According to attorney Dr. Rodrigo Pimentel, partner at Pimentel & Mochi Advogados Associados, the stay period is one of the most important pillars of judicial reorganization in Brazil. This timeframe represents a true “relief period” for companies in crisis, as it temporarily suspends lawsuits and enforcement actions against the debtor.
Therefore, it is an essential measure that allows financial reorganization and preserves business continuity. In the following paragraphs, we will explore what the stay period is, how it works, and how this mechanism provides legal certainty and time for companies to restructure. Keep reading to understand how this period acts as real relief for businesses undergoing reorganization.
What is the stay period in judicial reorganization?
The stay period, established by Law No. 11,101/2005, is a 180-day period during which all enforcement actions and collection proceedings against a company under judicial reorganization are suspended, as emphasized by Dr. Rodrigo Gonçalves Pimentel. This suspension is automatic once the reorganization request is granted and aims to create a stable environment so the company can negotiate with creditors without the risk of bank account freezes, asset seizures, or other judicial measures that could compromise its cash flow.
Moreover, the stay period is not just a procedural pause—it is also a strategic tool, as noted by Dr. Lucas Gomes Mochi, also a partner at the firm. It grants the debtor the necessary time to develop a viable restructuring plan with financial projections and measures that benefit both the company and its creditors.
What are the practical effects of the stay period?
In practice, the stay period directly impacts the legal and financial routines of a company undergoing judicial reorganization. Its main effects include:
Suspension of enforcement actions: the debtor is protected from account freezes, seizures, and other constrictive measures.
Maintenance of business operations: the company can continue operating normally, meeting obligations and preserving jobs.
Negotiation environment: the period creates favorable conditions for building a sustainable payment plan.
Protection of assets: it prevents the dispersion of company assets, which is essential for future viability.
These points show that the stay period is not a privilege granted to the debtor but rather a balancing mechanism within the judicial reorganization process. It prevents individual creditor actions from undermining the company’s collective restructuring efforts.
Can the stay period be extended?
Although the standard timeframe is 180 days, there are situations in which the stay period may be extended. However, such an extension is not automatic and depends on a reasonable justification and a court decision. Extensions are usually granted when the company demonstrates good faith, cooperation with the court, and concrete progress in negotiations with creditors.
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In many cases, the progress of the proceeding can be affected by external factors, such as a large number of creditors, parallel litigation, or delays in reviewing the restructuring plan. According to Dr. Lucas Gomes Mochi, in these scenarios, extending the stay period becomes necessary to ensure that the primary goal of reorganization—the preservation of the company—is achieved.
How can business owners make the most of the stay period?
The stay period is a unique opportunity to reorganize the company’s structure and restore financial balance. To make the most of this time, business owners must adopt an active and strategic approach. Good practices during the stay period include:
Mapping all debts: identifying total liabilities and key creditors.
Reviewing contracts and commitments: renegotiating terms and deadlines to align them with the company’s new reality.
Improving the restructuring plan: building realistic projections with achievable goals and transparent data.
Communicating clearly: maintaining consistent dialogue with creditors, employees, and suppliers.
Seeking technical support: relying on a specialized judicial reorganization team for guidance at every step.
These measures strengthen the company’s credibility and increase the likelihood of plan approval. Thus, as Dr. Lucas Gomes Mochi emphasizes, the stay period should not be seen as downtime but as a phase of intense activity and strategic planning.
Regaining Financial Stability
Ultimately, the stay period is an indispensable tool for the success of judicial reorganization. As attorney Rodrigo Pimentel highlights, by providing time and legal protection to reorganize debts and reassess strategies, it gives companies the chance to rebuild their trajectory with responsibility and planning. Therefore, its purpose goes beyond simply suspending collections—it helps restore confidence in the business and fosters a new cycle of sustainability.
Author:Clodayre Daine
