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STF Forms Majority And Decides That Judicial Recovery And Bankruptcy Do Not Apply To State-Owned Enterprises, Even When They Compete With The Private Sector
The Supreme Federal Court (STF) formed a majority on October 17, 2025 to confirm that judicial recovery and bankruptcy do not apply to state-owned enterprises. The decision, made in a virtual plenary with general repercussion recognized, will apply to all similar cases ongoing in Brazilian courts.
The trial began on October 10 and involved a municipal state-owned enterprise from Montes Claros (MG), which had requested judicial recovery due to a financial crisis. However, the Court of Justice of Minas Gerais (TJMG) denied the request based on Law 11.101/2005, which exclusively regulates private companies.
STF Reaffirms Exclusion of State-Owned Enterprises From Bankruptcy Law
According to Minister Flávio Dino, the rapporteur of the case, Law 11.101/2005 is valid and constitutional, as Article 2, item I excludes public companies and mixed-economy enterprises from these procedures. He emphasized that subjecting state-owned enterprises to market regulations would cause serious socio-economic disruptions, since these companies operate in areas of public interest.
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Furthermore, Dino emphasized that declaring a state-owned enterprise bankrupt would be equivalent to the bankruptcy of the State itself, which would be unacceptable for institutional and economic stability. Therefore, he reiterated that only the State can determine the extinction of its companies, as long as there is a specific law approved by the Legislative.
The minister recalled that this rule is provided for in Article 37, item XIX of the Federal Constitution, which establishes that the creation and extinction of public companies depend on legal authorization. Thus, the removal of a state-owned enterprise from the market can only occur by formal legislative decision, and not by isolated judicial act.
Constitutional Basis Delimits The Economic Action Of State-Owned Enterprises
The state-owned enterprise from Minas Gerais argued that Article 173, paragraph 1, item II of the Constitution requires that public companies follow the legal regime applicable to private ones. Nevertheless, the STF understood that the provision does not authorize the application of the Judicial Recovery and Bankruptcy Law to state-owned enterprises, even when they operate in competitive sectors.
The rapporteur’s vote was supported by ministers Cristiano Zanin, André Mendonça, Dias Toffoli, Edson Fachin, and Kassio Nunes Marques, consolidating the majority in Theme 1101 of general repercussion. Thus, the thesis approved by the Supreme will serve as guidance for all levels of courts in the country, ensuring legal uniformity and institutional stability.
As a result, public companies and mixed-economy enterprises remain under a differentiated legal regime, which ensures protection of the collective interest and reinforces the administrative sovereignty of the Brazilian State.
The RFFSA Case Reinforces The Supreme’s Understanding
During his vote, Minister Flávio Dino cited the case of Rede Ferroviária Federal S.A. (RFFSA), which was dissolved in 2007 by a specific law that defined the fate of its assets, credits, and obligations. He explained that RFFSA “was born by law and died by law”, reaffirming the principle of symmetry of forms.
This precedent confirmed that no judicial decision can extinguish or declare a state-owned enterprise bankrupt, as only the Legislative Power possesses this competence, as established by the Federal Constitution. Thus, the Court reinforced that the preservation of public interest must prevail over purely economic criteria.
Economic And Administrative Impacts Of The Decision
With the decision, no state-owned enterprise will be able to resort to judicial recovery or bankruptcy. Thus, creditors will have to seek alternative means, such as administrative agreements or tax executions, to recover outstanding amounts.
According to the STF, the measure prevents economic imbalances, preserves public jobs, and ensures the continuity of essential services, especially in the sectors of energy, sanitation, transportation, and infrastructure. Furthermore, the Court emphasized that state-owned enterprises must maintain transparency and accountability in management, ensuring financial balance and administrative efficiency.
Decision Consolidates Security And Institutional Sovereignty
The decision made on October 17, 2025 marks a turning point in the application of Law 11.101/2005. By stating that only private enterprises can seek judicial recovery or bankruptcy, the Supreme strengthens legal security, protects public assets, and reaffirms national sovereignty.
With this, the STF concludes an old discussion and ensures that state-owned enterprises continue to operate as instruments of collective interest, without the risk of removal from the market by isolated judicial decisions. The Court further reinforced that these companies are pillars of the country’s economic and social stability, remaining under the control and responsibility of the State.
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