São Paulo’s Court of Appeals confirms a single extension of the stay period

Last week, São Paulo’s Court of Appeal rejected an appeal filed by the debtors in a judicial reorganization proceeding (RJ) seeking a second extension of the 180-day stay period, confirming the limitation to a single extension introduced by amendments to the Brazilian Bankruptcy Law in effect since 2021.

Before the amendment, despite the previous language expressly prohibiting any extensions, courts and scholars widely admitted several extensions of the stay period, interpreting that a single 180-day period would be insufficient to negotiate, approve and confirm a plan.

Two years ago, the law was amended to permit a single 180-day extension, for a total of up to 360 days from the beginning of an RJ. Last week the 2ª Business Law Chamber of São Paulo’s Court of Appeals confirmed the literal interpretation of the revised provision, refusing to extend the stay period for a second time, even if the delay was not caused by the debtor.

The literal interpretation of the new provision confirms that parties negotiating the RJ plan should be swifter and more effective, curbing prior practices of delaying the process to seek leverage in long lasting RJs. The decision is not binding, and the matter is not yet settled, but it is an important precedent that could provide guidance not only in São Paulo, but elsewhere in Brazil.Lefosse’s Restructuring and Insolvency Team closely monitors the changes that impact the Brazilian Market. For further clarification on this matter, or others that may be of interest to you, contact our professionals.