Lei de Recuperação Judicial e Extrajudicial e Falência (Lei 11,101/2005)
Law No. 11,101 of 2005 established the modern framework for corporate insolvency in Brazil, introducing judicial recovery (recuperação judicial) and extrajudicial recovery (recuperação extrajudicial) as alternatives to bankruptcy (falência). The law was designed to preserve viable companies and their economic functions while protecting creditors’ rights. It provides for a debtor-in-possession model during recovery, allowing the existing management to continue operating the business subject to judicial oversight. The law also addresses pre-packaged recovery plans, creditor committees, and the priority of claims.
Legal area: Insolvency and bankruptcy law governs the restructuring and liquidation of financially distressed companies.
Year enacted: 2005
Full text: https://www.planalto.gov.br/ccivil_03/leis/Lei/L11101.htm
Key Provisions
- Art. 6: Debtor in possession (devedor na posse do estabelecimento)
- Art. 47: Judicial recovery (recuperação judicial) objectives
- Art. 58-66: Recovery plan approval (voting by creditor classes)
- Art. 49: Suspension of judicial and extrajudicial actions against debtor
- Art. 111-132: Bankruptcy (falência) proceedings and liquidation
- Art. 136: Priority of claims (privilegios e preferencias)
- Art. 161: Avoidance actions (ação revocatória)
- Art. 166: Individual extrajudicial recovery (recuperação extrajudicial)
Significance
The 2005 insolvency law modernized Brazil’s corporate reorganization framework, bringing it closer to Chapter 11 of the U.S. Bankruptcy Code. Since its enactment, the law has been used by major Brazilian companies including Oi (telecommunications) and Varig (airline). The law has been credited with increasing the recovery rate of distressed companies but criticized for delays in judicial proceedings and insufficient protections for unsecured creditors.