An Increase in Out-of-Court Reorganization

Out-of-Court Reorganization Gains Momentum in Brazil’s Restructuring Landscape

The use of out-of-court reorganization has gained momentum in recent years, occupying an increasingly prominent position in the restructuring market. Since the reforms introduced by the Brazilian Bankruptcy Law (Law No. 14,112) in 2020 – which modernized insolvency legislation and bolstered the legal certainty of the out-of-court reorganization mechanism – the number of requests for approval has risen sharply. According to the Brazilian Out-of-Court Reorganization Observatory (OBRE), approximately 80% of requests filed between 2005 and February 2026 were submitted from 2021 onward, the period shaped by the reformed legislation.

Out-of-court reorganization has proven to be an efficient alternative for companies seeking to restructure their debts more quickly. This mechanism allows the company to submit a plan to the courts that has already been approved by a simple majority of the covered claims, making it binding on all creditors within its scope – even those who disagreed with the proposal. This characteristic breaks deadlocks, avoids holdout minorities, and enables faster, less contentious restructuring processes.

The recent surge in out-of-court reorganizations also points to the growing sophistication of transactions in Brazil. Out-of-court reorganization has been used in highly complex cases involving substantial sums and structures that combine corporate reorganization, financial renegotiation, and securities issuances. The mechanism has become an important means of maximizing credit recovery for investors and lenders, especially in companies facing more severe financial distress.

With the Brazilian Bankruptcy Law reforms, out-of-court reorganization has become a more attractive option, offering several advantages in relation to the judicial counterpart. It is faster, less costly, covers only the selected creditors and reduces reputational harm for the debtor

Marcelo Ricupero

Partner – Restructuring & Insolvency

Although the issue remains unsettled, with no clear legal provision or consolidated case law, there are already notable instances in which DIP [Debtor-in-Possession] financing has been extended to companies undergoing out-of-court reorganization, on the same terms as would apply in judicial reorganization