Insolvency due diligence in Brazil

01

Build the entity map before opening the model

Start with the legal name and CNPJ on the signed contract. Match them to the Brazilian Federal Revenue Service registration and the entities named in the operative court document. Carry the full registration identifier for each establishment and verify which registrations are branches of the same company. Add the CNJ case number, court and relevant appeal numbers. The CNPJ identifies a registration and the court number identifies a proceeding.

Give each party a role for the instrument you hold. A parent may be a guarantor, a sister company may own the collateral, and a bank may appear as a creditor. Establish the debtor’s status from the act naming that entity. In judicial restructuring, procedural consolidation can coordinate group cases while keeping assets and liabilities separate. A substantive consolidation order can treat the affected debtors’ assets and liabilities together. Read the order and list exactly which entities it covers.

• For each obligor, record the instrument, legal name, CNPJ and relationship to the case.
• For collateral and guarantees, record the owner or provider, the relevant registry, the beneficiary and the evidence of perfection or priority.

Sources for this section: Federal Revenue Service CNPJ lookup · CNJ Resolution No. 65/2008 on court case numbering · Insolvency Law, Articles 69-G–69-L on group proceedings

02

Reconcile the claim across versions

Open the actual notice and its attachment. Preserve the debtor’s initial list, the judicial administrator’s published list and the consolidated schedule (quadro-geral de credores) when available. Log the document identifier, publication date, debtor, listed holder, amount, currency and class for every version. A single creditor may have entries against different debtors or in different classes. Read individual entries before reconciling a total.

Rebuild the balance from agreements, drawdowns or invoices, evidence of delivery, amendments, repayments and applicable interest. Article 9 specifies the balance reference date for a claim submitted in judicial restructuring or bankruptcy. Attach later orders that admit, reserve or reclassify the claim. For a mismatch, record the two amounts, why they differ, the unresolved question and who owns it.

Sources for this section: Insolvency Law, Articles 7–10, 18 and 51

03

Find who owns the claim today

A listed creditor may be the originator, a prior holder or a representative. Trace each transfer through the assignment agreement and its schedules. Match the line item to the original contract, obligor and balance. Check for partial transfers, contractual restrictions, notices, registrations, payment instructions and any dispute over title. Under Article 39, paragraph 7, the assignment or promise to assign an admitted claim must be promptly communicated to the judicial restructuring court.

When a Brazilian receivables fund (FIDC) is involved, identify the fund and relevant class against the assignment and fund documents. Confirm who may speak, sign, vote or receive a distribution under the applicable documents. For a bank, the Central Bank’s registry helps verify the institution’s identity and regulatory status. For either type of holder, obtain current evidence of the representative’s authority and match it to the act the representative intends to take.

Sources for this section: Civil Code, Articles 286–298 on assignment · Insolvency Law, Article 39, paragraph 7 · CVM Resolution No. 175 and Annex II on FIDCs · Central Bank lookup for regulated and supervised institutions

04

Separate plan coverage, classification and guarantees

For judicial restructuring, identify the event that gave rise to the claim and compare its date with the filing. The Superior Court of Justice’s Repetitive Theme 1051 uses the underlying event for that test. Invoice maturity, a later judgment and the date of a creditor list answer different questions. Article 49 contains exclusions, including certain fiduciary ownership interests, with limits on selling or removing essential capital assets during the stay.

Check the claim’s voting class under Article 41 and the treatment proposed or approved for that entry. In bankruptcy, consult the separate ranking rules in Articles 83 and 84 and read relevant restitution and distribution orders. For a guarantee, review the guarantor’s own status, the terms, collateral and any release, consent or ruling. Article 49 and STJ Súmula 581 generally preserve recourse against third-party co-obligors in judicial restructuring of the principal debtor. Model each recovery route and reconcile receipts across them.

• Identify the fact or transaction that gave rise to the claim and keep its evidence.
• Record voting class, plan treatment and guarantee enforceability as separate conclusions.
• Flag shared collateral, prior liens, waivers and payments that could change a second recovery route.

Sources for this section: Insolvency Law, Articles 41, 49–50, 83–84 and 149 · STJ Repetitive Theme 1051 on when a claim exists · STJ Súmula 581 on claims against co-obligors

05

Prepare for the vote while a dispute is open

If the investment thesis depends on influencing a plan, verify eligibility for the specific vote, the list and decisions that apply to that meeting, and the deadline for representation. Brazilian law sets rules for which listed or admitted creditors may vote and accounts for certain reservations and late claims. Some claims outside the plan carry no vote. Where the decision relies on voting weight, record the recognised amount for the meeting and the approval rule for its class.

Article 38 uses the exchange rate from the day before the meeting for converting a foreign-currency claim solely for voting in judicial restructuring. Keep that calculation separate from the treatment the plan assigns the claim for payment. Track the vote and the claim dispute in parallel. Article 39 protects meeting decisions from invalidation on the grounds of a later ruling about the existence, amount or class of a claim.

Sources for this section: Insolvency Law, Articles 10, 37–41 and 45 on participation and voting

06

Calculate recoveries in the currency that matters

Keep separate columns for contractual principal and currency, amount on the creditor list, amount admitted or disputed, projected distributions and cash received. Article 50, paragraph 2, preserves exchange variation as an index for foreign-currency claims in judicial restructuring unless the creditor expressly approves different plan treatment. For bankruptcy, Article 77 converts foreign-currency claims at the exchange rate on the day of the declaration. Confirm the treatment, rate convention and dates for each ledger entry, plan payment and investment model.

Read the latest approved plan and amendments for the relevant creditor election, haircut, indexation, grace period, instalments and any prerequisites for payment. In bankruptcy, review amounts realized, amounts reserved and authorized distributions. For investment analysis, model cash timing, currency conversion and costs separately, then match each receipt to the obligor, instrument and distribution. A balance accepted on the schedule still leaves the amount and timing of cash recovery to be established.

When projected recoveries depend on whether management can deliver a turnaround, Ritus Partners ↗ (opens in a new tab), a PreservaCred restructuring partner, can be a point of contact for reviewing liquidity, working capital and the operating assumptions behind a restructuring.

Sources for this section: Insolvency Law, Articles 50, 59, 77 and 149

07

Set up access for a foreign institution

Article 167-G gives foreign creditors the same procedural rights as domestic creditors, subject to the statute’s claim classification and treatment rules. For creditors without domicile or an establishment in Brazil, the judge determines appropriate arrangements for notices and information. Confirm access to the official docket, any restricted documents and the notice channel for this case. If another country’s proceeding is relevant, look for a Brazilian recognition request, the ruling and any measures affecting Brazilian assets or concurrent proceedings.

Ask Brazilian counsel which authority documents, powers of attorney and Portuguese translations are needed for the specific submission or meeting. Formal court filings have Portuguese language requirements. For foreign documents, establish which need authentication and whether an apostille, consular legalization, treaty arrangement or applicable exception governs. An apostille authenticates a document’s origin. Proof of who can bind the creditor is a separate diligence question.

Sources for this section: Insolvency Law, Articles 167-G–167-N and 167-S · Code of Civil Procedure, Articles 75, 103–105, 189 and 192 · National Council of Justice guidance on the Hague Apostille

08

Give the first days an owner and a deadline

Start from the signed court order and the publication that triggers the action you are tracking. Article 7 sets a 15-day window from the statutory initial notice in judicial restructuring or bankruptcy to submit a claim (habilitação) or report a discrepancy (divergência) to the administrator. Article 8 sets a separate 10-day window from publication of the administrator’s list for a court challenge (impugnação). The law uses calendar days for its deadlines. Have counsel confirm the operative notice, the exact cutoff, the filing method and the effect of any missed window in the case.

Keep a dated chronology of docket entries (andamentos), attaching the underlying decision or notice where available. Assign a reviewer to stays, plan changes, voting notices, appeals, orders changing a claim and payments. PreservaCred’s company search can orient an entity review. The case follow-up service supports monitoring selected proceedings, and the reports page describes available creditor lists and custom requests. Check decisive documents against the official case file.

• First read. Confirm the debtor, case number, latest operative act and current exposure.
• Next review. Save each list version, reconcile the claim and send the deadline and representation questions to counsel.
• Before the credit decision. State the verified facts, disputed assumptions and next document that could change the exposure or recovery estimate.

Explore follow-up for a selected case (Portuguese)

Sources for this section: Insolvency Law, Articles 7–10, 52, 99 and 189 on claims, notices and deadlines