Company liquidation in Brazil covers proceedings of non-corporate and corporate entities. The first ones are governed by the Civil Code, while the second ones by Law 11,101/2005. The first step in any of the two cases is filing for insolvency, followed by bankruptcy.
Below, our lawyers in Brazil explain how you can close a business in this country. We are at your disposal with several services related to company winding up in Brazil.
Table of Contents
Conditions for a Brazilian company to be declared bankrupt
A company must meet a set of criteria before being allowed to enter into liquidation in Brazil. The most important one is for it to be declared a business, from a legal point of view. This condition also applies to sole traders, for example.
| Quick Facts | |
|---|---|
| Applicable law(s) |
– Civil Law, – Bankruptcy Act. |
|
Conditions to liquidate a company |
– limited duration of the business, – shareholders’ agreement, – termination of activities in Brazil, – bankruptcy. |
|
Types of procedures |
Voluntary and compulsory procedures are available. |
| Voluntary company liquidation | Voluntary company liquidation is possible at the end of a company’s life or when the shareholders reach an agreement to close the business. |
| Compulsory company liquidation |
Compulsory liquidation becomes a possibility when a Brazilian company enters insolvency and the creditors file for bankruptcy. |
| Appointment of a liquidator in a voluntary procedure |
One of the company directors is appointed as a liquidator in the case of voluntary winding up. |
| Appointment of a liquidator in a mandatory procedure |
A Brazilian court will appoint the liquidator in the case of compulsory liquidation. |
| Authorities to notify in case of liquidation |
– the Companies Register, – the Tax Department, – Social Security Organization. |
| Requirement to notify other parties (YES/NO) |
Yes, the creditors. |
| Notice requirements | All parties must be notified after the decision was made/ruled. |
| Additional accounting requirements to comply with (if any) |
Yes, the liquidator must prepare a final balance sheet and financial statement. |
| Company liquidation time frame (approx.) |
6 to 16 months, depending on the type of procedure. |
| De-registration with the Tax Department in Brazil required (YES/NO) |
Yes, after completing the liquidation. |
| Trade Register deletion requirement (YES/NO) |
Yes, the company must also be deleted from the Trade Register. |
| Company liquidation support (YES/NO) | Yes, you can rely on our lawyers in Brazil for support in company liquidation. |
From there, company winding up can be divided into:
- a voluntary procedure (decided by the shareholders);
- a compulsory procedure (decided by a Brazilian court of law).
Closing a company voluntarily in Brazil requires the owners to start the dissolution of the business and appoint a liquidator.
Mandatory winding up occurs when one or more creditors file a petition in court and ask for the company’s activity to cease. Based on reasonable cause, the judge may rule for the liquidation as part of the debt collection procedure.
Each of the two situations can be explained by our Brazilian lawyers who can also help you carry out any procedure.
Here is also an infographic on how to close a company in Brazil:
Voluntary company winding up in Brazil
This is one of the simplest ways to close down a business. It can occur when:
- the company was incorporated for a limited period from the beginning;
- one or more shareholders have left the business, leaving it in the position of not respecting the law or its own bylaws;
- the shareholders have reached a mutual agreement to terminate the business.
In this case, the shareholders must convene a meeting and draft the decision to liquidate the company. The declaration must be filed along with other documents with the Trade Register. It must also appoint a liquidator (usually one of the directors is nominated).
Feel free to address our law firm in Brazil for support if you decide to close your company and need assistance.
Compulsory company liquidation in Brazil
Closing a company in Brazil can also occur after a court of law has issued a ruling. In this case, the decision is made by a judge, who will appoint the liquidator. Similar documents as in the case of voluntary liquidation must be filed with the Companies House.
Apart from these, the liquidator will be in charge of making the inventory with all the assets that can be used in the debt repayment stage. All remaining goods will be distributed among the shareholders, in accordance with their participation in the business.
The video below summarizes the company winding up process in Brazil:
Number of companies filing for bankruptcy protection on the rise
According to a recent survey, the number of companies requesting bankruptcy protection in 2023 was higher compared to 2022. In numbers, things look as follows:
- in the first quarter of 2023 (Q1), 289 companies filed for protection against bankruptcy;
- out of all types of businesses, micro firms and small businesses accounted for 20%;
- 6.5 million companies could not pay their debts or apply for business loans, out of which 90% were small and medium-sized enterprises (SMEs).
Apart from our support dedicated to businesses, our lawyers have also developed various legal services available to natural persons. Among these, one of the most sought is related to immigration to Brazil. From this point of view, we can help you obtain residency and citizenship in Brazil.
Do not hesitate to contact our law office for support in company liquidation in Brazil or any other service we can assist with.