[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN BRAZIL] 12
Judicial/Extrajudicial Reorganization. In Brazil, it is common for guarantors to seek Judicial Reorganization to avoid the enforcement of debts against them. However, if the guarantor does not request Judicial/Extrajudicial Reorganization, creditors retain all their rights against the guarantors. v) When is the protection granted? (e.g. in the rehabilitation proceeding in Greece, the debtor may apply before a court for protection of its assets before any agreement has been concluded with its creditors. After the agreement is concluded, different protection applies). Typically, the stay period protection is granted after the debtor files for Judicial Reorganization, following a decision that authorizes the commencement of proceedings. However, it is increasingly common for debtors to request an advance of the stay period’s effects (injunction), with the Court granting a deadline for the debtor to file for Judicial/Extrajudicial Reorganization and confirm the injunction. vi) For how long is the protection granted? 180 days, extendable once. vii) Which creditors are bound by the protection? All the creditors are subject to the Judicial/Extrajudicial effects. viii) Any other particularities of the procedures of each country (if any). Recently, Federal Law No. 14,112/2020 amended the Brazilian Bankruptcy and Reorganization Law and overhauled the 15-year-old legislation. Some of the most
relevant changes to the current legislation are the following: 1. Brazil has adopted the UNCITRAL Model Law on Cross-Border Insolvency, adding a specific chapter in the Brazilian Bankruptcy and Reorganization Law to regulate these proceedings. 2. Debtor-in-possession (DIP) financing is now easier, with provisions allowing asset encumbrance and shareholder loans after filing for judicial reorganization. 3. The process of selling assets in judicial reorganization and bankruptcy liquidation is now more efficient, flexible, and legally secure, creating a safer environment for investors. 4. Creditors can now submit competing reorganization plans if certain legal conditions are met. 5. While tax claims remain excluded from judicial reorganization, new provisions aim to resolve such debts and allow the Treasury to negotiate more favorable terms with the debtor. Bankruptcy liquidation proceedings are now significantly faster, enabling debtors to be discharged from obligations in a much shorter timeframe compared to the lengthy processes currently seen in Brazil.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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