Regardless of the economic sector, companies are susceptible to facing crisis moments and financial issues, whether due to internal factors, related to management, or even external factors, related to sectorial or generalized crises, such as the current crisis caused by COVID-19, that directly impacts the global economy.
An immediate consequence of the lack of resources in a company is the inability to fulfill its obligations, which, due to the interdependence of economic agents, can affect the entire market chain.
In order to mitigate the unwanted effects of non-compliance with legal obligations and considering business relevance for employment and economic activity, the Insolvency and Company Recovery Code, provided for in Decree-Law No. 53/2004 , of 18 March (CIRE) offers solutions for a recovery process (PER) and payments reorganization (PEAP) dedicated to companies in economic difficulty, despite not being insolvency context.
Special Process for the Companies Recovery (PER)
What is the Company Recovery Process (PER)?
PER has a legal description in art. 17-A of Decree-Law no. 53/2004, of 18 March and allows companies to negotiate their debts with creditors while maintaining their economic activity, without interrupting its business operations.
PER works as a turnaround path against the possible insolvency of society, providing support measures in order to protect business activity while responding to its debts.
Who is PER for?
PER is aimed to companies that are in struggling with its economic situation, in order words, is dedicated to companies that face serious difficulties to fulfil their obligations on time, either due to lack of financial liquidity or because they are unable to obtain credit to compensate such debts.
What are the PER effects?
Art. 17-E foresees some immediate consequences to the recovery request, all aimed to protecting the maintenance of the company's business activity. Among them, we highlight the lawsuit suspensions against the company and the obstruction to any lawsuit of this nature during the execution of the PER.
As well, essential public services cannot be suspended, such as:
a) Water supply service;
b) Electricity sales service;
c) Supply service for natural gas and piped liquefied petroleum gases;
d) Electronic communications service;
e) Postal services;
f) Services dedicated to treating wastewater;
g) Urban solid waste management services.
How to request it?
The companies facing financial issues can request the PER through a lawyer, who will represent the company interests on the Court to whom the request is directed.
In addition to other legal formalities, the request must be instructed with a recovery proposal plan including, at least, the company's equity and financial situation description.
Related legislation:
– Insolvency and Company Recovery Code, provided for in Decree-Law no. 53/2004, of 18 March (CIRE);CIRE);
Civil Code, Decree-Law no. 47344/66, of 25 November;
– Civil Procedure Code, Law No. 41/2013, of 26 June;