The Superior Court of Justice (STJ) has established the requirements that must be observed when reviewing applications for court-fee waivers filed by legal entities.
The decision was issued by the Court’s Special Panel in the judgment of Theme 1,424, under the system of repetitive appeals, and will serve as guidance for lower courts when reviewing similar cases.
According to the ruling, companies may be granted a court-fee waiver provided that they effectively demonstrate their inability to bear the costs and expenses associated with the proceedings.
Mere allegations of financial hardship, a decline in revenue, or business inactivity are not sufficient to establish financial and economic insufficiency.
What information must the company provide?
According to the legal position established by the STJ, the assessment of a legal entity’s financial capacity must consider information capable of providing a comprehensive understanding of its financial and asset position.
Among the elements identified by the Court are:
- Assets and liabilities;
- Shareholders’ equity;
- Financial results for the period;
- Cash flow;
- Equity interests in other companies;
- Balances held in bank accounts;
- Investments and financial assets.
The company must demonstrate that, despite its asset structure and any existing revenue, the payment of court costs and expenses would compromise its financial capacity.
The application may be supported by balance sheets, income statements, income tax returns, bank statements, cash flow reports, and other documents capable of accurately reflecting the organization’s financial condition.
Are business inactivity or declining revenue sufficient?
The STJ established that evidence of business inactivity or a decline in revenue, by itself, does not demonstrate that a company is unable to bear litigation expenses.
This is because an organization may be temporarily inactive or experience reduced revenue while still holding assets, financial resources, equity interests, or other funds that remain available.
Consequently, accounting or tax documents showing only the company’s revenue should not be used as the sole basis for the application.
The supporting documentation must provide a comprehensive view of the legal entity’s financial and asset position, rather than merely its tax or operational status.
Does the decision also apply to companies undergoing judicial reorganization?
The requirement for effective evidence also applies to companies undergoing judicial reorganization, bankruptcy proceedings, or extrajudicial liquidation.
These circumstances do not automatically create a presumption of financial insufficiency. The organization remains responsible for demonstrating, based on the specific facts of the case, that it lacks the resources necessary to bear the costs of the proceedings.
Judicial reorganization may be a relevant factor in the assessment, but it must be supported by documents clarifying the company’s asset position, cash flow, existing obligations, and available financial resources.
What are the impacts on companies?
The precedent increases the importance of proper documentation before filing an application for a court-fee waiver.
An application supported only by general allegations, statements of inactivity, or information regarding declining revenue may be deemed insufficient.
If the application is denied, the company may be required to pay the applicable court costs, which may affect the budget allocated to litigation. Depending on the procedural stage and the circumstances of the case, failure to make the required payment may also have consequences for the filing or continuation of the lawsuit.
For this reason, litigation costs should be incorporated into the legal, financial, and strategic assessment carried out before legal proceedings are initiated.
How should companies prepare?
Organizations should keep their accounting, financial, and asset-related documentation up to date so that their financial capacity can be assessed objectively.
Before submitting an application, companies should:
- Assess their actual capacity to pay court costs and expenses;
- Identify the documents required to demonstrate financial insufficiency;
- Verify that accounting and banking information is consistent;
- Present arguments that accurately reflect the organization’s financial circumstances;
- Consider the impact of a potential denial on the litigation strategy;
- Make appropriate provisions for potential litigation-related expenses.
The STJ’s decision reinforces that court-fee waivers remain available to legal entities, but their granting depends on complete, individualized, and properly documented evidence.
The legal assessment should consider not only the existence of financial difficulties, but also the organization’s overall asset position, the characteristics of the proceedings, and the risks arising from a potential denial of the application.
PDK Advogados’ Strategic Litigation and Corporate Law practice includes the assessment of legal, financial, and operational impacts associated with the management of corporate disputes.
