In June 2005, the old Bankruptcy Law in Brazil was replaced with a law known as the Corporate Restructuring Law. The so-called “New Law” was designed to preserve jobs, generate tax income, improve the chances of recovering credits and avoid the liquidation of otherwise viable businesses. As a result, Brazilian legislation now offers two paths to restructure distressed businesses: traditional Judicial Restructurings and new Out-of-Court Restructuring Agreements (OCRA). Plus, Judicial Restructuring itself recently replaced the former concordata preventiva, or preventive creditor protection. Today in Brazil, all creditors - secured and unsecured - are included in restructurings. However, tax credits, forward foreign-exchange contracts, trustee and leasing agreements are not always included.

Galeazzi & Associados has a 15-year history of restructuring organizations under both the former and current Brazilian bankruptcy laws. We fully believe that the so-called “New Law” is a significant step in the right direction and that positive effects are already being seen. But, at the same time, our experience is that the New Law, and OCRA, are far from perfect, and still have a lot of “maturing” to do—a fact that has great ramifications for virtually any company doing business in Brail today, the world’s ninth largest economy.