BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
that hold both shares and debt in an obligor – cannot vote the amount of their debt claims at a general meeting of creditors in a debtor’s bankruptcy proceeding (although these restric- tions are being somewhat relaxed by court prec- edents). In a bankruptcy liquidation scenario, the Brazil- ian Bankruptcy Law sets forth an order of priority for claims against the liquidating company. Such rankings may be applicable to the insolvency of financial institutions (where their liquidation is adjudicated) but are not applicable for reorgani- sation regimes set forth in the relevant Brazilian laws (where the debtor and creditors may agree on a different payment regime if certain require- ments are met). Based on the prevailing rules, the claims that should be paid before any existing pre-petition claim include: • certain limited senior labour claims and criti- cal expenses of the bankrupt estate; • claims for restitution; • debtor-in-possession financings; • claims for restitution in cash proceeds; and • administrative expenses and post-petition claims, including judicial administrators′ and advisers′ fees, creditors’ committee refunds, labour claims, other post-petition obligations, bankruptcy estate expenses, the estate’s general court fees and tax claims. Any remaining balance is paid to creditors based on the following order of priority: • labour-related claims, limited to 150 minimum wages per creditor (any excess amounts are paid concurrently with unsecured claims) and occupational accident claims;
• secured claims up to the value of the collat- eral; • tax claims (excluding fines); • unsecured claims; • contractual penalties and monetary penalties for breach of criminal or administrative law,
including tax law; and • subordinated claims. 7.2 Claw-Back Risk
Insolvency proceedings involving companies and corporations in Brazil, specifically with regard to bankruptcy liquidation ( falência ), and certain acts executed during the so-called legal term will have no effect on the bankrupt estate, regardless of whether or not the parties were aware of the debtor’s economic situation or had the intention of defrauding creditors. The “legal term” is set by the competent bank- ruptcy court and cannot be greater than the 90 days preceding: • the first protest in the protest registry by a creditor for an unpaid debt; • the filing for bankruptcy liquidation; or • the filing for judicial reorganisation (in case of subsequent conversion into bankruptcy liquidation). The following transactions occurring during the legal term, among others, may be clawed back pursuant to prevailing laws: • payment of debts not yet matured; • payment of debts due and payable in any way other than originally set forth by the relevant contract in effect; and • the granting of an in rem guarantee right (ie, security interests such as a mortgage or pledge), including the right of retention in respect of a debt contracted prior to or during
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