Botafogo delayed paying creditors in court and claims this was caused by commitments which, in his version, should not be made due to the SAF law. Withholdings were made for tax debts and made by CBF and Ferj for loans. But there are those who argue that the debt freeze is legitimate from a legislative point of view. Therefore, the case is emblematic for the financial fate of the SAF: the alvinegro club claims that there was an impact of more than R$ 15 million on its liquidity in 2022.
In court, Botafogo is seeking an extension of the payment terms to creditors so that SAF receives contributions from shareholder John Textor to remedy the problem. The question is whether this type of restriction will be repeated in Alvinegro or in other SAFs.
When the SAF Act was passed, it was stipulated that the new companies would allocate 20% of their revenues to paying the debts of the original companies (civil associations) pending civil and labor proceedings. There was a gap in the legislation on tax debts. Theoretically, they would be paid within installment programs like Profut.
Botafogo closed the sale of its SAF to American John Textor in March 2022. The deal involves an investment of 400 million reais. At the same time, the club was already within the RCE (Centralized Execution System) under which civil and labor debts would be paid in installments to creditors.
Mid-year, Brasileiro TV revenues were withheld for Botafogo SAF, which would come from Globo and CBF. Reason: judicial attachment carried out in 2019 referring to a tax debt with the Union for a total of 17.9 million reais. The judge understood that there was no reason to stay the attachment and that SAF was the debt successor. All money has already been withheld and used for payment.
Subsequently, the CBF withheld BRL 4.9 million in premiums from Botafogo to settle the club’s debts to the entity for previous loans. Ferj did the same with other payments amounting to R $ 5 million.
“Precisely because of the scenario now faced by SAF, and because of the cash flow problems resulting from torts practiced exclusively by third parties, the appellant found itself unable to, for the first time since then distribution of the respective action, to fulfill its obligations under the centralized enforcement regime?, Botafogo said in a petition to the labor court.
The club should stop paying two months’ installments to creditors in court, one already overdue and the other due in December and January. He said he preferred to pay salaries to players and employees, and exposed a difficult situation with declining year-end revenue, no box office and no fan partners.
As regards the tax debt, the loophole of the SAF Law leaves open the possibility of favoring clubs transformed into companies. But there is certainty that the company has become responsible for paying off the debt.
Lawyer Pedro Teixeira, a specialist in judicial reorganization, understands that tax debts are outside the provision for payment by law by installments and that, therefore, “it will be up to SAF, in the current system, to be fully and directly responsible for all tax debts of the associations, and pay directly or possibly enter into a tax operation to settle the debt.?
On the question of the CBF’s withholding, Botafogo criticizes the institution very harshly, accusing it of an irregular operation: “As harmful as the aforementioned foreclosure is, the SAF also deals with irregular withholdings, such as that practiced by the Brazilian Football Confederation pursuant to the questionable (not to say illegal) claim that the original club was the debtor, which is why it withheld, à manu militari and administratively, the prize amount resulting from the Copa do Brasil dispute, represented by the amount of R$ 4,900,000.00 (four million nine hundred thousand reais)?, says the Botafogo petition
Botafogo club labor lawyer Pedro Belmonte said: “I can’t go into too much detail (because it’s a civil debt). Basically, the CBF could, as a creditor, sue and queue up. In practice, did he skip the line?, he explained, specifying that Ferj did the same by withholding R$ 5 million.
At CBF, the information is that the entity was entitled to withhold the money because there was no court case, i.e., the entity was not in the line of creditors. Therefore, it could maintain its system of withholding payments to pay off the club’s debts. The definition of whether or not entities can withhold payments for old debt is also relevant to the cash impact of SAFs.
The purchase transaction of Botafogo SAF was made with the calculation that there would be money from these Globo revenues retained and those from CBF. Thus, the club claims that it has delayed payments of the RCE, i.e. the creditors in court. Some creditors of the club have already gone to court to ask for the attachment of their debts.
The club’s petition is to give a period of 30 days to start paying all the one-month delay in the RCE, i.e. expect payments at the end of February. The justification is that, in March, John Textor is expected to contribute R$100m to SAF under the club deal, which will be enough to settle the delays.
The American has already made clear his dissatisfaction with the situation. In an interview with fan site Fogão Net, he said the SAF law was “broken”. “It (the law) doesn’t work. We started checking the club on March 11 and from the beginning we felt that the Brazilian judges and courts were not careful in interpreting the law as it was created,” said the owner of the Botafogo website. He even threatened not to pay the RCE anymore, which doesn’t seem to have materialised.
Botafogo SAF’s legal department said it could not comment on the matter.
Analysis of the lawyer Pedro Teixeira, specialist in judicial recovery, on the issue of the tax debt of the SAF:
“According to the information I have accessed from the press, most of the patrimonial constraints claimed by Botafogo SAF, which gave rise to the request for suspension of the RCE, come from foreclosures for tax debts (e.g. a tax garnishment of approximately 17 million ).
At this point, in particular, I understand that Botafogo’s interpretation of the Law may not be the most correct. I explain: The SAF Law (Law 14.193/21 – ordinary law) only exempted the SAF from direct liability for the payment of civil and labor debts linked to the corporate purpose of the SAF, i.e. football! In this system, the SAF would not directly assume responsibility for these debts, but, in return, would undertake to allocate 20% of the current revenues and/or 50% of the dividends to the payment of the aforementioned obligations organized through the CER.
However, tax obligations, governed by the National Tax Code (CTN – Complementary Law), automatically take over from the purchaser (SAF), pursuant to articles 132 and 133.
Only if the sale of the asset (football) had been carried out in court and in the context of judicial reorganization or bankruptcy proceedings would these obligations/debts not have automatically occurred to SAF (Article 133, § 1). See the following articles:
Art. 132. The private law entity resulting from the merger, transformation or incorporation of another or into another is responsible for the taxes due up to the date of the deed from the merged, transformed or incorporated private law entities.
Single paragraph. The provisions of this article apply to cases of extinction of legal persons under private law, when the exploitation of the respective activity is continued by any other shareholder, or his estate, under the same or other corporate name, or with individual signature.
Art. 133. The natural or legal person governed by private law who acquires from another, for whatever reason, a commercial, industrial or professional establishment, and continues to exploit it, with the same or another company name or with the company name or firm, liable for the taxes, relating to the land or establishment acquired, due up to the date of the deed:
I – in full, if the seller ceases to operate in the trade, industry or business;
II – on a subsidiary basis with the transferor, if exploration continues or a new activity in the same or another branch of commerce, industry or profession begins within six months of the transfer date.
§ 1 In the case of judicial alienation, the provisions of the caput of this article do not apply: (Taken from Lcp n. 118, of 2005)
I ? in insolvency proceedings; (Included by Lcp nº 118, of 2005)
II? of a branch or isolated production unit, in the course of judicial recovery (Included by LCP n. 118, of 2005)
§ 2 The provisions of § 1 of this article do not apply when the buyer is: (Included by the Lcp nº 118, of 2005)
I ? shareholder of the bankrupt company or in judicial recovery, or company controlled by the bankrupt debtor or in judicial recovery; (Included by Lcp nº 118, of 2005)
II? relative, in direct or collateral line up to the 4th (fourth) degree, consanguineous or related, of the debtor in bankruptcy or in judicial recovery or of one of his partners; o (Included by Lcp nº 118, of 2005)
III? identified as agent of the bankrupt or of the debtor in judicial recovery with the aim of defrauding the tax succession (Included by the Lcp nº 118, of 2005)
§ 3 In bankruptcy proceedings, the proceeds of the judicial sale of a business, branch or isolated production unit will remain in a deposit account at the disposal of the bankruptcy court for a period of 1 (one) year, counted from the date of sale, and may be used only for the payment of extra-bankruptcy claims or claims they prefer to tax. (Included by Lcp nº 118, of 2005).
I emphasize that, in addition to the SAF Law which does not provide for tax obligations/debts, the Complementary Law (CTN) replaces the Ordinary Law (Law 14.193/21). Therefore, it will be up to the SAF, in the current system, to answer integrally and directly for all the tax burdens of the associations, having to pay directly or, possibly, carry out a tax operation to settle the obligation”.
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