BRAZIL Trends and Developments Contributed by: Ralph Melles Sticca, Passos e Sticca Advogados Associados
The case is still ongoing, but thus far the Credit Guar - antee Fund ( Fundo Garantidor de Créditos – FGC), maintained by mandatory contributions from associ - ated financial institutions for the purpose of protect - ing the financial system, preventing crises and safe - guarding clients, while guaranteeing payment of up to BRL250,000 per natural person or legal entity in the event of intervention or liquidation by Bacen, has spent approximately BRL49.5 billion to reimburse Counting on one of the highest basic interest rates in the world (14.5% per annum), Brazil’s private sector has been suffering from reduced investment and high default rates. Since 2022, the number of companies undergoing judicial reorganisation (Chapter 11) has nearly tripled, reaching 2,466 in 2025, according to Serasa Experian. In addition to the aforementioned Americanas, major companies such as Oi, Light, and Odebrecht remain under judicial reorganisation, while other large groups such as Raízen, Pão de Açúcar, Casas Bahia, and Andrade Gutierrez have resorted to out-of-court restructuring plans. Master’s investors and clients. Sustainability and resilience Negative as this may sound, moments of crisis and scarcity create business opportunities and demand that greater attention is paid to controlling tools, such as management information systems for monitoring performance indicators (KPI) and cash flow, risk man - agement tools, such as the use of hedge instruments to protect against fluctuations in exchange rates, prices, and interest rates, and corporate governance mechanisms that strengthen the role of the board of directors, the fiscal council, and internal audit, risk, and compliance committees. Those management and corporate governance systems are mandatory for publicly held joint stock companies listed on the B³, and are strongly recom - mended for private companies, to provide business sustainability and resilience, although Brazil is not sustained by large companies alone. Specific issues of corporate governance in Brazil In agribusiness, a driving force of the Brazilian econ - omy, it is still very common for farming activities to be conducted by the individual producer rather than
through the creation of a legal entity, which entails a series of management and governance problems. Individuals acting as companies In Brazil, since 1996 (Law No 9,393), individuals have been allowed to calculate their income tax – gener - ally due annually – in a differentiated manner for rural activity, allowing not only the deduction of production expenses and charges, but also of investments made (eg, improvements and the acquisition of machinery and equipment), while also limiting the application of the progressive tax table (with rates of up to 27.5%) to 20% of the gross revenue earned, thus creating a tax incentive against the formation of legal entities. Moreover, from 2020 onwards (Law No 14,112), indi - vidual rural producers have also come to enjoy the possibility of seeking the benefits of judicial reorgani - sation on the same terms as companies (Chapter 11), which had already been required since 2005 (Law No 11,101) to prove the regular exercise of their activities for more than two years. Finally, public financing for producers under the Multiannual Crop Plan tends to be cheaper (lower interest rates) and less bureaucratic for individuals, resulting in reverse incentives against In the opposite direction, families and family business groups have sought so-called asset-holding compa - nies as an alternative for protecting assets against claims by commercial creditors and the tax authorities. In fact, the Brazilian Civil Code (Law No 10,406/2002) adopts the enterprise theory, under which legal enti - ties constitute a segregation of assets for business activity, attracting rights and obligations separate from those of the shareholders, especially due to the appli - cation of the accounting entity principle. the creation of legal entities in Brazil. Companies acting like individuals However, Brazilian procedural rules (Law No 13,105/2015) provide modern debt-recovery tools, and in cases of proven abuse of legal personality, characterised by misuse of purpose (harming credi - tors and practising unlawful acts of any kind) or by commingling of assets (repeated performance by the company of the obligations of the shareholder or man - ager, or vice versa, or by transfers of assets or liabili - ties without effective consideration), the judge may,
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