segunda-feira, 27 de abril de 2015

Cross-Border restructurings in Brazil

An interesting article by Felsbert, a Brazilian law firm (not affiliated to me).

 Adoption of insolvency proceedings and staff restructuring measures

The Brazilian economy is in deep water: after years of prosperity on the back of high commodity prices
combined with an ever growing middle class leading to high domestic consumer demand, GDP flatlined
in 2014 (+0.1%). Especially the propensity to invest was on a very low level, with less than 18% of GDP. At
the same time, the scandal involving Petrobras, its suppliers and the political establishment unsettles
not only Brazil and its entrepreneurs and the population but the whole region and international investors
as well. Christian Moritz (Felsberg Advogados, São Paulo) and Dr. Alexander Verhoeven
(WELLENSIEK) comment on the relevance of these recent developments for German companies.

 Some 1.200 German companies are doing business in Brazil
under the conditions of a volatile (emerging) market – do
you see first signs for an intensifying crisis?

Verhoeven: Well, the dominant topic at the moment is
the scandal at Petrobras and its disastrous effects on the
Brazilian economy: a) the currency (Real) has depreciated
significantly against the Dollar (up to an 11-year
low), b) the economy is trapped in a state of stagnation
because many of Petrobras‘ suppliers are involved in the
scandal; one by one getting into financial distress themselves
and c) at the same time politicians (especially the
ruling coalition) are loosing the backing of the population,
businesses and investors alike because of their involvement
in the investigations of the public
prosecutor’s office. It should be outlined, however, that a
decline in the Brazilian overall economic data had already
been in the making before Petrobras.

What exactly are the reasons for these negative developments
– do you see signs for hope?

Verhoeven: The surge in commodity prices lead to a sudden
rise in economic growth for the Brazilian market and
other emerging markets. Unfortunately the steady revenue
stream stemming from this economic boost was not
used to fund much needed new infrastructure projects or
to stimulate diversification of domestic industries. In
consequence the aforesaid negative economic status
quo is also the outlook for the near future; a budget deficit
combined with the introduction of a fiscal austerity
policy will not make it easier for the economy to bounce
back on a growth path. However, a gleam of light comes
from the labor market with a comparatively low unemployment
rate of about 5 %, signaling a steady and
strong consumer demand on domestic markets.

What are the biggest risks of liability when a Brazilian subsidiary
enters a state of distress?

 Moritz: Particularly in an insolvency scenario the liability
of directors and shareholders as well as of other group
members (including their shareholders) becomes a factor
to be aware about. In theory, Brazilian companies in
the legal form of a sociedade limitada or a sociedade em
ações (comparable with the German GmbH or AG respectively)
are granted exclusion of liability of its shareholders
and directors. But in fact Brazilian law offers (...)

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