Changes to Brazilian Bankruptcy and Reorganization Laws

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Law No. 14.112/2020, which amended Law No. 11.101/2005, the Brazilian Bankruptcy and Reorganization Law, brought relevant changes to the insolvency regime in Brazil.


The 180 days may be extended, exceptionally, only once, provided that the debtor has not contributed to exceed the original period or if the creditors submit, within the established period, an alternative judicial reorganization plan. Furthermore, creditors excluded from the judicial reorganization process, as well as tax debts, continue not to be subject to the judicial reorganization effects, but the competence of the judicial reorganization court was established to determine the replacement of the seizure acts on essential capital assets.


The requirements for the rural producer to avail himself of the judicial reorganization process have been defined, with the possibility of filing a special judicial reorganization plan, if the total debt does not exceed R$4,800,000.00. In that case, only the credits arising from rural activities are subject to judicial reorganization.


Abusive voting at the General Meeting of Creditors (AGC) has been defined as that “manifestly exercised to obtain an illicit advantage for oneself or others”. In addition, the AGC may be replaced by an adhesion instrument, and it is also possible for creditors to present an alternative plan, which, in practice, may present difficulties in its implementation, given the quorums and the exemption of personal guarantees provided by natural persons related to the credits to be novated and held by creditors who supported or voted in favor of it.


The following credits have been excluded from the effects of judicial reorganization: (i) funds controlled and covered by articles 14 and 21 of Law no. 4. 829/1965, unless they have not been subject to renegotiation before the request for judicial reorganization; (ii) credits and guarantees relating to debts constituted in the three years before the request for judicial reorganization and which were contracted for the to acquire rural properties; (iii) rural assets appropriated for a certain purpose linked to Rural Real Estate Credit Note; (iv) credits guaranteed by cession and fiduciary alienation; (v) products object of CDA (certificate of overdue tax liability) / WA (agricultural warranty) if the holder of the CDA, entailed to the WA, is other than the depositor; (vi) CPR (rural product warrant) with in natura liquidation and respective guarantees; and (vii) cooperative acts, including those related to health plan cooperatives.


There is now the express possibility of third-party financing of the company in crisis, providing greater security to the lender of the “new money”, mitigating risks. Thus, if the disbursement has already been made, the good faith lender is preserved, in the event the decision authorizing DIP Financing is subject to appeal because there is no change in the extra-business nature of the credit, nor modification of the guarantees provided by the debtor.

The financing cannot be secured with the current assets of the receivership. In addition, it may be performed by any person, including creditors, subject or not to judicial reorganization, family members, partners, and members of the group of the company under reorganization. Furthermore, any person or entity may guarantee, with the resignation or fiduciary alienation of assets and rights, including the debtor itself and other members of its group, whether or not in judicial reorganization.

The constitution of a subordinated guarantee to any type of fiduciary alienation or fiduciary assignment is forbidden.

Finally, in the event of conversion into bankruptcy (i) the credit will be paid immediately after the essential expenses for the administration of the bankruptcy and labor credits limited to five minimum wages per worker are paid, and (ii) the financing agreement will be automatically terminated even before the full release of the funds to the company being reorganized.


The changes to the Law expressly provided that any credit assignments entered into must be promptly notified to the judicial reorganization court.


With the acquisition of a UPI, the purchaser will not succeed in the debtor’s environmental, regulatory, administrative, criminal, anti-corruption, tax, and labor obligations. Furthermore, the reform defined an isolated productive unit as goods, rights, or assets of any nature, tangible or intangible, alone or together, including the partners’ interests. On the other hand, the changes to the Law now recognize the possibility of selling the debtor in its entirety as a means of judicial reorganization, which will be considered an isolated production unit.


In bankruptcy: (i) there was a simplification of the list of creditors with the exclusion of the class of creditors with privilege; (ii) assigned credits will maintain their nature and classification; and (iii) credits arising from the advance on an export exchange contract may be refunded regardless of the payment of labor credits.



(i) transnational insolvency;

(ii) expertise before the granting of the judicial reorganization process;

(iii) new possibilities of reorganization;

(iv) modification of out-of-court reorganization;

(v) promotion of conciliation and mediation and procedural legal business;

(vi) prohibition of distribution of results until approval of the judicial reorganization process;

(vii) procedural and substantial consolidation;

(viii) possibility of a virtual GMC;

(ix) early maturity in a repo and derivative transactions.

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