[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN PORTUGAL] 97
After the appointment of the PA, any pending enforcement proceedings filed against the debtor shall be suspended, for a period of four months, extendable by one month, and no further proceedings shall be filed for the same purpose after such date (except for claims related to labour credits). The company shall continue to operate its business, under the PA’s supervision. The PA’s prior written authorization is required for “acts of special importance,” without that approval the transactions have no effect. IV. OUT OF COURT RESTRUCTURINGS AND CONSENSUAL WORKOUTS Creditors and debtors favor extrajudicial restructuring proceedings over statutory proceedings because the latter are necessarily prejudicial to the company’s image, harming the regular continuation of the business. Moreover, out-of-court proceedings secure greater value for creditors and maximize the recovery of credits. Out of court restructurings may occur within pure informal and dejudicialized negotiations and agreements, or within a proceeding following an Extrajudicial Company’s Recovering Regime, set out in Law no. 8/2018, of 2 March, (“RERE”). If the debtor’s restructuring inevitably entails the reduction of a debt, then insolvency proceedings or the PER (statutory in-court recovery proceedings) are chosen over out-of-court proceedings. Simple restructurings are usually concluded within three to four months, and more complex restructurings in eight to 12 months. Creditors do not generally accept any compromise on the suspension or limitation of their rights (e.g., enforcement rights), but, in practice, they refrain from exercising such rights while negotiations are ongoing. Banks generally
require full disclosure during negotiations (typically regarding accounts, assets, and the business of the debtor). In more complex restructurings, banks sometimes require an audit and a viability plan made by specialized entities. Restructuring agreements typically include solutions such as a restructuring of the payments schedule (periods of grace, extension of repayment dates, decrease of interest rates), a sale of assets, a reduction in activity, and increased compromise by the owners. Out of court restructuring agreements only bind the signatory parties (they cannot be imposed on non-parties) and cannot modify any rights of non-subscriber creditors or owners. Only PER or insolvency proceedings are binding for all stakeholders, including creditors and owners. V. MULTINATIONAL CASES The effects of restructuring or insolvency proceedings opened in an EU Member State are automatically recognized in all other Member States, according to Regulation (EU) 2015/848 (Recast Insolvency Regulation). However, the CIRE requires foreign judgments to comply with certain formalities before they can be recognized:
Insolvency has been declared by a foreign court;
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Foreign court’s decision is final and binding;
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Decision is adopted by the court where the debtor’s center of main interests is located;
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• Decision is not illegal under Portuguese law. Portuguese courts must normally apply the principle of reciprocity when recognizing foreign insolvency decisions.
The information contained in this “Guide” is provided for informational purposes only and should not, under any circumstances, be understood as legal advice on any subject matter. Recipients of this document, clients or otherwise, should not act or refrain
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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