The 2nd Court of Bankruptcy and Judicial Recovery Cases of São Paulo recently found invalid a chattel mortgage securing an interchangeable chattel good (i.e. iron ore) offered to a foreign financial institution not authorized by the Brazilian Central Bank to operate in Brazil. According to the ruling, only Brazilian or foreign financial institutions authorized to operate in Brazil may receive a chattel mortgage offered to secure interchangeable goods.
More than ten (10) years after the enactment of Brazilian Bankruptcy Law, a uniform understanding by the Brazilian courts of several matters remains unresolved, being the application of substantive consolidation one of the most troubling.
Consolidation (procedural and material)
In this respect, Brazilian Bankruptcy Law is silent on the possibility of judicial recoveries being filed by and/or involving more than one company of a same corporate group. In this respect, Brazilian Bankruptcy Law makes reference to “debtor” in the singular form and does not expressly provide for the possibility of a judicial recovery being requested by more than one company or being consolidated.