Member Article

A range of business support mechanisms have been introduced to face the crisis caused by the COVID-19 pandemic. Among them, the recent Law 75/2020 of 27 November has created a series of measures in the field of restructuring and insolvency procedures. The stand-out among these new procedures is the Extraordinary Business Viability Process (Processo Extraordinário de Viabilização de Empresas referred to here by it Portuguese initials, “PEVE”).

This is a new extraordinary process aimed exclusively at companies in a difficult economic situation or facing imminent or actual insolvency (provided it is not yet been declared judicially)¹.

The PEVE is intended to lead to court approval of a debt restructuring agreement (“Viability Agreement”) established out of court between the company and its creditors representing at least the majorities provided for in the Special Revitalisation Procedure (“PER”)².

The approval decision binds the company, the creditors signing the Viability Agreement and the creditors on the list submitted by the debtor (which may be contested by any creditor), even if they have not participated in the out-of-court negotiation.

At the time of filing the application in court, the company may not have be subject to any pending PER. Besides this, it must meet and prove it has met the conditions necessary for its viability. In addition, it must also demonstrate that, on 31 December 2019, the company's liabilities did not exceed its assets (determined in accordance with the rules of the “CIRE”). That is, in practice, it must provide evidence that its difficulties stem from the pandemic situation. However, the law does provide for two exceptions: (i) micro and small businesses, where the liabilities may exceed the assets provided certain additional conditions laid down in this law are met; and (ii)businesses which, although not in a positive net position on 31 December 2019, have managed to regularise their 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 due time.

The judge is responsible for checking that all the preconditions and requirements are met by issuing the order granting or opening the PEVE appointing the interim judicial receiver (administrador judicial provisório or “AJP”).

To guarantee the speed of the process, no provision is made for a credit claim phase. Thephase for potential challenges by the creditors (based on undue inclusion or exclusion of credits, or errors in their amounts or their ranking) and for any application for the non-approval of the Viability Agreement begin immediately and simultaneously. Moreover, there are short time limits for the judge's decision and priority is given to this extraordinary procedure over other urgent procedures (insolvency and the PER), including in the appeal phases.

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