PROTECTION OF CORPORATE HERITAGE: EFFECTIVE LIABILITY AND RISK MANAGEMENT
After years of deep economic crisis, which significantly depressed business and led countless companies to bankruptcy, post-election Brazil 2018 seems to have, at least, an indication of what is the way forward: deep institutional reforms ( and more than necessary) and economic liberalism.
Being a businessman in Brazil was always an act of bravery. In recent years, more than that, it was almost crazy, given the amount of problems to be managed at a time when staying alive was the challenge.
But the future scenario seems to be promising. A wave of optimism is looming, and since the new government makes part of it (a little, at least), the trend is, in fact, that wave is made concrete. With this, new investments must be created, production increased and the level of employment resumed, resumption of concession projects and, together with all this, the need for more public transport.
The market as a whole grows and, at that moment, two very important challenges come into play in the field: how to position oneself for growth and, at the same time, how to manage the liabilities charged throughout the years of crisis and that deserve total attention so as not to make the business unfeasible.
As for the first challenge, it is up to each passenger transport operator to create their plan, since they are, in the end, the great connoisseurs of their markets. As for the management of liabilities, professional assistance is recommended. Not just any professional help, but people with mastery of advanced passive management techniques, able to obtain effective results and allow relevant business assets to be protected and allow a fairer negotiation with potential creditors.
The topic of patrimonial protection (personal and business) is as sensitive as it is obscure. The ordinary use of the term "patrimonial armoring" and the overcrowding of offshore companies and other aggressive protection structures ended up generating a wrong (and unfounded) prejudice with practice. But the reality is that, after years of aggressive tax enforcement action by the tax authorities, wave of layoffs that generated a considerable labor liability (with "help" from the benevolence of the labor court) and excessive bank interests, it is rare to find companies that are living quietly with the right side of your balance.
And, in a moment of resumption, the objective is to focus on gaining efficiency, it is looking at the future, and not spending all the energy managing the past. Therefore, the objective, here, is to demonstrate that, before being only an isolated measure, which results in the implementation of a stagnant structure, patrimonial protection is something that borders on what is essential in a Brazil that plays against entrepreneurship and makes the past profit pay for future problems.
And the first essential truth about patrimonial protection is that there is no "cake ready", nor unbreakable structure. Any "shelf" solution tends to be ineffective, and whoever says protection is infallible has a very high chance of lying.
From the legal point of view, the management of liabilities must start from a structured process that must involve several areas of legal knowledge, but essentially comes from the corporate structure of the company. Unfortunately, in Brazil, the judicial (labor) culture did not understand the concept of limited liability of the legal entity, which generates the need to always be one step ahead.
And being one step ahead is structuring the business from the corporate point of view with the least exposure of the holders of capital, an adequate management of cash (through the implementation of cash protection structures and their flow of receivables) and the protection of the property of the essential assets of the business.
The use of more complex structures, but which do not impede management, is essential. Corporations offer, for example, better alternatives for the protection of holders of capital, and there are instruments that allow the control of decisions with those of right, without the unnecessary public exposure of the owner of the shares. This is the case of the assembly of a ghost-board, or ghost-council, in which the decisions of the controllers are not publicly disclosed.
The use of shareholding companies aimed at the management of equity interests has also intensified, an effective and less complex management mechanism than the S / A structure.
The most sophisticated structures have been made from investment funds (especially the Investment Funds in Units, the so-called FIPs), which are justified, however, in larger companies, given the high cost of maintaining the structure
In the management of the receivables, mechanisms such as the fiduciary assignment of the receivables and the Investment Funds in Credit Rights ("FIDC"), accompanied by the custody of the resources by third parties - even in in-house operations - have guaranteed a adequate shielding of cash and receivables against undesirable surprises arising from court orders blocking bank accounts.
The entire corporate movement must also be the subject of adequate tax planning. In the end, there are innumerable tax consequences that can be derived from a process of corporate reorganization, and it is necessary, if not to make a profit, at least to avoid any loss or future fiscal dysfunction throughout the process. There are many structures that we have seen that were poorly thought out from the tax point of view and created several fiscal "clock bombs".
Within the framework of these measures (as an example), it is essential to organize the management strategy and, where appropriate, the settlement of liabilities. It includes other legal specialties, depending on the structure of the liability and the characteristics of the creditor. If we are facing labor creditors, the management method is one; If the risk is banking, the method is different. On the other hand, full knowledge of the structure of the liability and its current risks is fundamental for the assembly of the protection structure itself, given that each type of liability (or even creditor) can offer a degree of risk that demands a specific mitigation.
Fundamental note: protective structures are not static. They are necessarily created to be dynamic, giving "mobility" to the assets whose objective is to protect, as the risks advance. Therefore, the work does not end with the implementation of the structure. Actually, that is the initial stage.
The important thing is that there is a strategy for managing liabilities that dialogues with the structure created. The management of the legal alternatives will depend on the plan outlined, and the evolution of the risks needs to be immediately known by the strategic managers, to enable the adequacy of the structure before it is dismantled.
The measures of patrimonial protection - within the law, without the use of illegal or ineffective measures, which create more risks than solutions - are powerful instruments of renegotiation of liabilities, given that, and times of resumption of economic activity, many creditors spend to believe that the financial effects for the debtor are immediate, that there is cash flowing into the company, and refuses to negotiate, or "play heavy" in the negotiation. Again: in the moment of retaking the breath, the entrepreneur can not lose focus just taking care of the past problems.
Protecting business assets can guarantee the sustainability of the company, because it makes it possible that, if much goes wrong, the "soul" of the company still retains its value. Far from being an embezzlement mechanism in creditors, the implementation of protection mechanisms is a healthy measure of patrimonial management, which allows the company to be better positioned in a recession exit scenario, a proper moment to plan the future without keeping the head focused on the past
Leonardo Cordeiro is a partner of the Cordero, Lima and Abogados, specialist in Tax Law by the PUC / SP, former professor of tax planning and holds LL.M in Corporate Law from Insper / Brasil.