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Grant Thornton obtains first Brazilian recognition of a BVI insolvency proceeding

Grant Thornton obtains first Brazilian recognition of a BVI insolvency proceeding under UNCITRAL Model Law on Cross-Border Insolvency

Matthew Richardson and David Bennett of Grant Thornton (BVI) Limited are appointed Joint Liquidators of a BVI company (“Company”) whose sole unencumbered asset was, at the date of appointment, the controlling interest in a large Brazilian company (“Brazilian Subsidiary”) under the control of the Company’s director and associated persons.  Unfortunately, all attempts by the Joint Liquidators with regards to engaging with the Brazilian Subsidiary were unsuccessful and, accordingly, the Joint Liquidators had been unable to realise any value out of it.

Accordingly, in January 2022, the Joint Liquidators (assisted by their Brazilian counsel Duarte Forssell Advogados (“DFA”) and BVI counsel Martin Kenney & Co Solicitors (“Matin Kenney”)) applied for recognition of the BVI liquidation under the recently-introduced Brazilian Law 14,112/2020, which brought into force key provisions of the UNCITRAL Model Law on Cross-Border Insolvency.

In its recent decision, the District Court of Ibaiti, in Paraná, Brazil, granted the Joint Liquidators’ recognition application.  We understand this to be the first Brazilian recognition of a BVI liquidation, and that the only other published recognition of a foreign insolvency proceeding in Brazil related to recognition of a Singaporean restructuring of a company with substantial direct operations and creditors in Brazil.

The application for recognition of the BVI insolvency proceeding centred on a number of key points, in particular:

  • Establishing that the Company’s Centre of Main Interests was the BVI;
  • Establishing that the BVI liquidation was a main foreign proceeding in accordance with Law 14,112/2020; and
  • Establishing that recognition of the BVI liquidation would not offend the fundamental norms governing the Brazilian state or offend the public interest.

The Joint Liquidators’ application successfully argued all of these points, and as a result their application for recognition was granted.  Recognition of the BVI insolvency proceeding will allow the Joint Liquidators to take substantive action in respect of the Company’s Brazilian assets in order to protect the interests of unsecured creditors at the BVI level and enhance their prospects of receiving a material return.  In particular, the recognition will allow the Joint Liquidators to obtain banking records, balance sheets and other financial records of the Brazilian Subsidiary, and to participate or initiate any legal measure with respect to its assets and liabilities.

Further, the recognition will help to set future precedent in the Brazilian courts with regards to transnational insolvency and will disseminate the Model Law principles now incorporated to the Brazilian legal system, paving the way for use of the Model Law provisions in future asset recovery strategies in Brazil.

Critical in successfully obtaining recognition was Grant Thornton’s, DFA’s and Martin Kenney’s deep experience in asset recovery across Brazil and Latin America, together with our and our advisors’ ability to offer flexible fee arrangements even on complex and novel matters such as this one.

For further information please contact:

Grant Thornton

Duarte Forssell Advogados

Martin Kenney & Co Solicitors