtain a declaratory relief affirming the jurisdiction of the 7th Court of Rio de Janeiro.
The reporting judge, via an in limine order, granted a stay of the decision handed down by the arbitral tribunal in the case, therein provisionally finding the 7th District Court of Rio de Janeiro as having jurisdiction to review issues related to judicial reorganization and related urgent measures as a means of preserving the interests and assets of the company undergoing reorganization.
In reviewing the cases decided, one notes, therefore, that in judicial reorganizations, either at the time of filing the request or at the time of a resolution on the means of reorganization, conflicts may arise between the corporate law and the Bankruptcy and Reorganization Law, with the prevailing theory to date being that it will be incumbent on the reorganization court to decide on the issue, and, to that end, resolve, among other points: (i) the conflict in the specific case; (ii) the motive of the shareholder with its actions and the claim sought by it; and (iii) the profile of the controlling power of the company under judicial reorganization.[8]
Despite this, it is true that a great deal of debate will still arise regarding the subject, on the one hand, the defenders of the prevalence of corporate rights and arbitration, and, on the other hand, those who consider the rights of the company in reorganization.
[1] Case No. 1099671-48.2015.8.26.0100, 1st Bankruptcy and Judicial Reorganization Court of the Central Judicial Section of the District of São Paulo - Interlocutory Appeal No. 2257715-26.2016.8.26.0000, 2nd Chamber Reserved for Business Law - TJSP
[2] P. 9 of the appellate decision handed down in Interlocutory Appeal No. 2257715-26.2016.8.26.0000
[3] Interlocutory Appeal No. 0154311-66.2011.8.26.0000, Chamber Reserved for Bankruptcy and Reorganization, TJSP - Resp 1.539.445 - SP, Third Panel, STJ.
[4] Headnotes of Interlocutory Appeal No. 0154311-66.2011.8.26.0000.
[5] Conflict of Jurisdiction No. 157.099/RJ, STJ
[6] Court where the judicial reorganization of Oi is pending (case No. 0203711-65.2016.8.19.0001).
[7] Court where Arbitration Proceeding No. 104/18 is pending, initiated by the minority shareholder Bratel BV.
[8] COELHO, Fabio Ulhoa, idem, pp. 256.
