CHANGES TO THE INSOLVENCY AND RESTRUCTURING COMPANIES CODE

The changes to the Insolvency and Restructuring Companies Code, as established in Decree-Law No. 79/2017 of June 30, entered into force on July 1 2017.

Noteworthy changes

A. Special revitalization proceeding (Processo Especial de Revitalizao "PER")

1. This proceeding is now only available to companies.

2. Requirements for this proceeding were revised.

a. For every company:

 CONTENTS CORPORATE LAW NEWSLETTER I MARCH, 2017 I CAPITALIZAR PROGRAMME – PRESS RELEASE FROM THE COUNCIL OF MINISTERS OF 16 MARCH 2017 2 II NATIONAL LEGISLATION 5 III NATIONAL CASE LAW 6 NEWSLETTER I CORPORATE WWW.CUATRECASAS.COM NEWSLETTER I CORPORATE 2/7 NEWSLETTER CORPORATE LAW I CAPITALIZAR PROGRAMME – PRESS RELEASE FROM THE COUNCIL OF MINISTERS OF 16 MARCH 2017 One of the priorities of the programme of the 21st Constitutional Government is to reduce the high level of corporate borrowing and to improve conditions for investment, which is why the capitalisation of companies is one

I CORPORATE FINANCE, COVENANTS AND CREDITOR’S LIABILITY 2 II NATIONAL LEGISLATION 4 III EUROPEAN LEGISLATION 5 IV NATIONAL CASE LAW 5 NEWSLETTER I CORPORATE LAW WWW.CUATRECASAS.COM NEWSLETTER I CORPORATE LAW 2/6 CORPORATE LAW NEWSLETTER I CORPORATE FINANCE, COVENANTS AND CREDITOR’S LIABILITY Introduction In the field of corporate finance the liability of creditors that negotiate covenants with companies is an issue that currently generates great concern.

Recent developments

A decision recently handed down by the Delaware Chancery Court, CML V, LLC v. Bax, indicates that creditors of a limited liability company (“LLC”) organized under Delaware law do not have standing to institute derivative suits against an LLC’s management, even when the LLC is insolvent, unless the right is expressly set forth in the LLC’s organizational documents or external agreements.

Background

When the United States Court of Appeals for the Third Circuit decided Thabault v. Chait, 541 F.3d 512 (3d Cir. 2008), in September 2008, it was the most significant accounting malpractice decision of last year and perhaps the most significant damages case in the last 20 years. Why? Accounting malpractice cases are filled with pitfalls for unsuspecting plaintiffs. Moreover, accounting firms tend to settle cases in which the plaintiffs survive motions predicated on tried-and-true legal defenses and factual hurdles. The result is that few auditing malpractice cases are tried.

For the third time in as many years, the Delaware Chancery Court has handed down an important ruling interpreting the interaction between federal bankruptcy law and Delaware corporate law. The thorny question this time was whether a bankruptcy court’s determination that the directors of a corporation acted in good faith when they authorized a chapter 11 filing precluded a subsequent claim that the directors breached their fiduciary duties by doing so. The Delaware Chancery Court concluded that it did, ruling in Nelson v.

Principles of corporate governance that determine how a company functions outside of bankruptcy are transformed and in some cases abrogated once the company files for chapter 11 protection, when the debtor's board and management act as a "debtor-in-possession" ("DIP") that bears fiduciary obligations to the chapter 11 estate and all stakeholders involved in the bankruptcy case.

The importance and practical benefits resulting from the use of the same in-house counsel for an entire corporate family are numerous. For example, the in-house attorneys are particularly familiar with the corporate family’s structure, can assist with joint public filings, and can expertly oversee the corporate family’s compliance with regulatory regimes. If a subsidiary in the corporate family becomes financially distressed, however, the creditors of the financially distressed entity may look to the parent corporation for recourse.

Following the failure of over 400 financial institutions since the beginning of 2008, the FDIC has clarified its expectations with respect to collection and retention of bank documents by directors and officers of troubled or failing financial institutions for the purpose of explaining or defending their conduct.