Heloisa Nogueira and Thamara Belinatti
A lack of knowledge about a specific subject, when combined with the unbridled sensationalism of major media outlets, can be detrimental to the public, particularly given the prevalence of misinformation and "fake news."
In the realm of judicial reorganization, this type of error frequently arises from confusing the judicial reorganization process with bankruptcy. A recent example is a CNN Brazil report on the reorganization of the famous company Tupperware; the plastics manufacturer filed for corporate restructuring under Chapter 11 in the United States due to financial issues linked to its declining popularity in recent years.
However, the news report was flawed in its discussion of the reorganization by equating Chapter 11 with bankruptcy. This reveals confusion regarding the three central terms of the discussion—stemming from a clear lack of understanding and an eagerness to capture the audience's attention through the shock value of the word "bankruptcy." To clarify the differences between these terms and better understand the discussion and Tupperware's credit agreements, it is essential to distinguish between bankruptcy, judicial reorganization, and Chapter 11.
The first of these, bankruptcy, is—in short—the end of the road and the "life" of a legal entity; it is a judicial process that occurs when a company can no longer pay its debts and becomes insolvent. This differs significantly from judicial reorganization, a legal tool adopted by the Brazilian system designed to help viable companies in crisis overcome difficulties and preserve their business operations. Judicial reorganization is very similar to Chapter 11, a mechanism within the U.S. legal system that allows financially distressed companies to suspend debt payments and undergo restructuring.
Therefore, Tupperware is not undergoing bankruptcy proceedings; in fact, the very fact that its claims are being negotiated indicates this, as bankruptcy implies a lack of cash flow to sustain payments to creditors, leaving no room for debt negotiation. Consequently, technical misinformation affects how people perceive Judicial Reorganization. This legal instrument offers a lifeline to a company in crisis rather than serving as a step toward bankruptcy. Business owners in Brazil should consider this concept, given the mechanism's accessibility and compliance with Law 11.101/2005, which governs Judicial Reorganization proceedings in the country.
