Insolvency and Restructuring

Due to present political and economic circumstances in Brazil, the number of judicial reorganisation requests has considerably increased in the past few years. As a result, courts have been tested on a number of issues and new legal interpretations have been adopted. Specifically, recent court rulings have determined that provisions under financing agreements setting forth the acceleration of outstanding debt as a consequence of judicial reorganisation filings by debtors would contradict a legal purpose of protecting the debtor’s going concern, and would thus be null and void. In this scenario, the article contains an analysis of the legal validity and effectiveness of debt acceleration contractual provisions in Brazil, particularly vis-à-vis the referred recent court rulings and their potential adverse impact on credit supply and risk management.

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