BRAZIL Law and Practice Contributed by: Thaís Vasconcellos de Sá, Bermudes Advogados
1. Market Overview 1.1 Market Comparison
overflooding and storms have disrupted activi- ties in several regions and markets. Furthermore, the aviation sector and other ser- vices that depend on flights and tourism have not completely bounced back from the COV- ID-19 pandemic, although there the respective crisis was more restricted to financial impacts (rather than being more widespread). As Brazil has a considerably developed legal statute and practice on financial restructuring – including a law that was significantly updated in 2020 – suc- cessful judicial restructuring of companies on those markets has occurred as well. 1.3 Post-Crisis M&A The maturity of Brazil’s restructuring laws and practice is significant for crisis management, as a crisis usually has significant financial implica- tions that can impair a company’s ability to meet its past obligations. As Brazil is a high-litigation country (its courts consistently top rankings in terms of number of ongoing proceedings), an important part of overcoming a crisis will be to renegotiate these past obligations and avoid related enforcement measures. For that reason, most business acquisitions and/or restructur- ings occur via judicial restructuring proceed- ings, where the company will not only be able to renegotiate collectively with its creditors but will also have access to corporate restructuring measures that protect the acquirer of the asset from past liability, maximising the value of the assets sold and the possibility of the company overcoming the crisis.
Crisis management practice in Brazil has devel- oped significantly over the past few years. This development was driven by specific industrial and environmental accidents that occurred in Brazil, by climate events that have become more extreme and recurrent and, of course, by the COVID-19 pandemic. Companies acting in different markets were suddenly faced with the complex challenges of overcoming a crisis; such challenges are inherently multifaceted, and bring significant liability exposure that could impair the most thorough crisis response efforts. The development of the market has raised aware- ness of the need for adequate preparation and crisis response, and of the value of engaging external consultants for this intricate and unique task. Companies across different industries have begun to dedicate their time and resources to developing their internal policies and proce- dures; this, in turn, has led to the crisis manage- ment market improving and professionalising its practices more each day. 1.2 Key Sectors Impacted by Crises Industrial sectors are inherently subject to potential crises arising from the usually signifi- cant risks of their activities. An industrial acci- dent may not only lead to a disruption of the company’s activities and other damages but may also bring a significant level of exposure to multiple legal demands by authorities and third parties, which can perpetuate and multiply the impacts of the crisis. Extreme climate events know no boundaries when it comes to affected sectors, as their mate- rial impacts disrupt companies’ abilities to per- form their activities across the board. Brazil is rarely ever subject to events like hurricanes, but
2. National Legal Framework 2.1 Legal Framework
Brazil’s civil law system governs the various implications of crisis management through dif-
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