Differences between judicial recovery and extrajudicial recovery

In the current scenario, many companies face financial challenges that threaten business continuity.

To avoid bankruptcy, there are two legal processes provided for in Brazilian law: judicial recovery (RJ) and extrajudicial recovery (RE). Both aim at financial restructuring, but have different characteristics that can directly impact the company’s recovery strategy.

Judicial Recovery:
RJ is a procedure that involves the intervention of the judiciary to enable the negotiation of debts of a company in financial difficulties. The main advantage of this process is protection against bankruptcy, since, once approved, it prevents collection actions, tax executions and other measures against the company.

The process is more complex and can be time-consuming, but it offers a security structure for companies with a considerable number of creditors or in more critical situations.

When to opt for RJ?
> Informal negotiations with creditors are not viable.
> Considerable number of creditors and high financial liabilities.
> Faced with imminent risk of bankruptcy and the company needs judicial protection.

Extrajudicial Recovery:
RE, on the other hand, occurs without the need for judicial intervention. In this model, the company and its creditors directly negotiate the terms of a possible agreement for debt restructuring. The great advantage is agility and flexibility, allowing the parties involved to reach a consensus more quickly and at a lower cost.

However, this modality is more suitable for companies with a small number of creditors or that have an already established relationship of trust with them.

When to opt for RE?
> The company has a small number of creditors.
> Informal negotiations with creditors are already underway and the solution appears viable.
> The company is looking for a quick and less expensive solution.

After all, which modality should I choose?
The decision about which process to choose depends on several factors, such as the amount of debt, the number of creditors and the urgency of the situation.

Both judicial recovery and extrajudicial recovery are effective alternatives for companies seeking to restructure their finances and avoid bankruptcy.

The key to success is to make the decision based on a careful assessment of the company’s situation, with the support of qualified professionals.

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