Reorganization of Corporate Groups in Brazil: Substantive Consolidation and the Limited Liability Tale

International Insolvency Review, Forthcoming

27 Pages Posted: 28 Apr 2021

Date Written: August 1, 2019

Abstract

The article analyses the use of substantive consolidation in view of the meaning of limited liability in Brazil and explores the proposition that such a solution to corporate distress should only exceptionally be imposed on creditors. In light of Brazilian corporate law, a court should only order substantive consolidation if continuous dishonest use of legal personality had occurred before the debtors filed for reorganization. The author further questions if such a proposition is adequate or if substantive consolidation must gain new colors in a corporate system such as the Brazilian one, in which (a) ex ante the legal system does not sustain limitation of liability of the business corporation in face of a wide number of claims, and (b) group entities are frequently not managed as separate and independent companies. The author concludes by reaffirming the importance of using substantive consolidation more strictly, rather than as a one-size-fits-all solution.

Keywords: substantive consolidation; reorganization; bankruptcy; piercing the corporate veil; abuse of the corporate form; limited liability.

Suggested Citation

Neder Cerezetti, Sheila, Reorganization of Corporate Groups in Brazil: Substantive Consolidation and the Limited Liability Tale (August 1, 2019). International Insolvency Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3817700

Sheila Neder Cerezetti (Contact Author)

University of São Paulo Law School ( email )

São Paulo
Brazil
11 31114008 (Phone)

HOME PAGE: http://www.direito.usp.br/sneder

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