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Legal Update

Brazil: Superior Court of Justice Decides that a Company Under Judicial Reorganization can still Participate in a Bidding Process

13 August 2018
Tauil & Chequer Legal Update
In a decision published on August 8, 2018, the 1st Panel of the Superior Court of Justice (STJ) unanimously recognized the right of a company under judicial reorganization to participate in a bidding process (licitação). This understanding was adopted during the Special Appeal analysis (Agravo em Recurso Especial) No. 309.867 - ES.

According to the decision, the Brazilian legal system does not require a company that intends to participate in a bidding process to present a certificate stating it is not under a judicial reorganization.

According to Justice Gurgel de Faria, the Bidding Law (Law No. 8.666/1993) requires only the submission of certificates stating the company is not under bankruptcy or concordata proceedings, and does not mention the process of judicial reorganization. Considering that Law No. 8.666/1993 involves public law, according to Justice de Faria, the law is not open to wide interpretation and, as such, the certificate that states a company is not under judicial reorganization cannot be included in the list mentioned in Article 31 of Law No. 8.666/1993.

The decision is also grounded in the fact that the Bankruptcy and Judicial Reorganization Law (Law 11.101/2005) provides for the possibility of companies under judicial reorganization to contract with the public authorities (Article 52, II), which presupposes participation in a bidding process.

Finally, the need for a systematic interpretation of both the Bidding Law and the Bankruptcy and Judicial Reorganization Law was highlighted, considering that the maintenance of a company's activities, insofar as its social function is concerned, is in the public's interest.

The decision, however, states that it is up to the company under judicial reorganization to demonstrate, during the submission stage for the bidding process, its fully economic-financial capacity to perform the object of the bidding.

The ruling in question is an important precedent and can serve as a basis to resolve other issues related to companies under judicial reorganization, such as the improper restriction on obtaining or maintaining licenses related to certain activities simply because the company is under judicial reorganization.

Our Restructuring, Bankruptcy and Insolvency team is available for further clarification regarding this matter and other related issues.

Authors

  • Leonardo Morato
    T +55 11 2504 4262
  • Luciana Celidonio
    T +55 11 2504 4640
  • José Guilherme Botelho
    T +55 11 2504 4205
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