This chapter looks at the treatment of executory contracts under Brazilian bankruptcy law and at the debate for reforming the existing law. Federal Law No. 11,101/2005, as of 9 February 2005, amended from time to time (the Bankruptcy Law or “BBL), governs corporate insolvency in Brazil. As a matter of legislative policy, the BBL aims at allowing for the reorganization of viable businesses and the efficient liquidation of businesses that should otherwise be wound-up. Whilst this may sound counterintuitive for business reorganizations – i.e., formal insolvency proceedings should protect going concern value and not the opposite – stigma, the use of personal guarantees by shareholders (which accelerate upon the engagement of BBL), lack of available financing for insolvent entities, local bank policies and regulations as regards risk exposure and allocation and a certain degree of legal uncertainty with the application of BBL, all contribute to calling formal insolvency proceedings only as the last resort. The treatment of executory contracts in BBL is somewhat dispersed and, as a matter of policy, should be improved, especially in Judicial Reorganization. There is a growing interest in corporate insolvency matters in Brazil, and recent multi-billion-dollar cases have highlighted the importance of the treatment of executory contracts. It is expected that the initiative of the Ministry of Finance to propose a new draft-bill to amend BBL will address such concerns accordingly.
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