Brazilian companies have increasingly chosen arbitration as their preferred method for resolving domestic and international disputes. Now the impact of COVID-19 in Brazil has caused a sharp increase in insolvencies, and there is no expectation of a quick turnaround in the next months and, possibly, years to come. What, then, are the potential effects of Brazilian insolvency proceedings on arbitrations in Brazil and abroad? We provide our insights in the document below.
Brazilian companies have increasingly chosen arbitration as their preferred method for resolving domestic and international disputes. Now the impact of COVID-19 in Brazil has caused a sharp increase in insolvencies, and there is no expectation of a quick turnaround in the next months and, possibly, years to come. What, then, are the potential effects of Brazilian insolvency proceedings on arbitration in Brazil and abroad?
Are arbitration agreements affected by the opening of insolvency proceedings?
On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the Act) came into force. The Act included far-reaching wholescale reforms to the UK’s restructuring toolbox, including the introduction of the restructuring plan, which has the potential to be a gamechanger for restructurings.
It also included temporary measures dealing with COVID-19 impacts on companies. The two most significant temporary measures for companies facing financial difficulties as a result of the COVID 19 pandemic were:
As the coronavirus pandemic began spreading through Europe in the early months of 2020, the authorities had little idea of how best to respond – both to the virus itself, and its impact on livelihoods and businesses.
But since then, Europe’s major economies have introduced a suite of measures to contain COVID-19’s spread and keep the economic fallout from social restrictions to a minimum.
Algemeen wordt aangenomen dat dit najaar een gevaarlijke fase wordt voor vele ondernemingen. Naar de reden daarvoor hoeven we niet ver te zoeken alhoewel het misschien een beetje te gemakkelijk is alle schuld in de schoenen van Corona te steken. Het is in alle geval al lang geen schande meer om te moeten toegeven dat het soms moeilijk is om alle leveranciers te betalen.
On entend de manière générale que cet automne sera une période dangereuse pour de nombreuses entreprises. Et il n'est évidemment pas nécessaire de chercher bien loin pour en connaître la raison, bien que la situation économique difficile actuelle ne trouve pas sa cause unique dans la crise subie suite au Coronavirus. En tout cas, il n’y a rien d’honteux à admettre que l’on peut avoir du mal à payer tous ses fournisseurs.
It is generally accepted that the last quarter of 2020 will be a risky period for many businesses. The reason for this is not far-fetched, although it is maybe a little too easy to put all the blame on Corona. In any case, it is no longer a disgrace to have to admit problems to pay all suppliers.
During lockdown period, many companies were still able to survive with the special government coronacrisis measures. But now, as these measures are being systematically phased out, risk of bankruptcy has increased.
Following the global implementation of stay-at-home orders in response to the novel coronavirus, businesses suffered unprecedented declines in demand. As the United States struggles to reign in the contagion, a number of household names – from Chuck E. Cheese to J.C. Penney – have filed for bankruptcy. Logically, distressed M&A transactions should rise as corporations struggle under historic levels of debt, but who is poised to take advantage of a boom in distressed M&A, what are the new realities of distressed M&A and how will these transactions proceed?
The truism that every crisis brings about opportunities also applies to mergers and acquisitions (M&A). Companies that encounter difficulties as a result of the COVID-19 pandemic, or even have to file for insolvency, will have to seek equity investors or joint venture partners, or otherwise sell parts or, in worst cases, all of their business operations. This provides ample opportunities for corporate buyers to enter a new market or expand their existing business or portfolio – for an attractively low price.
Court closures
India was in complete lockdown from 24 March until 31 May, a situation that inevitably impacted the functioning of Indian courts. Even though most implemented measures to conduct virtual hearings, these hearings have been limited to only the most urgent cases. Once courts return to business as usual, they are likely to receive a surge in filings, which will increase the backlog in a country that already has 30 million pending cases.