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Restructuring and insolvency law in Brazil is focused on providing solutions for individuals and companies facing financial distress. The legal framework aims to balance the need to protect creditors' rights with the potential for debtors to recover their businesses and financial stability. The main goals are to facilitate economic recovery, preserve jobs, and ensure that creditors receive fair treatment throughout any insolvency or restructuring process.
Brazilian law offers several mechanisms for addressing financial distress, such as judicial reorganization (recuperação judicial), extrajudicial reorganization (recuperação extrajudicial), and bankruptcy (falência). These proceedings are governed primarily by Law No. 11,101/2005, also known as the Brazilian Bankruptcy and Restructuring Law, which underwent significant reforms in 2020 to modernize processes and encourage business recovery.
Restructuring and insolvency scenarios can be highly complex and require careful navigation of Brazilian legal procedures. People may need a lawyer in circumstances such as:
A lawyer can help analyze financial risks, design restructuring plans, guide negotiation with creditors, represent stakeholders in court, and ensure compliance with all statutory requirements.
Key aspects of Brazilian law relevant to restructuring and insolvency include:
Judicial reorganization is a court-supervised process that allows a financially distressed company to propose a recovery plan to creditors. This plan may include debt reduction, payment extensions, or asset sales, designed to preserve the business and jobs while repaying creditors.
Bankruptcy is declared by a court after a creditor or the debtor files for it, and the court confirms the company is unable to pay its debts or has committed acts of bankruptcy. The company’s assets are then liquidated and proceeds distributed among creditors.
Creditors can approve or reject restructuring plans during a judicial reorganization. They are grouped by the type of claim (labor, secured, unsecured, or microenterprise) and vote on the proposed plan at a creditors’ meeting.
Yes. Brazilian law prioritizes labor claims, placing workers among the first in line during the distribution of assets in bankruptcy proceedings, subject to specific caps determined by law.
Yes. Micro and small businesses can access judicial reorganization under a simplified process, allowing for reduced bureaucracy and tailored solutions.
Extrajudicial reorganization is an out-of-court restructuring process where the debtor negotiates a plan directly with certain groups of creditors and later submits it to the court for approval, streamlining the process compared to full judicial reorganization.
Generally, contracts remain valid, but certain clauses (such as those allowing immediate termination due to insolvency) may be suspended. Essential services and supply contracts must often be maintained to enable business continuity.
Company directors, executives or shareholders may be held personally liable if there is evidence of fraud, irregularities, or mismanagement leading to bankruptcy. Otherwise, liability is typically limited.
The duration varies widely, depending on the complexity of the case. Simple cases may resolve within a year, while complex reorganizations with numerous creditors can take several years.
Yes. Foreign creditors have the right to participate and vote in restructuring or bankruptcy processes, provided they comply with Brazilian legal procedures.
For further information or assistance on restructuring and insolvency matters in Brazil, consider contacting:
If you or your business are facing financial hardship or are involved as a creditor in an insolvency situation, consider the following steps:
Navigating restructuring and insolvency proceedings can be complicated, but with timely legal assistance and an understanding of your options, it is possible to achieve an optimal outcome and secure your financial future.
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Disclaimer:
The information provided on this page is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and relevance of the content, legal information may change over time, and interpretations of the law can vary. You should always consult with a qualified legal professional for advice specific to your situation.
We disclaim all liability for actions taken or not taken based on the content of this page. If you believe any information is incorrect or outdated, please contact us, and we will review and update it where appropriate.
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