You may not need it, but you must understand it: Four key Q&As on bankruptcy law in Brazil that Chinese enterprises must thoroughly grasp.

In today’s globalized business environment, cross-border investment and operations have become an increasingly common choice for Chinese enterprises. As the largest economy in Latin America, Brazil’s unique market conditions and commercial opportunities have attracted significant attention from numerous Chinese companies. Yet alongside these opportunities come risks. For any Chinese enterprise considering entry into this market, understanding and mastering Brazil’s bankruptcy laws is of critical importance. ・Bankruptcy law forms a foundational component of every country’s legal system. It not only prescribes procedures for handling enterprises facing financial distress, but—more importantly—provides a balanced mechanism designed for both debtors and creditors. For Chinese enterprises, a thorough understanding of Brazilian bankruptcy law enables them to effectively deploy legal tools to protect their interests during operational crises, while also better managing and controlling business risks. ・Brazil’s bankruptcy regulations differ from those of China and other jurisdictions. For instance, provisions concerning corporate reorganization under Brazilian bankruptcy law may be more flexible than those under Chinese law, offering financially distressed Chinese enterprises greater opportunities and options to avoid formal bankruptcy. Thus, deep familiarity with Brazilian bankruptcy law is essential not only for formulating effective risk management strategies, but also for long-term corporate planning. ・Understanding Brazil’s bankruptcy laws also helps Chinese enterprises more accurately assess potential legal risks and costs when engaging in cross-border mergers and acquisitions or making investment decisions. This not only enhances corporate competitiveness but also provides stronger legal support and arguments during negotiations with local Brazilian businesses and government authorities. As economic and trade cooperation between China and Brazil continues to deepen, knowledge of Brazilian bankruptcy law also reflects the professionalism and sense of responsibility of Chinese enterprises. Let us now begin exploring the key questions and answers! Q1: How does a company’s bankruptcy proceeding affect a lender’s ability to enforce its rights as a secured creditor over pledged collateral? Main types of proceedings available to financially distressed companies: (i) out-of-court restructuring; (ii) judicial restructuring; and (iii) bankruptcy. Out-of-court restructuring is a private settlement between the debtor and its creditors. Despite its name, such restructuring must be submitted to court for approval to become enforceable. The debtor and creditors negotiate revised debt payment terms, and the resulting restructuring plan is submitted to court for approval. Creditors may challenge the plan, but there are no specific statutory provisions governing the filing of credit claims (habilitação de crédito) in connection with out-of-court restructuring. Upon filing a petition for judicial restructuring—and once the court accepts it—certain creditors are prohibited from enforcing their rights. Under Brazilian bankruptcy law, an automatic stay (moratorium) of up to 180 days applies, extendable once for an identical period, provided the debtor has not caused the delay. During this stay period, creditors may neither initiate nor continue any legal or foreclosure proceedings against the debtor—except for certain categories of claims, such as those secured by trust transfers or ownership rights over underlying assets. In bankruptcy, the court may set aside certain transactions conducted within 90 days prior to (a) the bankruptcy petition, (b) the judicial recovery petition, or (c) the first protest (“suspicious period”) filed against the debtor due to non-payment. Transactions potentially subject to avoidance include those granting security for pre-existing debts or registering security interests after the debtor’s insolvency. The court may also set aside transactions deemed valueless (gratuitous) carried out by the company within two years prior to the declaration of bankruptcy.

Overview of legal issues concerning cross-border bankruptcy claim protection.

Across nations, nearly all countries adopt market economies as their fundamental development model. Differences among them stem primarily from variations in social ideology, class structure, or humanistic environments—yet these distinctions do not undermine the shared premise of a universal market economy. This common foundation constitutes the starting point for our discussion of cross-border bankruptcy claim protection. Bankruptcy rules governing market participants’ exit from the market constitute one of the core components of market regulation. When abstracted and codified into law, such rules form bankruptcy legal systems—a vital part of the broader legal framework. Moreover, the procedural philosophy embedded in bankruptcy law fully externalizes legal values, while its procedural nature, in turn, promotes the effective realization of core legal values such as fairness, justice, and equality. Clearly, efficient market operation depends on rules; effective rule enforcement depends on the rule of law; and whether cross-border bankruptcy claims can be adequately protected hinges upon the existence—and applicability—of procedural rules in cross-border bankruptcy cases. Such procedural rules inherently demand consistency and systematic coherence. Therefore, analyzing exemplary domestic and foreign legislation facilitates deeper research on this issue. Strictly speaking, no universally binding international treaty or agreement specifically dedicated to cross-border bankruptcy claims currently exists. However, looking back historically and assessing the present, several multilateral treaties of general international law significance do exist—treaties that regulate rights and obligations among a number of sovereign states in cross-border bankruptcy cases—and remain highly instructive. Notable examples include: the European Council Regulation on Insolvency Proceedings, which entered into force on 31 May 2002 and applies directly in all EU Member States except Denmark—the strongest and most far-reaching multilateral international legal instrument on cross-border bankruptcy to date; the Nordic Bankruptcy Convention, which entered into force on 7 November 1933 among six Nordic countries; and the OHADA Uniform Act on Business Law (Organisation pour l’Harmonisation en Afrique du Droit des Affaires), signed in 1993 and entering into force in 1995, now comprising 17 member states—the most widely influential substantive-law convention on cross-border bankruptcy to date. Notably, OHADA establishes four institutions, one of which is the Common Court of Justice and Arbitration (CCJA), tasked with harmonizing and resolving disputes related to the interpretation, application, and implementation of the OHADA treaties. In addition, there exist several multilateral treaties addressing personal bankruptcy specifically—though these fall outside the scope of the present discussion. ………… (II) Theoretical Research on Cross-Border Bankruptcy Claim Protection Historical inconsistencies among national bankruptcy laws arise from differences in respective social, economic, cultural, and political contexts. Simultaneously, under the principle of sovereign equality and independence, the legal effect of a nation’s legislation naturally terminates at its territorial borders—including jurisdiction, choice of law, and recognition of judgments.

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