Bankruptcy crimes in the pandemics
Tarsila Tojal , Ana Fernanda Ayres Dellosso, Nara Chavedar

In these times of pandemic, there is an urgent and indispensable need to take measures in favor of public health. In addition to that, the recession caused by the spread of the virus is inevitable, as well as, among its many effects, the state of insolvency that affects companies.

A survey from the Brazilian Service of Support for Micro and Small Enterprises reveals that at least 600,000 micro and small businesses had to shut permanently because of the pandemic and, according to a recent edition of such research, carried out in cooperation with FGV, 46% of small businesses have sought loans from banks since the beginning of the crisis, many without success.

The Transparent National Treasury platform disclosed that, until the beginning of August, R$ 20.9 billion was spent by the Brazilian federal government in emergency policies to help small and medium-sized businesses (Provisional Measures 972 and 977). The amount is considerably smaller than originally expected and it ranks far behind emergency plans from countries such as the United States.

The crisis creates insolvency and insolvency exacerbates the crisis. As a result from this spiral, a great number of enterprises have already filed for court and out-of-court reorganization and bankruptcy, and the numbers are expected to increase with the escalation of the pandemic. A survey carried out by Boa Vista SCPC – a Brazilian company specialized in credit protection – released last month indicates that the number of bankruptcies grew 93% from May to June and the requests for judicial recovery increased 82.2%.

Hence the need to talk about bankruptcy crimes – provided under the Brazilian Law 11,101/2005 – and the need to distinguish the obligations imposed by law on companies from the criminal liability of individuals.

Not every offense provided for in Law 11,101/2005 needs to be committed by members of the debtor company. An accountant, for example, may perpetrate the crime as much as a creditor or a public authority. The reason underlying such legislative choice is that the law was meant to protect business activities, by enabling “the debtor to overcome situations of economic and financial crisis” (art. 47) and, when it is not possible to do so, by preserving and optimizing ” the productive use of the company’s assets and productive resources, including intangible assets” (art. 75). While the business activity is expected to last, creditors and debtors will always hold a transitory position. The law is not aimed at meeting their financial expectations or at collecting debts.

The criminal liability will always fall on individuals who effectively take part in a crime, to the extent of their culpability. Criminal law does not allow the presumption of guilt and interpretations to that effect should be rejected.

One particularity of the crimes described in Law 11,101/05 is that the behavior, regardless of whether in a pre- or post-bankruptcy context, may only be punished if there is “a judicial decision that decrees bankruptcy or grants court or out-of-court reorganization.” Mere financial difficulties do not attract criminal liability.

Prosecution shall also demonstrate that all elements of the offense were willfully committed by the defendant. In many cases, there must exist a specific intent. For example, one will not commit a bankruptcy crime by disclosing false information about a debtor in court reorganization if there is no specific intent of leading that “debtor to bankruptcy or to gain advantage.”

Another question that may arise is whether serious financial difficulties faced by a company may justify the commitment of a bankruptcy crime and thus prevent criminal liability.

Defenses as such have already been accepted by courts in a few cases of tax evasion, when it is proven that the collection of taxes would have led to the impossibility of paying employees.

However, the answer seems to be different for most situations provided under Law 11,101/05, because the existence of financial difficulties is an assumption of almost all bankruptcy violations and there is already an order of preference to settle the debts.

In any case, for now, the use of criminal law will not bring solutions, nor will it prevent the aggravation of bankruptcy or court reorganization situations.

A different sort of measures, on the other hand, may present more appropriate solutions. Bill 1,397/20, for instance, proposes a transitional solution while the state of public calamity persists, by establishing, for instance, the suspension of execution proceedings and the possibility of preventive negotiation for debtors that had more than 30% of revenue reduction.

Despite some caveats in day-to-day situations, the idea of Bill 1,397/20 is to give the entrepreneur tools to better manage a crisis before it becomes inevitable, preventing crimes from being committed.