JUDICIAL CONTROL OF THE PRE-STAY PERIOD IN JUDICIAL REORGANIZATION

PRELIMINARY INJUNCTIVE RELIEF, FIDUCIARY ALIENATION, AND LIMITS ON THE RESTRAINT OF EXECUTIVE SEARCH AND SEIZURE ACTS

Abstract

This article examines the phenomenon of the pre-stay period in Brazilian corporate insolvency law, understood as the precautionary phase preceding the formal commencement of judicial reorganization proceedings, during which courts may temporarily modulate the enforcement effects of individual measures capable of frustrating the usefulness of a future restructuring process. The issue becomes particularly sensitive when precautionary relief interferes with repossession orders grounded on fiduciary ownership guarantees. The article argues that preliminary injunctive relief does not override or revoke repossession orders, but may exceptionally operate as a mechanism of temporary procedural coordination. Drawing on Brazilian legislation, specialized doctrine, case law of the Superior Court of Justice and a comparison with the automatic stay under Chapter 11 of U.S. bankruptcy law, the paper proposes a three-level judicial review model — systemic admissibility, economic essentiality and strict proportionality — complemented by a qualified essentiality test and a practical decision-making framework. The conclusion is that the pre-stay period is only legitimate when subjected to rigorous judicial control; otherwise, it becomes an informal shortcut to neutralize fiduciary guarantees and undermines credit stability.