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Bankruptcy Law Reform and COVID-19-related measures for insolvency

In order to deal with the COVID-19 pandemic scenario and to keep the economy stable during the crisis, Brazil has adopted some measures to protect businesses against insolvency and bankruptcy. Whether such measures are pandemic-related or not, they integrate Brazil in a worldwide effort to avoid damages.

In April 2020, the State Courts of Justice of both Sao Paulo and Parana created projects for out-of-court dispute resolution. The first developed a conciliation and mediation project for pre-litigation business disputes and the latter implemented a Judicial Center for Conflict Resolution and Citizenship (CEJUSC) for reorganisation.

The Brazilian National Council of Justice (CNJ) recommended in early August 2020 the creation of CEJUSCs for any business disputes to be settled by ways of negotiation, mediation or conciliation either in out-of-court or court processes. Before that, in March, the CNJ recommended the adoption of measures to mitigate the impact of COVID-19 in reorganisation and bankruptcy processes, e. g. stay period extension in the case the creditor’s meeting needed to be postponed.  However, these recommendations are not mandatory.

The provisions of out-of-court mediation and reorganisation are similar to the Chinese instructions for civil cases involving COVID-19 released in May 2020, which has key content on bankruptcy cases.

Irrespective of its transitory character, the Emergency and Transitional Legal Framework for Private Law Relations (RJET), established by Federal Law No. 14,010/2020, did not regard insolvency, but rather some general provisions, e.g., on statute of limitations and contractual issues.

Although there have been no provisional changes to federal insolvency law facing the COVID-19 pandemic so far, on November 25, 2020, the Brazilian Federal Senate approved the Bill of Law (“Bill”) 4,458/2020 which reforms the Brazilian Bankruptcy Law (Federal Law No. 11,105/2005). The Bill had previously been voted by the Chamber of Deputies and now awaits presidential sanction.

The main objectives of the Bill are, inter alia, to support the economic recovery of businesses, to reduce litigation and court proceedings, to reduce the duration of a proceeding and to stimulate out-of-court processes, such as extrajudicial reorganisation and pre-litigation dispute resolution.

The following topics are the major changes in Brazilian bankruptcy law in connection with the current legislation of other jurisdictions:

   a) Conciliation and mediation on extrajudicial and judicial reorganisation

According to novel articles to be inserted in bankruptcy law, conciliation and mediation shall be encouraged in any court, including superior courts, both before and after the request for judicial reorganisation. These methods are specially recommended when, among others, (i) the dispute involves partners and shareholders of a business in financial distress or in a current judicial reorganisation proceeding; and (ii) the business in financial distress and its creditors are able to renegotiate the debts, before the filling for judicial reorganisation.

Regarding COVID-19 and public calamity, the Bill encourages conciliation and mediation during the judicial reorganisation proceeding in the cases there are “extraconcursais” credits.

   b) Creditors can provide the judicial reorganisation plan

In the case the judicial reorganisation plan submitted to creditors approval is rejected, the judicial administrator puts the proposition to the creditors’ meeting vote. If the creditors do not agree to provide a reorganisation plan or the creditors’ plan is rejected, the judicial reorganisation will be converted into bankruptcy.

   c) The adoption of transnational insolvency

The Bill integrates to Brazilian legal framework the possibility of transnational insolvency based on UNCITRAL Model Law on Cross-Border Insolvency, seeking for international cooperation, uniformity of application and respect to good faith.

Among several and detailed provisions, there are sections to regulate the recognition of foreign processes, the cooperation with foreign authorities and representatives and the concurrent processes. The latter is related to the extrajudicial and judicial reorganisation or bankruptcy proceedings to commence after the recognition of a foreign main process.

The Brazilian Prosecutors Office will also intervene in such processes.

   e) The possibility to consolidate group estates

The Bill innovates by authorising debtors under common corporate control to request for judicial reorganisation by means of procedural consolidation. Exceptionally, the judge can also authorise substantial consolidation if there is interconnection or confusion of assets or liabilities among the debtors plus at least two other situations. In this case, assets and liabilities are considered to be of a single debtor.

   f) The judicial reorganisation of the rural producers

This topic puts an end in a great discussion among state courts in Brazil. The rural producers can request for judicial reorganisation even if their commercial register does not meet the required period of registry. Such period may be proved by using the documents of the activities performed, including, e.g., Digital Cash Book and balance sheet.

g) General novelties: regulation of dip financing (debtor in possession financing); broader cases of bankruptcy declaration; increase number of outstanding tax debt instalments; stay period extension.

Once sanctioned by Brazilian President, the Bill will enter into force in thirty days after publication on the Official Gazette.

Referências:

“CEJUSC Recuperação Empresarial” é implantado na comarca de Francisco Beltrão. Tribunal de Justiça do Paraná. Disponível em: https://www.tjpr.jus.br/noticias/-/asset_publisher/9jZB/content/id/35253519

COVID-19 and the Current State of Insolvency in China. The University of Melbourne. Disponível em: https://law.unimelb.edu.au/centres/alc/engagement/asian-legal-conversations-covid-19/alc-original-articles/covid-19-and-the-current-state-of-insolvency-in-china

Guiding Opinions of the Supreme People’s Court on Several Issues Concerning the Proper Trial of Civil Cases Involving the New Coronary Pneumonia Epidemic Situation (2). The Supreme People’s Court of the People’s Republic of China. Disponível em: http://www.court.gov.cn/fabu-xiangqing-230181.html

Nova Lei de Falências é aprovada pelo Congresso Nacional. Ministério da Economia. Disponível em: https://www.gov.br/economia/pt-br/assuntos/noticias/2020/novembro/nova-lei-de-falencias-e-aprovada-pelo-congresso-nacional

Provimento CG nº 11/2020. Tribunal de Justiça de São Paulo. Disponível em: https://www.tjsp.jus.br/Download/Portal/Coronavirus/Comunicados/Provimento_CG_N11-2020.pdf

Recomendação Nº 63 de 31/03/2020. Conselho Nacional de Justiça. Disponível em: https://atos.cnj.jus.br/atos/detalhar/3261

Recomendação nº 71 de 05/08/2020. Conselho Nacional de Justiça. Disponível em: https://atos.cnj.jus.br/atos/detalhar/3434

Tabela de principais mudanças do PL nº 4.458/2020. Ministério da Economia. Disponível em: https://www.gov.br/economia/pt-br/assuntos/noticias/2020/novembro/arquivos/TabelaLeide_Falencias.docx.pdf

Is there a relationship between PVP Law and agribusiness?

In the field of intellectual property, it is common to think in trademarks, patents and computer programs as its great representatives. Although that is true, there is a specific area that are both agribusiness and IP subject we are required to understand: the cultivated variety, or just “cultivar”.

Brazilian IP Law bars the protection of natural living beings, in whole or in part, and biological material, when found in nature or isolated, from patent system. Such provision was an option for each signatory of both Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) and International Convention for the Protection of New Varieties of Plants (the UPOV Convention from 1978). In this regard, plant variety such as sugarcane, cotton, banana, orange and corn, whose harvests were particularly responsible for increase in 3,81% the Brazilian agrobusiness GDP in 2019, have a sui generis protection system.

The Brazilian Plant Variety Protection Law (Law No. 9,456/1997) regards several criteria in order to distinguish the cultivar use and reproduce from another kind of plant. To do so, the article 10 presents actions that are not deemed to be breeder’s right infringement. For instance, a person who stores and plants seeds for his/her own use on his/her premises or on the premises of third parties shall not be considered a PVP infringer. Using the plant as a source of variation in genetic improvement or in scientific research is another exception.

A special treatment is given to small rural producers (familiar agriculture), who are allowed to multiply seeds for donation or exchange in dealings exclusively with other small rural producers, under programs of financing or support authorised by the Government.

But such general provisions do not apply to the cultivation of sugarcane. A specific list of provisions regulates cultivar. The producer who wants to multiply vegetative propagating material, for example, is obliged to secure authorisation from the owner of the right to the plant variety, even for his/her own use. It does not apply just in case the rural property the producer has possession or ownership has less than four modules, according to Law No. 4,504/1964.

To regulate and manage applications for protection, Brazilian PVP Law established the National Plant Varieties Protection Service (SNPC), under the authority of the Ministry of Agriculture, Livestock and Food Supply (MAPA). All responsibilities of this agency are listed at article 3 of Decree No. 2,366/1997, that implements regulations of the Plant Variety Protection Law.

Under article 9 of UPOV Convention, Brazilian PVP Law provides restrictions in the exercise of breeder’s right in two main cases: compulsory license and restricted public use.

The first restriction ensures the availability of the plant variety on the market, at reasonable prices, when the maintenance of a regular supply is being unduly hampered by the title holder. Any part having legitimate interest may request this measure if there is evidence that the requester has attempted, unsuccessfully, to obtain a voluntary license from the holder of the cultivar.

Conversely, the second restriction is declared ex officio by the MAPA, based on a technical opinion issued by the competent agencies. Article 36 of Brazilian PVP Law allows restricted public use declaration in case of national emergency, abuse of economic power or other circumstances of extreme urgency. The cultivar may be exploited directly by the Federal Union or by third parties designed by it.

According to article 6 of the law its provisions also applies to applications for PVP originating abroad and filed within the country by a natural or legal person whose protection is ensured by a treaty effective in Brazil. It is important to note that the person domiciled abroad shall appoint and maintain an agent with power of attorney domiciled in Brazil to represent him/her in dealings with the SNPC.

In addition, the term of protection under Brazilian law is basically the minimum settled at UPOV Convention: fifteen years. For vines and fruit, forest and ornamental trees, including their rootstock, the period is eighteen years. Both periods begin in the date of grant of the Provisional Certificate of Protection issued by SNPC, and at the end of such term the cultivar shall pass into the public domain.

The law also ensures that any person who infringes the rights of a protected plant variety shall be bound to indemnify the title holder as well as shall be deemed guilty of the crime of infringement of the rights of the breeder.

The increasing of agricultural activities depends on plant variety protection for planting and harvesting. Consequentially, nowadays intellectual property has a tight relationship and is becoming a more and more important issue for agribusiness.

How reliable is biometric data in tightening bank cyber security?

Multi-factor authentication (MFA) is one important pillar of cyber security in banking. Financial services interests have realised that requiring consumers to provide their personal information before processing transactions can deter data breaches.

And it has worked. Despite the numerous cases of successful high-profile hacking in the past 10 years, involving prominent names in the industry such as JPMorgan Chase and SWIFT, Fortunly believes more people would have been defrauded had there been lax customer authentication policies in place.

However, cyber robbers have managed to exploit a weakness in text-based MFA. In February, The Telegraph reported that Metro Bank and some smaller financial institutions were hacked. The attackers were able to get their hands on the codes sent to customers by capitalising on a flaw in SS7. Telecoms rely on this set of protocols to exchange SMS text messages and calls between one another anywhere in the world.

Clearly, more secure MFA is necessary to protect the integrity of financial services organisations as custodians of sensitive data of billions of people on the planet. This is where biometrics come in.

Unlike texted codes, pieces of biometric data are harder to steal since they are unique to individual consumers. Then again, biometrics are not equal and may not provide different levels of protection.

Fingerprint

Fingerprints, as well as finger-vein patterns, are being used by banks to authenticate customers at brick-and-mortar branches. Scanners for both biological characteristics can deliver fast, accurate results, which allow frictionless in-building and ATM transactions.

The availability of scanners in consumer electronics makes fingerprint authentication a feasible solution to boost cyber security. In fact, it has been adopted by the Royal Bank of Scotland (RBS) for mobile banking. With just one touch, fingerprints can authenticate users to complete card payment transactions made via RBS’s mobile apps.

Face

What is advantageous about facial features as biometric details is that they are hard to cheat. Unlike fingerprints that could be reproduced with tape, the distinct qualities of a face could not in any way, shape or form be mimicked.

Voice

Voice biometric technology is sophisticated, for it considers up to 80 of the distinguishing vocal-tract attributes of a person. As biological data, the voice is actually more unique than the fingerprint.

Citibank has been using voice authentication since 2016. The consumer arm of the Citigroup analyses the voice pattern of a caller based on a pre-recorded voice print to help detect identity thieves more accurately.

Online Behaviour

Signatures, keystroke patterns and website browsing tendencies are some peculiar customer identifiers being tested by some banks to prevent fraud. Behavioural biometric tech may require a ton of historical data to be considered helpful, but its readings are claimed to be 99% accurate.

Conclusion

Ultimately, biometrics are imperfect. Physical characteristics and individual behaviours can change, so they can’t be reliable 100% of the time. Nevertheless, biological data is a potent tool for cyber security all banks should adopt to stay ahead in the game of cat and mouse they play with hackers until the next MFA innovation comes along.

5 Rules Of Money Management For Small Businesses

Individuals must know how to manage their money to become rich so you also need to know how to manage your business money to be successful.

Just like an individual, your business also needs to pay for the cost to survive. How to spend money effectively without getting caught in debt or going into debt?

Individuals must know how to manage their money to become rich so you also need to know how to manage your business money to be successful. With businesses, you will have to work with employees, suppliers, tax authorities. How to work with them, you always take advantage of the money you spend.

Here are 5 rules to help you manage money for your small business:

1. Minimise The Cost Of Life

If you are managing your own small business for the first time, the above principle is extremely important in the first few years. Calculate how much money you need to cover your monthly living and withdraw the right amount of income from your business. With the remaining profit, invest back into the company. Let that money serve growth.

It will be exciting to make money from a business, but many new business owners use it on expensive vacations or homes. Resist those impulses. Wait until the business has gone through a few years, then you can start taking those profits to enjoy yourself.

2. Do Not Hire Employee Early

In a fledgling business, the biggest expense, by far, is employee salaries. As the business gets busier and you seem to be overloaded, it’s time to hire a new employee right away. However, make sure it is essential.

Never hire staff until you need them. Always ask your current staff to work hard to make sure they work to the best of their ability.

3. Strategic Use “Jit”

JIT is an abbreviation of “Just In Time”. This is a strategy to reduce the cost of loans and inventory in all business forms.

For example, if you estimate you need to cover your expenses for next year, there’s no need to borrow the entire amount at once. Because if you do that, you’ll have to pay interest on the entire amount when you don’t use it up until the end of the year.

Instead, you will borrow that estimated amount in the first 2 months of the following year (except for the month of the new year holiday). Then borrowed it again for the next 3 months. Following this rule, you will reduce the total amount of interest payable to the bank. So that money will increase and you save a large amount of money after a long time.

4. Agreement With Supplier

When dealing with external contractors or suppliers, such as delivery services, food delivery, electricity, security services, do not hesitate to negotiate contract terms. Choosing a provider that allows you to pay after 30 days of receipt of service bills instead of paying immediately.

That grace period allows you to better manage your money and organise your bills in order of priority. Many peers always allow this but need to be willing to ask when they want to pay immediately.

Year: Do Not Pay Money To Wage Payments

State tax law requires business owners to deduct an amount in addition to employee salaries such as Social Insurance, Health Insurance, Union Funds and Unemployment Insurance for each payment period. Businesses will have a certain extension period before they have to submit this fund report. As a business owner, it’s important to keep those funds separate from other funds. Don’t use this money to invest or cover daily expenses.

Instead, put the money in a separate account that you cannot touch. This will help you avoid spending money that you don’t have to. It’s a good habit to keep your business free from violations at the end of every month. State fines will not tolerate such cases. Nowadays there are a number of maintenance planning training and maintenance planning courses were available online from that you can get more ideas for maintaining your business easily.

How a Trade War with China is impacting Natural Stone Prices

The Trump administration has announced this year that the US will impose a tariff on a massive amount of imported goods from China. Many of these goods fall into the home improvement category in the American market. Things like stone tile, natural stone slabs, hard surfaces and there is no telling on how high the retail price will go for American consumers as the tariffs continue to stay in place. This all comes at a time when China has very lax laws on who and how natural stone can be mined, China has a large amount of undeveloped land with natural stone able to be harvested and they are able to meet the growing demand of natural stone seen in American consumers.

One of the largest questions is how much the price of natural stone countertops will rise within the next year. One particular stone concern is granite, and how much it will cost to purchase and install depending on what project you’re working on. For most questions the answer is to purchase now because the cost of granite is only expected to rise. Using this useful reference, currently, prices for granite countertops start at around $35 per square foot installed, and can go well beyond $100 per square foot for exotic and rare materials. With trade negotiations continuing as they are now it has been projected that the price per square foot of granite is expected to increase to over $200 per square foot by early 2020.

When purchasing your stone, it is also important to research the seller. Big box retailers that provide countertops won’t be as detail oriented as their local counterparts mainly due to the lack of knowledge of the staff that will be assisting you. This is because a big box store has a higher turnover of staff and less of a risk to damage their reputation. Also a large retailer will typically have a more limited selection of stone and a more rigid outline of their services, typically a price is set and adhered to in a large retailer. A local fabricator, more often than not, will negotiate pricing, accommodate specific requests, and handle customers with a higher degree of quality solely based on the fact that they are trying to compete with not only other local business but the large retailers as well. It would be advantageous to look into your local options and weigh them against large retail stores, depending on what you’re looking to have done one might be more beneficial than the other!

Knowing what you’re paying for will also be beneficial as the price of the stone increases with the tariffs. There are a lot of factors that make up the final price of your countertop including, the cutouts, edging, backsplash, finish, and color of the stone. By limiting the extra details you’re able to keep the overall price lower. The type of sink you install has an effect of the type of cutout which then has a price on the slab. Edging the counter will have an effect on the final bill as well because the more decorative the final edge look the higher the cost per foot will be! Some styles can rise as high as $10/foot. Choosing to have a matching stone backsplash obviously will heighten the price of your stone bill, but there are other ways to design a backsplash if this puts your costs too high. Tile is a great alternative or a shorter four or five-inch backsplash can help protect your walls against stains. The color of the actual stone can also play a factor in pricing as blue granite is often more expensive than other colors and marble with a more intricate or unique pattern can fetch a higher price. These are all things that, regardless of the trade war with China, will affect your final budget and should be considered!

These tariffs are not expected to go away anytime soon so if you’re planning a renovation or are in the middle of one currently and have yet to purchase your counters, do it! Having a plan of attack and being in the right place to order them will save you money before the end of the year as natural stone prices continue to rise. Removing your old counters as a DIY project might be a good idea as well in order to save even more in a pinch. There are many ways to try to circumvent these price increases and DIY-ing as much as possible is one of them, don’t hesitate to consult a professional but remember that most home jobs can be done with a little research! However, as long as this trade war holds out between the US and China, expect any and all renovations that involve products made or refined in China to be on the retail mark up until early 2020.

Lower Taxes Without Renouncing Your American Citizenship

Being born in the United States comes with many privileges. But it also comes with many responsibilities. According to Fortunly’s insightful infographic, the United States is one of two countries in the world that implement citizenship-based taxation. The only other one is the northeast African nation of Eritrea.

Interestingly enough, America’s citizenship-based tax system doesn’t only affect its natural-born citizens. Foreigners may also be held liable for income tax if they meet the country’s residency requirements. Spending too much vacation time is a common reason why non-Americans might need to hand over some cash to Uncle Sam.

But, there are legal ways to beat America’s citizenship-based income taxation system.

The most obvious way is to renounce your US citizenship. But this is a major decision that could lead to dramatic consequences. An alternative to such a drastic measure is filing for tax exemptions. The Foreign Earned Income Exclusion (FEIE) is a viable option for American professionals who intend to make a living outside of any US territory.

With the FEIE, a portion of a citizen’s total active income can be excluded up to a certain limit, which changes every year. To increase the excludable amount, a foreign housing credit can be added into the equation.

When it comes to income from passive activities like stock trading, the United States considers them taxable as usual. However, there are ways to classify passive incomes as active in order to render them partly excludable.

In addition, using an offshore company to run a business may provide an income-tax reduction. This move can legally separate an American-citizen owner and a business entity for tax purposes.

Pursuing every allowable avenue to minimize citizenship-based income tax liabilities is more practical than unpatriotic.