Extraordinary Process for Business Viability
The recent Law 75/2020 created the Extraordinary Business Viability Process (hereinafter refered to by its Portuguese initials, PEVE). This new procedure is one of the business support mechanisms provided for in “Programa de Estabilização Económica e Social” (PEES), a plan by the Portuguese Government to respond to the economic and social difficulties caused by Covid-19.
PEVE is a pre-insolvency procedure of urgent nature and is aimed at businesses which have been shown to be in a difficult economic situation or in an imminent or current state of insolvency as a result of the COVID-19 pandemic, but which are still likely to become viable. Essentially, these are companies which are structurally viable, however have suffered adverse economic consequences as a result of the pandemic.
It should be noted that this process has priority over other urgent procedures, such as insolvency and the “Processo Especial de Revitalização” (PER).
To apply in court for de PEVE procedure, companies must demonstrate that, on 31st December 2019, the company’s liabilities did not exceed its assets.
If liabilities exceed the company’s assets, the access to the PEVE may still be allowed if the company has managed to regularize its financial situation under the transitional provisions allowing the use of the RERE by businesses in a situation of insolvency, provided they have deposited the restructuring agreement in time.
PEVE procedure starts with the submission of the application by the company to the competent court, accompanied by a “Viability Agreement” drawn up between the company and the creditors.
This feature makes PEVE more attractive than PER procedure, since the credit claim phase does not exist in this procedure, making it a simpler and faster process.
A Transitional Administrator (Administrador Judicial Provisório – AJP) is subsequently appointed.
The AJP is responsible for informing Tax and Customs Authority, the Social Security Institute, I.P. and the Social Security Financial Management Institute, I.P. that the PEVE procedure is pending, authorizing acts of special relevance to the company and also issuing an opinion on whether the agreement with the creditors offers reasonable prospects of ensuring the viability of the company.
The AJP’s opinion will then be the basis for the judge’s decision on whether to approve or reject the agreement.
The report issued by the AJP is a novelty as it does not exist in the PER procedure.
The approval of the agreement binds the company, the creditors signing the agreement and the creditors in the list of creditors, even if they did not participate in the extrajudicial negotiation, in respect of the claims arising at the time of the decision. Creditors not included in the list of creditors have 30 days from the date of publication of the decision that approves the agreement – in the Digital Services Area of the Courts, accessible at https://tribunais.org.pt – in order to, by a mere declaration, express in the file their intention to adhere to the ratified agreement.
As in PER and Insolvency procedures, PEVE maintains the principle that tax and social security debts are nonnegotiable (with exception of interest rates), and the general system of instalment payments is maintained.
PEVE procedure may only be used once. When it ends, the company cannot use this procedure again.
The law is in force until December 31 st, 2021, with the possibility of extension by government decree.
Click HERE to acess the law.
For more information please contact us at: email@example.com
[Photo: nrd, available at unsplash.com]