Restructuring and insolvency law in Brazil

1. What is the primary legislation governing insolvency and restructuring proceedings in your jurisdiction?

Law 11,101 of 9 February 2005. The law provides rules on judicial recovery, extra-judicial recovery and bankruptcy proceedings. There are also specific insolvency rules on:

  • civil insolvency proceedings, for individuals and non-business entities regulated by the Civil Code
  • insolvency of financial institutions, co-operatives and other entities excluded from the scope of Law 11,101 of 9 February 2005. These are regulated by other specific legislation.

2. How are insolvency proceedings or restructuring proceedings initiated?

Judicial recovery 

Judicial recovery proceedings are requested through a petition to the court by the debtor. The petition should explain the reasons for the economic and financial crisis, including supporting evidence (financial statements, list of creditors and respective debts, list of employees, certain certificates relating to debts and enforcement actions, corporate documents, list of assets of the controlling shareholders and the insolvent company’s administrators, bank statements, investment statements of the insolvent company, list of legal actions in which the insolvent company is a party). 


Bankruptcy proceedings can be requested by the debtor or its creditors through a petition to the court explaining the reasons for the debtor’s economic crisis and the reasons the company does not qualify for judicial recovery, including supporting evidence as described above.

Bankruptcy proceedings can also be requested by the surviving spouse of the debtor, any of his/her heirs, or the estate administrator.  

Extra-judicial recovery

Extra-judicial recovery is not initiated with the Court. The debtor negotiates with its creditors to agree a recovery plan, which is then validated with the court.  

The legal reason for insolvency is that the insolvent entity’s debts exceed the value of its assets and it is not able to meet its commercial commitments. 

4. Which different types of restructuring / insolvency proceedings exist and what are their characteristics?


The insolvent company stops its operations due to insolvency and goes out of business. A judicial administrator is appointed to liquidate the company’s assets and the money is used to pay its creditors.

Extra-judicial recovery

The insolvent company does not stop its operations. The insolvent company enters into an agreement with its creditors to settle its debts. The parties (insolvent company and creditors) agree on a plan to reorganise the business and pay off the debts. This plan, if agreed by the majority of creditors, shall be filed with the court to validate the agreement. 

Judicial recovery

This involves court proceedings.  The insolvent company makes a request to the court for judicial recovery proceedings. If approved, the insolvent company must present a plan to reorganise the business and pay off the debts. This plan is presented and approved or rejected by the majority of its creditors in a creditors’ meeting. 

If the plan is rejected, the company can be declared bankrupt. If approved by the required majority of creditors in different classes, the company remains in recovery for up to 2 years until it pays off its debts in accordance with the plan. 
Under bankruptcy and judicial recovery proceedings, a judicial administrator is appointed to administer the plan, dealing with the creditors and the court. The payment of debts follows a prescribed order of preference. 

5. Are there several types of creditors and what is the effect of a difference?

Yes, there are. Some creditors receive payment before others, depending on their category. The payment of debts follows the following order of preference: 

  • Labour debts: debts with employees, limited to 150 minimum wages per employee, or resulting from accidents at work
  • Secured debts: up to the limit of the pledged asset value
  • Active debts with the government: taxes and charges due to the government, at federal, state or municipal level
  • Special privileged debts: defined in Article 964 of the Civil Code
  • General privileged debts: defined in Article 83 of Law 11,101/05
  • Unsecured debts: those not included in the previous categories
  • Debts arising from fines and penalties
  • Subordinated debts: those defined by law or debts of shareholders/partners and administrators without an employment relationship.

6. Is there any obligation to initiate restructuring / insolvency proceedings? For whom does this obligation exist and under what conditions? What are the consequences if this obligation is violated?

No, there isn’t an obligation to initiate restructuring/insolvency proceedings under Brazilian insolvency law. However, this obligation may be provided for in the company’s articles of association. Directors and administrators of a company must comply with standards of care and diligence established by Brazilian corporate law. They can be personally liable for bad administration, and violation of the duties of care and diligence can result in civil and criminal liability.

7. What are the main duties of the representative bodies in connection with restructuring / insolvency proceedings?

In judicial recovery and bankruptcy proceedings, a judicial administrator is appointed to represent the insolvent company, and a creditors’ committee can be constituted to represent the creditors. Their respective duties depend on the nature of the proceedings, as follows: 

Judicial administrator

Judicial recovery and bankruptcy

The judicial administrator is responsible for a wide array of administrative tasks. These include sending correspondence to the creditors as listed in Article 51, Article 99 and Article 105, communicating the date of request for the judicial recovery and the declaration of bankruptcy, provide all information requested by the interested creditors, extracts from the debtor’s books or information requested by the creditors, debtors or administrators. The judicial administrator must also prepare a list of creditors as referred to in § 2 of Article 7, consolidate the general picture of creditors under the terms of Article 18 and request the judge to convene a general meeting of creditors in the case, when it deems it necessary for its hearing to make decisions, and hire professionals or specialised companies to assist in the exercise of their functions and to manifest themselves in the cases provided for in the law. 

Judicial recovery

The judicial administrator is responsible for supervising the debtor’s activities and compliance with the judicial recovery plan, applying for bankruptcy in the event of failure to comply with the obligation assumed in the recovery plan, submitting, together with a case file, a monthly report and case file on the debtor’s activities, and reporting on the execution of the recovery plan. If the debtor fails to comply with its obligations assumed in the recovery plan, the judicial administrator should apply for its bankruptcy.


The judicial administrator has a large list of duties under bankruptcy proceedings including the following:

  • notify the official body of the time and place where creditors may access the books and documents of the bankrupted party 
  • examine the debtor’s bookkeeping
  • assume judicial representation of the bankrupt estate and report on proceedings
  • receive and open correspondence addressed to the debtor
  • present a report on the causes and circumstances that led to the bankruptcy, indicating potential civil and criminal liability of those involved
  • recover debtor’s assets and documents
  • evaluate recovered assets
  • hire appraisers to value the assets;
  • liquidate the assets and make payments to creditors
  • request the judge to pre-sell perishable items or those at risk or expensive to conserve
  • preserve the bankrupt party’s rights and take action to collect debts;
  • represent the bankrupt estate in court
  • render accounts at the end of the process.

Creditors’ committee

The creditors’ committee’s duties include the following:

Judicial recovery and bankruptcy

  • supervise the activities and examine the accounts of the judicial administrator
  • ensure the smooth running of the proceedings and compliance with the law
  • notify the judge if it identifies any violation of the rights or damage to the interests of the creditors
  • investigate and issue an opinion on any stakeholder complaints
  • request the judge to convene the general meeting of creditors.

Judicial recovery

  • supervise and report on the administration of the debtor’s activities
  • supervise the execution of the judicial recovery plan
  • in certain cases where the debtor is removed from management of its business, submit for the judge’s approval the sale of permanent assets, the constitution of guarantees and other security and the creation of indebtedness necessary for the continuation of business activity during the period prior to the approval of the judicial recovery plan.

When the bankruptcy of a company is declared or the judicial recovery is approved by the court, a judicial administrator is appointed. From that moment on, the debtor’s right to administer and dispose of assets is transferred to the judicial administrator, subject to the Court’s oversight and approval. If the representative bodies of an entity dispose of assets after the commencement of insolvency proceedings, such disposals will be considered invalid. The representative bodies of the legal entity are therefore normally not involved in insolvency proceedings. However, they continue to have duties of disclosure and cooperation, to assist the judicial administrator with the fulfilment of its duties. 

9. What are the main duties of shareholders in connection with restructuring / insolvency proceedings?

Before the commencement of restructuring/insolvency proceedings, shareholders must act to attempt to overcome the financial crisis and avoid the insolvency of a company. Once the judicial recovery is approved and bankruptcy proceedings declared, the shareholders must cooperate with the judicial administrator in the fulfilment of its duties, and they may also assist with the restructuring plan to be presented to creditors. 

10. Are the shareholders of a company involved in restructuring / insolvency proceedings?

The shareholders of a company are not normally involved in the judicial recovery or bankruptcy proceedings, but they must cooperate with the judicial administrator in the performance of his duties as described in point 7. 

In extra-judicial recovery proceedings, the shareholders may be more involved, together with the company’s directors and/or administrators, in the management of the recovery plan. 

11. Is a solvent liquidation of the company an alternative to regular insolvency proceedings?

Solvent liquidation is available where the company’s assets are sufficient to pay its debts and discharge its liabilities. If that is not the case, the company may negotiate a reduction in debts with its creditors and shareholders may make a capital injection to provide sufficient funds for a solvent liquidation, so as to avoid insolvency proceedings.

If a company is subject to a solvent liquidation and subsequently discovered to have outstanding debts, its directors, administrators and shareholders will normally be held liable for those debts.

Insolvency Law 11,101 of 9 February 2005 provides for extra-judicial recovery, which is a process that enables out-of-court restructuring and is intended to prevent judicial insolvency proceedings.

Please see points 2 and 4 for further detail.

13. What is the average success rate after completed restructuring / insolvency proceedings?

The average success rate in completing judicial and extra-judicial recovery proceedings in Brazil is less than 23%. The majority of companies that apply for judicial recovery are unable to complete the recovery plan and bankruptcy of the company is eventually declared.  

Bankruptcy proceedings are often very lengthy in Brazil, taking 10 years or more to be concluded, and eventual creditor recoveries are often a small proportion of their original debts.

Image of Carolina Vaissman Uribe
Carolina Vaissman Uribe
Rio de Janeiro