BRAZIL Trends and Developments Contributed by: Diana Henne, Machado Meyer
Rising Number of Extrajudicial and Judicial Reorganisations In 2024 and 2025, Brazil experienced a significant increase in extrajudicial and judicial reorganisations, mainly driven by high interest rates, limited credit availability and inflation. In 2024, there were 2,273 judicial reorganisation filings in Brazil, representing an increase of 61.8% compared with 2023, accord - ing to Serasa Experian. This elevated level of filings continued in 2025 and is expected to persist in 2026. This trend has had a significant impact on M&A activ - ity, with an increase in distressed asset acquisitions and companies seeking to divest non-core business - es, particularly in the technology, financial services and agribusiness sectors. Distressed M&A transactions are not only a con - sequence of Brazil’s economic conditions but also reflect improvements in the country’s bankruptcy framework. The 2020 reform of the Brazilian Bank - ruptcy Law introduced mechanisms allowing for the sale of assets “free and clear” of liabilities, including labour and tax liabilities. To benefit from such a structure, the debtor must file for judicial reorganisation and include in its reorgani - sation plan the possibility of selling assets or busi - ness units organised as independent productive units (UPIs). These sales are typically conducted through competitive processes, such as judicial auctions or other means authorised by the court’s reorganisation plan. This mechanism not only protects potential buy - ers from the company’s previous liabilities, but also enhances transparency to the transaction and pro - vides for a more efficient and faster sale process, maximising recoveries for creditors and providing greater legal certainty for potential buyers. Distressed M&A deals, including the acquisition of production units under a judicial reorganisation as mentioned above, attract investors who accept a higher degree of risk in exchange for greater and faster return. Therefore, the challenges of such deals demand complex and sophisticated structures and creativity from the professionals involved.
• Energy transition-related assets: Renewable energy and biofuels remain key investment themes. Solar transactions, in particular, increased significantly, supported by regulatory and tax incentives and public auctions conducted by ANEEL (National Agency of Electric Energy). Looking ahead, sectors such as mining, renewable energy, environmental services, infrastructure, water and sanitation, and logistics are expected to attract increased investor attention. Taxation of Dividends On 5 November 2025, the Brazilian Senate unani - mously approved Bill No. 1,087/2025, which intro - duced significant changes to personal income taxa - tion, including the imposition of withholding income tax on dividends for both residents and non-residents investing in Brazil, effective as of 1 January 2026. This represents a major shift from the system that had been in place since 1996, under which dividend distribu - tions were generally exempt from withholding taxa - tion. The bill establishes a transition rule for profits accrued up to 31 December 2025. Under this rule, dividends relating to results up to that date, if approved by the end of 2025 and paid by the end of 2028, would remain exempt from withholding tax. However, this rule is not aligned with the Brazilian Corporations Law, which requires dividends to be paid within 60 days and, in any event, within the same fiscal year in which they are approved. This discrepancy has led many companies to antici - pate dividend distributions that would otherwise have been retained or deferred. This may help explain why foreign direct investment inflows increased by 14.2%, while reinvested profits decreased by 21.3%, accord - ing to TTR Data Blog issued on 9 January 2026. Looking forward, the new dividend taxation rules may also impact the structuring of M&A transactions, requiring the adoption of alternative mechanisms to mitigate the tax burden.
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