BRAZIL Trends and Developments Contributed by: Marcelo Lucidi, Henrique Forssell and Octaviano Duarte, Duarte Forssell Advogados
What are the benefits of obtaining recognition in Brazil? Upon recognition of a foreign proceeding: • all execution proceedings against the debtor or property of the debtor are automatically stayed, subject to the provisions of the Bankruptcy Law; • any transfer, encumbrance or disposal of any non- current assets of the debtor shall be considered “ineffective” if made without the court’s authorisa - tion; and • all time limitations in connection with all judicial executions against the debtor are suspended, sub - ject to the provisions of the Bankruptcy Law. Furthermore, where necessary to protect the assets of the debtor or the interests of the creditors, the Brazil - ian court may, at the request of the foreign representa - tive, grant any appropriate relief, including: • avoidance of any act of disposal of the debtor’s non-current assets made without court approval; • the examination of witnesses, the production of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities; • entrusting the administration or realisation of all or part of the debtor’s assets located in Brazil to the foreign representative; and • granting any additional relief that may be neces - sary under the laws of Brazil. Recognition further allows the foreign representative to avoid fraudulent transactions by bringing the legal actions referred to in Articles 129 and 130 of the Bra - zilian Bankruptcy Law. Article 130 of the Brazilian Bankruptcy Law refers to a revocatory action, which can be brought by any credi - tor to render a past transaction ineffective. This action is predicated on fraudulent behaviour of the debtor and the counterparty of the transaction, resulting in losses to the bankruptcy estate. An action under Article 129 of the Brazilian Bankruptcy Law is grounded on acts considered fraudulent per se regardless of the parties’ intention. Examples include:
• payment of debts before the maturity date within the look-back period; • payment of debts in conditions not contractually agreed, also within the look-back period; and • performance of gratuitous acts two years before the bankruptcy. Distribution of assets The new legislation also introduced additional rules concerning the co-ordination of multiple insolvency proceedings. According to Article 167-V of the Brazil - ian Bankruptcy Law, the bankruptcy court responsible for non-main foreign proceedings must provide the main court with at least the following information: • value of assets collected and liabilities; • value of credits admitted and their classification; • classification, according to national law, of credi - tors not domiciled or based in countries holding credits subject to foreign law; • list of ongoing legal actions to which the bankrupt is a party, as plaintiff, defendant or interested party; and • information on the end of the liquidation and the balance thereof, as well as any remaining assets. The legislation further provides that no assets or pro - ceeds remaining from the liquidation will be delivered to the debtor if there are still unsatisfied liabilities in any other insolvency proceedings. In addition, the leg - islation provides that the main insolvency proceed - ing can only be finalised after the termination of the non-main proceedings or after it is verified that, in the latter, there are no remaining liquid assets. In this context, recognition in Brazil may also facili - tate the co-ordinated transfer, repatriation or distribu - tion of assets and proceeds located in Brazil to the foreign representative, where appropriate under the applicable insolvency framework and subject to the protection of local creditors and the supervision of the Brazilian court. This mechanism reinforces the ancil - lary function of recognition proceedings, not only as a means of obtaining information and preserving assets, but also as a tool to support the orderly administra - tion and distribution of the insolvency estate across jurisdictions.
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