Brazilian insolvency courts and enforcement

01

Find the forum through the business and the filing

Article 3 points to the court for the debtor’s principal establishment or the Brazilian branch of a company headquartered abroad. The Superior Court of Justice (STJ) looks at the actual centre of business activity when the case was brought, including the volume of business and where the business is run. The registered address, the biggest plant and the centre of decision-making can point to different places. Establish the facts and check how the relevant state court allocates insolvency cases locally.

A corporate group adds a second question. Under procedural consolidation, the court coordinates cases while each debtor retains its own assets and liabilities. Substantive consolidation is a different and exceptional measure that changes that treatment. Read the orders to establish which entities are in the case and whether the court has granted either form of consolidation. A common case number is insufficient to determine which company owes a particular debt.

Sources for this section: Law No. 11,101/2005, Articles 3, 6(8) and 69-G–69-L · STJ, CC 189.267/SP, principal establishment and pre-filing relief · STJ, CC 163.818/ES, facts at the time of filing

02

Assign each decision to the person or body that makes it

In judicial restructuring, management generally continues to run the business under statutory supervision. The judicial administrator verifies claims, monitors operations and plan compliance, files reports and performs procedural functions connected with creditor deliberations. A court-appointed professional may separately carry out a preliminary examination of the company’s actual operations and filing documents. These roles are distinct from authorising a shift, preparing payroll or negotiating a new supply contract.

The court can remove management on statutory grounds. If the debtor is removed, the law provides for a judicial manager, with the judicial administrator temporarily carrying out that role until the creditors choose one. Once bankruptcy is declared, the debtor loses the right to administer or dispose of estate assets. The judicial administrator has statutory estate duties. For a transaction or a document request, start by checking who has authority at the current stage.

Sources for this section: Law No. 11,101/2005, Articles 22, 35, 51-A, 64–65, 99 and 103

03

Separate a creditor decision from the court’s approval

When creditors deliberate on a judicial restructuring plan, their vote addresses the commercial terms within the statutory framework. The court reviews legality, including the vote, applicable thresholds and plan terms. A creditor challenging a discount on business grounds makes a different argument from a creditor identifying a voting irregularity or a clause that releases its security without the required consent.

A debtor plan can reach the court without a creditor objection, or after a vote or another legally permitted form of approval. Article 58 also allows approval over class dissent in specified circumstances. If the plan is contested, record which mechanism the debtor invokes and which version of the plan the court rules on. A vote in favour, a signed court decision and a plan amendment can each have a different practical effect on payment terms.

Sources for this section: Law No. 11,101/2005, Articles 45, 45-A and 53–59 · STJ, judicial review of legality and creditor decisions on commercial terms · STJ, AgInt nos EDcl no CC 172.379/PE, consent and guarantees

04

Follow labour claims from assessment to payment

The labour court can hear the case and determine the amount of a disputed employment claim. For a claim subject to the company’s judicial restructuring, the resulting amount is dealt with through the collective case. The Supreme Federal Court (STF), in Theme 90, assigns enforcement of labour claims against the company in judicial restructuring to the ordinary insolvency court. Check the date of the underlying events as well as the date of the judgment before classifying the claim. In a case about a claim that arose after the RJ filing, the STJ held that enforcement proceeds in the labour court after the stay ends. Check any orders affecting attachment of essential capital assets during the stay.

Enforcement against a shareholder raises a separate question. In Theme 26, the Superior Labour Court (TST) held that the labour courts can hear a veil-piercing incident involving a company in judicial restructuring, subject to an express order of the restructuring court suspending enforcement against its shareholders. The TST requires proof of abuse under Civil Code Article 50 for that route. Identify whose assets the order concerns and whether it merely opens the incident or establishes liability.

Sources for this section: Law No. 11,101/2005, Articles 6(1)–(3) and 49 · STF, Theme 90, enforcement of labour claims against the debtor · STJ, Repetitive Theme 1051, when a claim comes into existence · STJ, CC 191.533, labour claim arising after the RJ filing · TST, Repetitive Theme 26, shareholder liability incidents in judicial restructuring

05

Trace the asset through parallel enforcement proceedings

For covered debts, the opening order generally stays enforcement against the debtor and restricts seizure of its assets. Tax enforcement follows a separate track. Under Article 6(7-B), the restructuring court can determine that an attachment of essential capital assets be replaced through judicial cooperation until the restructuring case closes. The STJ has held that cash is outside that capital-asset provision. If a tax court freezes cash, identify the court that made the order and the available steps in that proceeding.

Certain fiduciary-title and other claims under Article 49(3) and (4) are outside the general stay. During the applicable stay period the restructuring court can order temporary suspension of measures affecting essential capital assets under Article 6(7-A), using judicial cooperation. The STJ distinguishes production assets from fiduciary assignments of receivables. The evidence can therefore point in different directions for a repossession of machinery and a lender’s collection of assigned invoices.

• Check the owner of the asset and the party targeted by the enforcement order.
• Identify the legal ground of the claim and the instrument securing it.
• Read orders in both proceedings for the measure, duration and any required cooperation.

Sources for this section: Law No. 11,101/2005, Articles 6(7-A)–(7-B) and 49(3)–(4) · Code of Civil Procedure, Articles 67–69 and 805 · STJ, CC 196.553/PE, tax attachment of cash · STJ, fiduciary assignment of receivables and the essential capital-asset rule

06

Identify the appealable order and its deadline

The STJ generally allows an immediate appeal by agravo de instrumento from interlocutory decisions in judicial restructuring and bankruptcy proceedings. The insolvency law expressly provides for agravo against a court ruling on a claim challenge and against the grant of judicial restructuring. A judgment declaring bankruptcy is challenged by agravo, while dismissal of a bankruptcy petition is challenged by apelação. Article 164 provides for apelação from the judgment on approval of an out-of-court plan, without automatic suspension of the judgment.

The ordinary deadline for an agravo de instrumento is 15 business days from formal notice of the decision under the Code of Civil Procedure, a rule the STJ applies to interlocutory decisions in these proceedings. Check the particular remedy and any special rule before calendaring it. Missing the deadline for an immediately appealable ruling can bar a later challenge to that ruling. The Code allows a late act if the court accepts proof of just cause. When Article 1,009(1) applies, an issue decided during the merits stage without an immediate appeal can instead be raised on appeal from the judgment or in the response. Check separately whether the appellate court has stayed or changed the ruling.

An appeal has a different trigger from a creditor’s first objection. For example, Article 8 gives 10 calendar days from publication of the judicial administrator’s creditor list to challenge the list. Article 55 gives 30 calendar days to object to the RJ plan, counted from that list’s publication or, if the plan notice is published later, from publication of the plan notice. A missed deadline for filing a claim can have its own consequences and late-claim procedures. Identify the act, who issued it and what filing the reader needs to make.

Sources for this section: Law No. 11,101/2005, Articles 7–10, 17, 55, 59(2), 100, 164(7) and 189 · Code of Civil Procedure, Articles 219, 223, 507, 995, 1,003, 1,009, 1,015 and 1,019 · STJ, Repetitive Theme 1022, interlocutory appeals · STJ, business-day counting for appeals of interlocutory decisions · STJ, REsp 1.985.436/SP, procedural preclusion in a judicial restructuring appeal

07

Build a timetable around the milestones that matter to the business

A stay has a statutory clock. A disputed claim, sale, appeal or case closure has its own path. Treat the expected date of a decision as a planning assumption until it has an operative order behind it. In RJ, the court may supervise obligations falling due within a period of up to two years from the grant. Plan payments can continue after the case closes. In bankruptcy, inventory, disputes, realisation of assets and distributions determine when there is cash to pay creditors.

For a financing or supply decision, keep the court timetable beside a cash and operating timetable. If a sale is meant to fund payroll, separate approval, any challenge, payment of the price and access to the funds. Assign a date by which the business must find an alternative source of cash if any milestone slips. Two cases at the same procedural stage can require very different decisions because their cash needs and the steps still in dispute differ.

When court milestones need to be translated into an operating and funding plan, Ritus Partners ↗ (opens in a new tab), a PreservaCred restructuring partner, can be a point of contact for cash planning, operational turnarounds and transaction execution.

Sources for this section: Law No. 11,101/2005, Articles 6, 61–63, 99, 139–149 and 154–156

08

Write the case update around the operative order

In a briefing, distinguish the application, the order and the step that gives effect to it. A request to sell an asset, authorisation to hold an auction and an order confirming the result answer different questions. Keep one line for the current order and one for the next step that could affect the decision. A short update stays usable if each line specifies the party, the document and the date.

• Record the debtor, case number, court, signed order and relevant notice date.
• Specify the claim, asset or conduct the order actually covers.
• State who is responsible for the next step and what would change the decision.