Brazil's new bankruptcy law, which was under consideration by Congress for more than a decade before becoming effective on June 9 2005, has brought important and long overdue changes to the country's insolvency framework. Under the previous bankruptcy law, which was enacted in 1945, there was essentially no effective mechanism for reorganizing financially distressed enterprises in the context of an insolvency proceeding. Rather, such companies often faced the prospect of liquidation through a bankruptcy proceeding.
The new law, by contrast, emphasizes reorganization as a critical component of the Brazilian insolvency regime. In so doing, it reflects the growing international consensus that reorganization, as opposed to liquidation, might be the most effective means of preserving value in the case of distressed enterprises that are otherwise viable as going concerns. This view is evident in the important insolvency law reform work that has been conducted by the United Nations Commission on International...