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Going Broke in Brazil
People, companies and even whole countries seem to be going insolvent left and
right these days, so I thought something on insolvency
and bankruptcy would be in order. Who knows what
we will have to translate tomorrow—if we are not
bankrupt ourselves, that is.
Roughly defined, a comerciante is someone who sells something tangible,
no matter who made it. So, the term includes people
who sell what they buy from others as well as
those who sell what they make themselves, such
as manufacturers
Falência is very drastic: after the debtor é declarado falido [adjudged bankrupt] o juiz nomeia um síndico [the court appoints a trustee in bankruptcy] who arrecada os bens [takes possession of the assets], creditors habilitam-se [assert their claims] apresentando declarações de crédito [filing proof of claim], the assets are vendidos em hasta pública [publicly auctioned], creditors are paid off from the proceeds, the business is liquidado [liquidated]. Finis. Atos falimentares [Acts of bankruptcy] In some cases, bankruptcy proceedings are commenced if the debtor shows signs
that it will go bankrupt, for instance, by disposing
of assets in a manner that appears to be reckless
or fraudulent.
Allow me a short digression here. Juiz is judge, of course, but
we often say juiz where English requires
the court. So the síndico nomeado
pelo juiz is the trustee appointed by the
court. In addition court often translates
Brazilian vara: vara de falências
[bankruptcy court]. Tribunal in Brazil is only used
for appellate courts: tribunal de recursos
[court of appeals]. A trial court is a juízo
de primeira instância. Vara [rod] is
an old symbol of the judicial power to compel
and punish. Debaixo de vara is translated
by bench warrant, and means that a bailiff
is empowered to bring someone to the presence
of the judge using a rod, that is, by force, if
so required.
A
check is a saque [draft] against a bank
account. For instance, John Doe has an account
with the Second International Bank of Lower Slobovia
and writes his bank a message instructing it to
pay the bearer of the check, a specified third
person or John Doe himself a certain amount of
money and deduct the amount paid from John Doe’s
balance. That is a draft.
In order to prevent bankruptcy, a company in financial distress may pedir concordata [file a petition for composition]. This is labeled concordata preventiva [preventive composition]. Under a composition Brazilian-style, the owner maintains control over the business, under the supervision of a court-appointed comissário [commissioner, supervisor]. In addition, the company is granted more time to pay its debts and a general reduction in the amount of its liabilities. During the prazo da concordata [duration of the composition] the court may adjudge the debtor bankrupt at any time. In some cases, a bankrupt is able to convince the court to convert its falência into a concordata, which is then labeled suspensiva [suspensive].
Insolvency
was considered evidence of dishonesty or, at least,
of gross incompetence. Thus, the basic idea behind
bankruptcy proceedings was to rid civilized society
of a bad egg and take possession of as much of
his assets as possible. His family was ruined
and shamed, but this served him right. If the
widow and children suffered, that was considered
a fitting example and an opportunity for charity.
Those were the good times, as you know.
Bankruptcy
proceedings had a sweet taste of revenge: He
didn’t pay me, look what happened to him.
Lately, however, potential petitioners for bankruptcy
have begun to notice that a customer is a valuable
asset and that customers who have credit are customers
who buy. This extraordinary conclusion led to
the idea that it might be useful to preserve the
insolvent business, albeit in more competent or
better capitalized hands. Now, the bankruptcy
act has no provision on that—but there is no prohibition
against it either. This, in turn, has led to the
formation of Comitês de Credores [Creditors’
Committees] who will usually include suppliers
and banks. Those committees will try to agree
on a way out of the mess by appointing an administrator,
usually a bank, to manage the business and keep
it open and breathing. The business is then sold
to willing investors who will pay part of the
debt. The basic idea is that losing some money
on an insolvent business is some sort investment
that will keep the channel open for future sales
or loans. It works. Sometimes, I mean.
Financial institutions and insurance are companies subject to a special régime: when one of them is in trouble, the Banco Central, (BACEN) [Central Bank—which is not the same as Banco do Brasil S.A.] appoints an interventor [conservator] who liquida [liquidates] the institution and sells its assets to another institution. The Central Bank seems to have a list of sick institutions and another of overhealthy ones interested in acquiring the corpses, when time comes. The basic idea is that you cannot really close one of those institutions and leave its customers out in the cold.
Ask any Brazilian lawyer about practically anything and they will probably tell
you that there is a projeto de lei [bill] that
will utterly change the current situation. For
better or worse, depending on the subject and
on the personal opinion of the lawyer. The bill
has probably been engavetada [shelved] somewhere,
but it may come off of the shelf anytime and become
a law. Who knows.
Only merchants are covered by the provisions of the bankruptcy act. Pessoas
físicas [Individuals] thus, cannot
falir or entrar em concordata. If
they do not pay their bills, they can go through
insolvência civil [civil insolvency]
proceedings. Meaning that the creditors will
take possession of their assets all the same,
but they will not be bankrupt, but only insolvent.
Any lawyer will tell you those are different things.
Lest someone decide to sue me for dispensing lawyerly advice without appropriate qualifications, allow me to state that I was granted an HSD [High School Dropout] from a Brazilian public school in a then remote part of São Paulo City. Of laws I understand but the little that plying my trade of translator has taught me. My sole purpose in writing these articles is to provide my colleagues with some terminological guidance and have a bit of fun to boot.
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