BRAZIL Law and Practice Contributed by: Octaviano Duarte, Henrique Forssell, Marcelo Lucidi and Mayara Rahman Rufino, Duarte Forssell Advogados
1. Fraud Claims 1.1 General Characteristics of Fraud Claims Brazilian substantive and procedural law estab - lish several rules that address fraudulent trans- actions such as the making of false statements, the making of corrupt payments, conspiracy and misappropriation. The specific fraud claim appli - cable will vary depending on the parties involved – both the perpetrator and the harmed party. In general, the following fraud claims can be pur - sued by the victim. Civil and Commercial Claims Fraud against creditors Fraud against creditors (in Portuguese, fraude contra credores ), as provided for in the Brazilian Civil Code, is applicable to private creditors in general. Unsecured creditors have the right to challenge an onerous sale of assets and may be able to reclaim the sale proceeds if the seller was notoriously insolvent at the time of the transac - tion or if the buyer had reason to know about the debtor’s insolvency. Fraud upon the execution of judgment In general, fraud upon the execution of judgment (or fraude à execução in Portuguese) occurs when, at the time of the transfer or encumbrance of assets, there were lawsuits pending against the debtor. Any creditor that filed an enforcement proceeding (or any other legal action against the debtor that could lead the latter to insolvency) before the transaction may challenge the trans - action and seek to reclaim the assets, provided
ments, conspiracy and misappropriation can be considered an act of abuse of legal personality. Under the doctrine of piercing of the corporate veil, shareholders, directors, officers and third parties within the same economic group may be held liable for the debts of a company, when they have committed an act of abuse of legal per - sonality. According to the Brazilian Civil Code, abuse of legal personality occurs when there is commingling of assets or deviation from the cor - porate purpose. Bankruptcy Fraud If the victim of a fraudulent conveyance is the estate of an insolvent company, a creditor, the judicial administrator or the Public Prosecutor’s Office may seek to claw back the assets of the transaction. Pursuant to Brazil’s Bankruptcy Law (Law No 11,101/2005) as amended, this can be achieved by means of the following. Revocatory action This action can be brought by any creditor to render a past transaction ineffective. It is predi - cated on the fraudulent behaviour of the debtor and the counterparty of the transaction, resulting This action is grounded on acts considered fraudulent per se regardless of the parties’ inten - tion. Examples include: • payment of debts before the maturity date within the look-back period; • payment of debts in conditions not contractu - ally agreed also within the look-back period; and • performance of gratuitous acts two years before the bankruptcy. in losses to the bankruptcy estate. Objective ineffectiveness claim
certain requirements are met. Abuse of legal personality
Under certain circumstances, the making of false statements, the making of corrupt pay -
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