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The Law no. 11,101 of 2005 (Brazilian Bankruptcy Law) provides the bankruptcy proceedings and
also the judicial and extrajudicial reorganization for debtors, as entrepreneurs and companies. According to the Brazilian Bankruptcy Law, both reorganization proceedings require the debtor’s consent and collaboration, as both proceedings pursue the overcome
of debtor’s economic crisis, allowing the maintenance of their activities and employees. However, the judicial reorganization proceedings are more commonly used than the out-of-court reorganization one.
1. Extrajudicial Restructuring
Extrajudicial Restructuring is an out- of-court proceedings in which the debtor negotiates directly with their creditors and draw up a restructuring plan that may be submitted to Court’s analysis and homologation.
It is important to mention that the restructuring plan cannot include tax credit holders, labor credits, or credits arising from labor accidents. Also, the plan cannot include early payment of debts or unfavorable treatment to creditors. If the plan
is approved by 3/5 of the creditors, their compliance is mandatory for all parties.
The advantage of Extrajudicial Restructuring is a less bureaucratic proceeding, faster and less costly than the Judicial Restructuring. Even so, Judicial Restructuring is still more requested.
The advantage
of Extrajudicial Restructuring is a less bureaucratic proceeding, faster and less costly than the Judicial Restructuring.
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