Judicial & Extrajudicial Reorganisation in Brazil: Limits, Feasibility & Reflections Based on the Raízen Case

Introduction

The reorganization of companies in crisis occupies a central position in Brazilian business law, especially in an economic landscape marked by volatility, rising borrowing costs, and significant fluctuations across various productive sectors.

Regulated by Law No. 11,101/2005, judicial reorganization was conceived as an instrument aimed at preserving business activity, allowing for the reorganization of liabilities and the continuity of operations. Over the years, however, the institution has come to be used in increasingly complex structures, keeping pace with the evolution of the market and credit relationships.

At the same time, out-of-court reorganization has gained ground as a more flexible alternative, based on direct negotiation between the debtor and creditors, often allowing for faster and less costly solutions.

In this context, recent cases involving large companies reignite a relevant discussion: to what extent is the Brazilian reorganization system prepared to handle highly complex restructurings with significant economic impact?

How Judicial and Extrajudicial Reorganization Works

Brazilian law is based on the principle of preserving the company, as set forth in Article 47 of Law No. 11,101/2005. Judicial reorganization is not intended to protect the business owner per se, but rather organized economic activity, recognizing its social function, its capacity to generate jobs, tax revenue, and the circulation of wealth.

In this sense, the reorganization process is structured around the idea that, in the face of an economic and financial crisis, it may be more advantageous for creditors and society to allow the company to restructure than to let it go bankrupt. The logic is eminently economic, as an operating company tends to generate more value than the isolated liquidation of its assets.

Within this dynamic, one of the most relevant mechanisms of judicial reorganization is the so-called stay period, provided for in Article 6 of Law No. 11,101/2005. This is the period during which lawsuits and enforcement actions brought against the debtor are suspended, generally for a term of 180 days, extendable under certain circumstances. This interval is not merely procedural in nature but plays a structural role in the reorganization process, as it prevents the fragmentation of the company’s assets and creates an environment of minimal stability for negotiation.

In practice, without the protection afforded by the stay period, a company in crisis would be exposed to simultaneous enforcement actions, judicial injunctions, and expropriatory measures that would render any attempt at reorganization unfeasible. It is precisely this temporary shield that allows for the development of a viable plan and coordination among creditors with differing interests.

Out-of-court reorganization, in turn, emerges as a mechanism that prioritizes private autonomy and direct negotiation between the debtor and creditors. By allowing certain groups to be selected for renegotiation, the institution reduces procedural rigidity and enables solutions better adapted to the company’s financial reality. Although it does not automatically replicate the broad effects of the stay period, it can, upon judicial approval, produce significant effects in stabilizing contractual relationships.

However, this greater freedom to negotiate also presents challenges, especially when applied to complex corporate structures with significant liabilities, as in the case of Raízen.

The Raízen Case and the Restructuring of Billions in Debt

As reported by G1 on March 11, 2026, Raízen, one of the largest companies in Brazil’s energy and biofuels sector, filed for out-of-court debt restructuring involving approximately R$ 65 billion in debt, covering financial creditors and structured transactions.

This move comes amid deteriorating financial indicators, influenced by factors such as rising interest rates, increased financing costs, climate impacts on agricultural production, and shrinking operating margins. It is, therefore, a crisis that stems not only from mismanagement but also from macroeconomic and sector-specific factors.

The plan presented involves mechanisms typical of large-scale debt restructuring, such as extending maturities, repricing debt, and the possibility of converting debt into equity. Such measures demonstrate a high degree of financial and legal sophistication, requiring coordination among multiple parties, including financial institutions, investors, and specialized advisors.

The scope of the case, however, goes beyond a purely technical analysis and raises broader questions about the limits of the Brazilian bankruptcy system, especially when considering the composition and organization of the creditors involved.

The Structure of Creditor Classes and the Complexity of Negotiations

In traditional judicial reorganization, creditors are organized into distinct classes based on the nature of their claims. The law generally establishes a distinction between labor creditors, secured creditors, unsecured creditors, and creditors classified as micro and small businesses. Each of these classes has its own voting dynamics and different levels of legal protection.

Labor claims, for example, enjoy priority and reflect the legislature’s concern for worker protection. Secured creditors, on the other hand, have a direct link to specific assets, which influences both risk and negotiation terms. Unsecured creditors, on the other hand, do not have specific guarantees and therefore tend to bear a greater burden in restructuring plans.

In large-scale transactions, however, this formal division reveals only part of the problem. Within the same class, especially among financial creditors, there is significant heterogeneity. Banks, investment funds, holders of debt securities, and international creditors may have distinct contractual structures, varying levels of exposure, and divergent credit recovery strategies.

In out-of-court restructuring, this complexity intensifies, as the company may choose to negotiate with specific groups of creditors without necessarily covering all of its liabilities. This option, while strategic, requires caution. The definition of the classes or groups affected by the plan may raise questions regarding equal treatment and fairness among creditors in comparable situations.

Furthermore, the absence of a general meeting of creditors, as in judicial reorganization, places even greater weight on the negotiation phase, requiring a high degree of coordination and transparency. In multi-billion-dollar transactions, any misalignment can result in resistance, litigation, and delays in the plan’s implementation.

The Absence of a Legal Limit and the Criterion of Economic Viability

From a regulatory standpoint, there are no restrictions on the amount of debt that may be subject to judicial or extrajudicial reorganization. Law No. 11,101/2005 does not establish caps or quantitative parameters, adopting the company’s economic viability as the central criterion.

This means that, in theory, the size of the debt does not matter, but rather the company’s ability to restructure and comply with the plan presented. Approval by creditors, combined with judicial confirmation when required, serves as a mechanism for validating the proposal.

However, in practice, the feasibility analysis becomes significantly more complex in billion-dollar transactions. This is because the volume of liabilities tends to reflect not only temporary difficulties but also highly leveraged financial structures that are dependent on macroeconomic conditions and sensitive to market fluctuations.

In this scenario, reorganization ceases to be merely a legal instrument and becomes part of a systemic framework, with potential impacts on the financial market, supply chains, and even economic policies.

Large-Scale Restructurings and Systemic Risk

Cases such as Raízen’s demonstrate that large-scale corporate restructurings do not affect only those directly involved. The restructuring of billions in debt can impact financial institutions, investors, suppliers, and the competitive environment itself.

This phenomenon brings the Brazilian debate closer to discussions already established in other countries, especially regarding the concept of companies that are “too big to fail.” Although the national legal system does not formally adopt this concept, it is undeniable that certain companies possess economic significance capable of generating ripple effects in the event of insolvency.

In this context, reorganization may assume, albeit indirectly, a role in economic stabilization, preventing abrupt disruptions in strategic sectors. On the other hand, this same scenario raises concerns regarding potential market distortion, to the extent that highly indebted companies are able to renegotiate their obligations under conditions that would not always be available in a purely competitive environment.

The Tension Between Preserving the Company and Legal Certainty for Creditors

Another sensitive issue in large-scale reorganizations lies in striking a balance between preserving the company and protecting creditors’ rights. The larger the liabilities, the greater the dispersion and heterogeneity of the interests involved, which makes it difficult to build consensus.

In out-of-court reorganization, this tension intensifies, since not all creditors necessarily participate in the initial negotiations. Although the law provides mechanisms to extend the effects of the plan, the perception of unequal treatment can lead to questions and legal disputes.

Furthermore, transactions of this magnitude often involve complex financial instruments, which can make it difficult for certain creditors to fully understand the terms, thereby increasing information asymmetry and the risk of future litigation.

Reflections on the Limits of the Brazilian Reorganization System

The Raízen case demonstrates that the Brazilian reorganization system is, from a formal standpoint, sufficiently broad to encompass transactions of any size. However, the absence of legal limits does not mean there are no practical limits.

The effectiveness of the reorganization depends, to a large extent, on the credibility of the plan presented, the confidence of creditors, and the ability to coordinate among the various parties involved. In billion-dollar transactions, these elements become even more critical, as any failure can jeopardize not only the company but the entire ecosystem surrounding it.

Furthermore, there is a growing need for qualified legal and financial advisory services capable of structuring solutions that balance interests, minimize conflicts, and ensure compliance with the law.

Conclusion

An analysis of the Raízen case demonstrates that the Brazilian corporate reorganization system has reached a level of maturity that allows for the management of corporate restructurings of extreme complexity and significant economic impact. The absence of legal limits on the amount of liabilities confirms the legislature’s choice of an open model, centered on the company’s viability and negotiations with creditors.

However, the use of these mechanisms in billion-dollar transactions requires a significant shift in perspective. Reorganization ceases to be an instrument restricted to the private sphere of the debtor and its direct creditors and takes on systemic dimensions, with the potential to influence entire supply chains, the credit market, and the very stability of certain economic sectors.

In this context, the analysis of economic viability becomes even more critical, as it cannot be limited to formal projections or optimistic expectations. A rigorous examination is required of the company’s actual cash-generating capacity, the sustainability of its business model, and the coherence of the measures proposed in the restructuring plan. The agency’s credibility depends, to a large extent, on the effectiveness of these recoveries over time, and not merely on their initial approval.

Furthermore, transactions of this magnitude heighten the need to balance the interests at stake. The preservation of the company cannot come at the expense of creditors’ legal certainty, lest it weaken the business environment and increase the cost of credit. Similarly, imposing excessive or disproportionate sacrifices can lead to resistance, litigation, and instability in the implementation of approved plans.

The case also reinforces the strategic role of specialized legal counsel, not only in the technical conduct of the proceedings but in the development of structured, transparent, and legally sustainable solutions. In complex scenarios, proactive and qualified action becomes crucial for reducing risks, aligning expectations, and enabling effective negotiations.

Finally, rather than debating the existence of a financial threshold for judicial or extrajudicial reorganization, what is required is reflection on the operational and institutional limits of the system itself. The evolution of specific cases demonstrates that the challenge lies not in the absolute value of the debts, but in the capacity of the legal system and economic actors to handle, with certainty and predictability, restructurings of ever-increasing scale.

Thus, the consolidation of the corporate reorganization framework in Brazil necessarily involves strengthening its practical credibility, ensuring that it continues to fulfill its primary function: enabling economically sustainable businesses, preserving productive activity, and maintaining a balance in the relationship between debtors and creditors.