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Reorganization of corporate groups in Brazil: Substantive consolidation and the limited liability tale
Author(s) -
Neder Cerezetti Sheila C.
Publication year - 2021
Publication title -
international insolvency review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.125
H-Index - 7
eISSN - 1099-1107
pISSN - 1180-0518
DOI - 10.1002/iir.1410
Subject(s) - consolidation (business) , corporation , proposition , ex ante , liability , creditor , business , law and economics , law , corporate group , substantive law , economics , accounting , sociology , political science , finance , debt , corporate governance , philosophy , epistemology , macroeconomics
The article analyses the use of substantive consolidation in view of the meaning of limited liability in Brazil and explores the proposition that such a solution to corporate distress should only exceptionally be imposed on creditors. In light of Brazilian corporate law, a court should only order substantive consolidation if continuous dishonest use of legal personality had occurred before the debtors filed for reorganization. The author further questions if such a proposition is adequate or if substantive consolidation must gain new colors in a corporate system such as the Brazilian one, in which (a) ex ante the legal system does not sustain limitation of liability of the business corporation in face of a wide number of claims, and (b) group entities are frequently not managed as separate and independent companies. The author concludes by reaffirming the importance of using substantive consolidation more strictly, rather than as a one‐size‐fits‐all solution.