Brazil High Court: Companies With Tax Debts Cannot Be Barred From Using Chapter 11

RIO DE JANEIRO—Brazil’s superior court of justice ruled June 19 that companies filing for Chapter 11 style bankruptcies do not need to have their taxes in order for their restructuring plans to be approved.

Brazil’s bankruptcy law of 2005 created the country’s equivalent of Chapter 11, called judicial recovery through the restructuring of debts. Since then, tax officials have claimed that companies with tax debts should not have their restructuring plans accepted by the bankruptcy courts. Companies, however, have argued that the restructuring permitted by the 2005 law includes tax debts.

The court in its June 19 ruling sided with ...