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Senate Analyzes Bankruptcy Law Reform That Could Redefine Judicial Recovery, Billion-Dollar Debts, and the Future of Small Businesses in Brazil.
In 2024, the federal government submitted to Congress the Bill No. 3/2024, which profoundly alters Law 11.101/2005, the cornerstone of bankruptcy and judicial recovery in Brazil. The text has already been approved by the Chamber of Deputies and is currently being processed in the Federal Senate, with a voting expectation still in 2025. If enacted, experts claim the new framework could forever change the way Brazilian companies deal with debts, bankruptcies, and billion-dollar renegotiations.
On one hand, there is the promise of faster, more transparent, and efficient processes. On the other hand, warnings from jurists and business entities arise about the risks of transferring more decision-making power to creditors.
The Context: 20 Years of the Bankruptcy Law and an Economy in Crisis
The current Bankruptcy and Judicial Recovery Law, in effect since 2005, replaced the old Concordata Law and modernized business protection mechanisms.
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Banco do Brasil sues famous influencer for million-dollar debt and intensifies debate on delinquency, risks of seizure, and direct impact on Gkay’s credibility.
However, nearly two decades later, it has come under criticism for its slowness, bureaucracy, and high legal costs.
According to Serasa Experian, Brazil registered over 6,000 bankruptcy filings and 13,000 judicial recovery requests in 2023, one of the highest volumes in the decade. Judicial delays, which can drag processes for more than 10 years, worsen value destruction and reduce the chances of distressed companies recovering.
It was in this context that Bill 3/2024 was born, crafted by the Ministry of Finance in partnership with jurists and business entities.
Main Changes Proposed by Bill 3/2024
The bill brings structural changes to the legislation, ranging from the management of bankrupt estates to new rules for asset sales and creditor participation. Among the most relevant points:
- Fiduciary Manager Chosen by Creditors – in some cases, creditors may replace the judicial administrator with a fiduciary manager, with greater decision-making power.
- Faster Asset Sales – assets of bankrupt companies may be sold quickly, without bureaucracy, preserving value and avoiding depreciation.
- Less Judicial Bureaucracy – decisions that previously depended on lengthy proceedings in the judiciary may now be made in creditor assemblies, speeding up processes.
- More Predictability – the bill seeks to standardize decisions, reducing prolonged legal disputes that stall negotiations.
- Protection for Viable Companies – judicial recovery will be reinforced as a tool to save businesses with potential for continuity, rather than dragging them into bankruptcy.
Impacts for Small and Large Enterprises
The changes will have direct effects on two extremes of the productive sector:
Small Businesses: representing over 90% of businesses in the country, may have cheaper and faster processes, increasing their chances of survival in times of crisis.
Large Indebted Corporations: conglomerates with billion-dollar debts will face greater pressure from creditors, who will have more power in decision-making. This could accelerate agreements but also reduce the maneuvering room for companies.
Jurists warn that in cases of billion-dollar renegotiations, as occurred with Oi, Americanas, and other retail and telecommunications giants, the new law could radically change the balance of power between companies and creditors.
What Jurists and Experts Are Saying
The proposal divides opinions.
For the Ministry of Finance, the reform is a fundamental step to modernize the legislation, reduce litigation, and attract investments. By simplifying processes, Brazil would be more aligned with international practices and reduce risks for creditors and investors.
On the other hand, lawyers’ and magistrates’ associations emphasize that transferring power to creditors could create imbalances, favoring large banks and funds at the expense of small suppliers and workers.
The challenge, according to experts, will be to find a balance between speeding up processes and distributive justice, without suffocating companies in recovery.
Brazil and the International Trend
The changes follow models already applied in countries like United States, Portugal, and Spain, which adopted mechanisms for more active creditor participation in bankruptcy processes.
These systems allow for quicker solutions for unviable companies and protect creditors from long waits, but also generate criticism for favoring institutional investors at the expense of weaker parties.
The progress of Bill 3/2024 in the Senate marks a decisive crossroads for the future of the Brazilian economy. The new Bankruptcy Law could represent a turning point: speeding up processes, saving small businesses, and attracting more market confidence.
But it also poses risks of concentrating power in large creditors and making it harder to restructure indebted conglomerates.
Leave your opinion in the comments: Will the new law manage to balance the interests of businesses and creditors, or will it create new conflicts in a landscape already marked by billion-dollar disputes?
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