Transnational Insolvency: The Legal Shield for the Assets of Foreign Groups in Brazil

How Brazilian legislation protects assets and ensures the continuity of global businesses in times of crisis.

In a hyper-connected global economy, large corporations maintain operations, machinery, and investments spread across multiple continents. However, when a foreign group enters bankruptcy protection in its country of origin, an immediate risk of asset depletion arises: how to protect assets located in Brazil against a chaotic rush by local creditors?

Until the enactment of Law No. 14,112/2020, which reformed the Law on Business Recovery and Bankruptcy, the scenario was one of legal uncertainty. The lengthy process of homologation of foreign judgments by the Superior Court of Justice (STJ) was required for any effective protection. Today, by adopting the UNCITRAL Model Law (United Nations Commission on International Trade Law), Brazil has definitively entered the era of international judicial cooperation.

Procedural Agility and the End of Bureaucracy

The new transnational insolvency regime establishes a direct assistance mechanism. The representative of the foreign proceeding can petition directly before the Brazilian bankruptcy court of first instance, dispensing with letters rogatory or homologation by the Superior Court of Justice (STJ). When the proceeding takes place in the country where the debtor maintains its Center of Main Interests (COMI), it is recognized as a "main foreign proceeding".

Suspension of Executions (Stay Period)

The recognition of the main process generates immediate and fundamental effects for the survival of the business: the automatic suspension of all actions, executions, and enforcement measures against the debtor's assets in Brazil. This means that vessels, agricultural machinery, cash flows, and real estate cannot be auctioned or seized without judicial authorization, preserving the company's value for efficient restructuring.

Relevant Precedents in Brazil      

The security of this mechanism has already been proven in high-profile cases in the Judiciary:

• Prosafe Case: In an unprecedented decision, the 3rd Business Court of Rio de Janeiro recognized the insolvency proceedings of Prosafe SE, originating from Singapore. This measure ensured the suspension of foreclosures against the assets of the debtor and its subsidiaries, protecting exploration vessels that even had contracts with Petrobras.
• Mercon Coffee Case Study: More recently, the Minas Gerais Court (Varginha) recognized the effects of the restructuring process of the Mercon Group (Chapter 11 in the United States). The decision protected the Brazilian subsidiary, which acted as guarantor of more than US$200 million in group debt, prohibiting restrictions that would make business activity unfeasible.

The Importance of Strategic and Preventive Action

Although the cooperation mechanism is provided for by law, domestic creditors tend to seek swift seizures as soon as news of an international crisis reaches the market. If the company does not promptly file a request for recognition of the foreign process, it may suffer irreversible asset freezes in Brazil.

To ensure that the transnational recovery plan is not thwarted, the company needs highly specialized local representation. The alignment between the foreign judicial administrator and the Brazilian defense is the difference between the recovery of the economic group or its fragmentation through aggressive individual executions.

Protect your Group's Operations in Brazil

Our firm focuses on asset protection and economic viability. With robust expertise in judicial reorganization processes and complex liability negotiations, we are prepared to represent foreign groups and promote the swift recognition of transnational insolvency proceedings in Brazil.

Article written by: Vitor Ferrari, Samar Majzoub and Alex Santos.