Out of the Red
Brazil's new bankruptcy law offers hope for indebted companies trying to stay viable, and assurance for their creditors, too.
In June 2005, Brazil's new bankruptcy law went into effect,
giving troubled companies fresh hope for recovery. While
critics say the law increases costs for companies going through
a restructuring and question whether it provides enough
security to potential investors, the legislation substantially
increases the chances that creditors will recover at least some
unpaid debts. Likewise, the law provides more options to
companies with temporary financial problems, offering a true
possibility to exit bankruptcy protection and continue to
operate. "The new law is without a doubt a step forward. Before
this law, Brazil didn't really have bankruptcy legislation,"
says Thomas Felsberg, a partner at Felsberg Associados, a law
firm in São Paulo. The bankruptcy law, which was stuck
in Congress for over 11 years, replaces legislation passed in
1945. The previous legislation awarded companies a two-year
moratorium on their debt, but gave creditors little voice in
the restructuring process. Once...
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