Business destruction and the Commercial Code

The fundamental principles of Bill 1572/2011 (Commercial Code) will not, by themselves, be able to curb the existing environment of business destruction in Brazil.

We are going through the biggest crisis ever experienced in the entire period of the New Republic, but whenever we face a serious problem, the light of salvation appears at the end of the tunnel: the drafting of a new Code.

This was also done with the Civil Code and with the recent Code of Civil Procedure, which worsened the backlog and demonstrated irreparable flaws in the guiding principles of modern procedural law.

Half of Brazilian companies are indebted, with extremely low liquidity rates among them. The signs of insolvency are worrying and alarming, with explosive numbers of bankruptcies and recovery efforts in the last two years. This is without considering the bankruptcy filing by Oi, one of the leading national companies, which is expected to worsen the overall situation.

Clearly, none of the four assumptions that underpin the project will be achieved. The modernization and rationalization of norms is much more cultural than a result of normative codification; ethics, morality, and decency in business depend on ending cronyism in relations between the State and certain companies. Legal certainty in the functioning of markets is achieved the less intervention there is by the State. The predictability of judicial decisions falls outside the scope of commercial law, substantive law, whose bureaucratic simplification is a pertinent chapter in the digital and electronic field of business formation and dissolution.

The draft of the new Commercial Code is no different from that which guided Napoleon's: the State knows better than the citizens what is good for them, but above all, the State wants Power, Command. Brazil needs, first and foremost, to create a Code of Ethics – for public and private agents, especially companies –, embrace free trade, open itself to globalized world markets, and be aware that business dynamism does not require codifications, operating better when structured in microsystems capable of addressing the complex issues that directly impact our economy.

The disciplines related to Banking, Insurance, and Agribusiness Law are incomplete and insufficient, and Maritime Law, in its wording, presents immeasurable errors, in addition to the resurrection of general warehouse contracts and securities, such as warrants, completely obsolete in the modern electronic environment of documents concerning business operations. The basic rules of negotiable instruments law, since Vivante, are sufficient to meet the needs of commercial transactions.

The Brazilian Stock Exchange suffers from a lack of legislation that incorporates investor confidence and credibility, especially for minority investors, and from a regulatory body not captured by the Public Power, without which not even a new Commercial Code will be able to minimally promote the revitalization of venture capital investments and the free trading of securities of publicly traded companies, as Lamy and Bullões intended.

Recently, the United Kingdom's exit from the European Union caused a tsunami in the economy and resulted in immediate losses of 2 trillion euros in the bloc's integration.

For two years, we have lived with a negative gross domestic product, close to 8%, unemployment affecting 12 million Brazilians, and more than 130 businesses closed. It does not seem to us, in all honesty, that this slow and gradual business destruction will resonate, to alter the curve, with the magic wand unveiled by the authors of yet another dream to improve business in Brazil.

*This article was written in collaboration with Jorge Lobo - Professor and retired Public Prosecutor of Rio de Janeiro, lawyer and jurist, and Rachel Sztajn - Associate Professor at USP, Author of Works and Legal Consultant.

 

Jorge Lobo - Retired Professor and Public Prosecutor of Rio de Janeiro, lawyer and jurist.

 

Rachel Sztajn - Associate Professor at USP (University of São Paulo), Author of Books and Legal Consultant