Congress overturns presidential vetoes on the reform of the Insolvency Law, bringing benefits to debtors

In January 2021, Law No. 14,112/2020 came into force, which brought about a broad and long-awaited reform of the Bankruptcy and Company Recovery Law (Law No. 11,101/2005). Although most of the amendments were well received, the President of the Republic vetoed several important provisions, calling into question essential points of the law.

The main vetoes were related to (i) tax rules that, in line with the international position and in consideration of the exceptional condition of the recovering company, allowed the use of tax losses, as well as disregarding debt forgiveness as revenue for tax purposes; (ii) rules that reinforced the non-succession in debts of third parties acquiring the debtor’s assets; and (iii) the possibility of medical cooperatives requesting judicial reorganization.

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