The Growing Role of Mediation and Associated Protective Injunctions as Part of Restructuring Strategies in Brazil
May 2026
The amendment of the Brazilian Bankruptcy Law in 2020 introduced new tools—specifically, mediation procedures and associated protective injunctions—for debtors and creditors to achieve restructuring solutions without the need to file directly for full judicial restructuring protections. Since then, major restructuring cases, including InterCement1, Unigel2, Rio Alto3 and St. Marché4, have included mediations and associated protective injunctions as a first step, laying the foundation for how such tools are seen by Brazilian and foreign courts and applied by creditors and debtors.
In this article, we present the main aspects of the mediation procedure and associated protective injunctions set forth in Brazilian Bankruptcy Law, and explain the paradigm shift that this change may be capable of causing in favor of less invasive, litigious, and judicialized restructuring strategies in Brazil.
The amendment of the Brazilian Bankruptcy Law in 2020 introduced new tools—specifically, mediation procedures and associated protective injunctions—for debtors and creditors to achieve restructuring solutions without the need to file directly for full judicial restructuring protections. Since then, major restructuring cases, including InterCement1, Unigel2, Rio Alto3 and St. Marché4, have included mediations and associated protective injunctions as a first step, laying the foundation for how such tools are seen by Brazilian and foreign courts and applied by creditors and debtors.
In this article, we present the main aspects of the mediation procedure and associated protective injunctions set forth in Brazilian Bankruptcy Law, and explain the paradigm shift that this change may be capable of causing in favor of less invasive, litigious, and judicialized restructuring strategies in Brazil.
Overview of the Mediation Procedure and Associated Protective Injunctions established in the Brazilian Bankruptcy Law
Among the various changes made to the Brazilian Bankruptcy Law in 2020, debtors are now permitted to commence a mediation with certain creditors and, at the same time, request associated court-supervised protective injunction proceedings.
If the debtor satisfies the legal requirements to commence a voluntary proceeding under Brazilian Bankruptcy Law5 and shows prima facie evidence that, absent the provisional relief, its business and assets are at risk of irreparable harm, the debtor can seek an order from the bankruptcy court granting a 60-day stay period to prevent its creditors from commencing any collection or enforcement proceedings against its assets or otherwise suspend any proceedings already initiated by the creditors invited to the mediation.
The main purpose of the mediation procedures is to create a stable environment that allows parties to negotiate a solution to the affected claims, and allow the debtor to seek certain relief on a provisional basis, that would otherwise only be available upon the commencement of a restructuring proceeding. During the 60-day preliminary stay that applies in mediation:
- If the debtor and its creditors reach an out-of-court agreement, the debtor must then submit such agreement for confirmation by the bankruptcy court, which shall confirm it if it complies with all applicable legal requirements, provided that such agreement will not bind any dissenting or non-party creditors absent a subsequent filing; or
- If no agreement is reached among and the debtor and all creditors, the debtor is entitled to commence an extrajudicial restructuring if it was able to obtain the support of at least one third of the subject creditors or a judicial restructuring, in each case before the expiration of the statutory period of the preliminary stay.
We discuss below some of the futures that are turning mediation and associated protective injunctions into increasingly used preliminary tools in Brazilian restructurings.
Overview of the Mediation Procedure and Associated Protective Injunctions established in the Brazilian Bankruptcy Law
Among the various changes made to the Brazilian Bankruptcy Law in 2020, debtors are now permitted to commence a mediation with certain creditors and, at the same time, request associated court-supervised protective injunction proceedings.
If the debtor satisfies the legal requirements to commence a voluntary proceeding under Brazilian Bankruptcy Law5 and shows prima facie evidence that, absent the provisional relief, its business and assets are at risk of irreparable harm, the debtor can seek an order from the bankruptcy court granting a 60-day stay period to prevent its creditors from commencing any collection or enforcement proceedings against its assets or otherwise suspend any proceedings already initiated by the creditors invited to the mediation.
The main purpose of the mediation procedures is to create a stable environment that allows parties to negotiate a solution to the affected claims, and allow the debtor to seek certain relief on a provisional basis, that would otherwise only be available upon the commencement of a restructuring proceeding. During the 60-day preliminary stay that applies in mediation:
- If the debtor and its creditors reach an out-of-court agreement, the debtor must then submit such agreement for confirmation by the bankruptcy court, which shall confirm it if it complies with all applicable legal requirements, provided that such agreement will not bind any dissenting or non-party creditors absent a subsequent filing; or
- If no agreement is reached among and the debtor and all creditors, the debtor is entitled to commence an extrajudicial restructuring if it was able to obtain the support of at least one third of the subject creditors or a judicial restructuring, in each case before the expiration of the statutory period of the preliminary stay.
We discuss below some of the futures that are turning mediation and associated protective injunctions into increasingly used preliminary tools in Brazilian restructurings.
Key Features that Encourage the Strategic Use of Mediation and Associated Protective Measures by Debtors
(1) Fairly Simple Requirements for Filing
Despite initial controversy over the document requirements for requesting protective injunctions associated to mediation proceedings, appellate courts in Brazil have held that, other than the commencement of a mediation proceeding and prima facie evidence that the debtor’s business and assets are at risk of harm, Article 20-B of the Brazilian Bankruptcy Law only “requires the company filing the petition to demonstrate that it would be entitled to request judicial reorganization.” This means that “the preliminary injunction shall be accompanied by the documents provided for in Article 48 of Brazilian Bankruptcy Law (i.e., simpler documents that only indicate that the debtor has been doing business regularly for over two years, as well as certificates that show the record of insolvency and criminal proceedings in relation to the debtor, its officers/directors, and controlling shareholders),” while “the documents provided for in Article 51 of Brazilian Bankruptcy Law (i.e., more detailed and complex financial, legal and operational documents) are required only in the case of filing the main judicial reorganization action6.”
The lower documentation standards for granting the protective injunctions associated with mediation proceedings enable debtors to secure key protections to stabilize the business and prevent collection by creditors in a relatively short time period, and at significantly lower cost than would be necessary to prepare for a full filing for judicial restructuring. The preliminary stay can be granted by the Brazilian bankruptcy court regardless of whether the debtor has any level of support from its creditors, eliminating the need for the debtor to coordinate with creditors in advance of seeking such relief (unlike, for example, in extrajudicial restructuring where such coordination during the preparatory period is required).
(2) Case Law Application that Favors a Comprehensive Scope of the Protective Injunctions
The protective injunctions associated with mediation proceedings, on the one hand, and the stay period provided for in judicial restructuring and extrajudicial restructuring, on the other, have different legal grounds. Despite these differences, Brazilian bankruptcy courts (especially in São Paulo) have entered a variety of protective orders granting debtors broad relief at the mediation stage. These protective orders indicate that Brazilian bankruptcy courts tend to take the position that they have broad jurisdiction to protect the debtor’s assets and activities even during the mediation stage, to an extent similar to that which could be expected in the course of a judicial restructuring.
Significant examples of protective injunctions that exceeded the 60-day stay of collection proceedings include:
- Unigel Group case, in which the Court determined “the prohibition of the cutting off or interruption of essential services by creditor suppliers; [and] the suspension of the effects of contractual clauses that provide for acceleration […] exclusively due to the filing of the preliminary injunction7,”.
- Rio Alto Energias Renováveis S.A. case, in which the Court determined “the suspension of the proceeding of deregistration of the debtor with the Electric Energy Commercialization Chamber (CCEE) […]; the suspension of the enforceability of debts with the CCEE […]; the impossibility of termination, acceleration, or imposition of penalties on electricity purchase and sale agreements signed within the scope of the CCEE, either due to the possible non-payment of credits whose enforceability is suspended, or due to the mere initiation of mediation or the filing of the protective injunction; the prohibition of administrative authorities from terminating contracts for the use of the transmission system in a manner that would prevent debtors from generating and distributing electricity8,”.
(3) Less Invasive Nature of the Mediation Tool
In general, during the mediation proceeding and the court-supervised protective injunction:
- company’s management remains in place, and the debtor is able to continue to operate and dispose of assets without need for prior court approval (limitations that are applicable to judicial restructurings, such as the prohibition on transferring non-current assets without prior approval by the court, are not applicable to the mediation phase);
- the court is not required to appoint a trustee or a professional to oversee the debtor’s operation;
- the debtor has the ability to specify which types of claims are included in the mediation proceeding so that only such affected claims are included in the scope of the relief granted, while creditors that are not subject to the preliminary stay can still be paid.
In this sense, the mediation phase represents a protective measure with less operational impact, both due to the absence of restrictions on acts of disposal of assets and since creditors are not broadly subject to it (but restricted to the groups defined in the request made by the debtor).
(3) Less Invasive Nature of the Mediation Tool
In general, during the mediation proceeding and the court-supervised protective injunction:
- company’s management remains in place, and the debtor is able to continue to operate and dispose of assets without need for prior court approval (limitations that are applicable to judicial restructurings, such as the prohibition on transferring non-current assets without prior approval by the court, are not applicable to the mediation phase);
- the court is not required to appoint a trustee or a professional to oversee the debtor’s operation;
- the debtor has the ability to specify which types of claims are included in the mediation proceeding so that only such affected claims are included in the scope of the relief granted, while creditors that are not subject to the preliminary stay can still be paid.
In this sense, the mediation phase represents a protective measure with less operational impact, both due to the absence of restrictions on acts of disposal of assets and since creditors are not broadly subject to it (but restricted to the groups defined in the request made by the debtor).
(4) Possible Combination with an Extrajudicial Restructuring
One of the interesting possibilities created by the 2020 Brazilian Bankruptcy Law reform is the combined application of protective injunctions associated with mediation followed by an extrajudicial restructuring.
Despite the many advantages associated with extrajudicial restructurings—e.g., favorable acceptance thresholds, time and value-efficient proceeding, and reduced operational and market impact—one of the most significant challenges is to gather, in the absence of protective measures that guarantee stability, the minimum support from creditors to enable the filing of a request for approval of an out-of-court recovery plan.
The 60-day stay available in the context of protective injunctions associated with the mediation may assist debtors and creditors to reach an initial consensus, whenever support by at least one third of the subject creditors could not be achieved otherwise. By using the mediation procedures, debtors and creditors may preserve extrajudicial restructuring as a viable option for cases that, before the 2020 Brazilian Bankruptcy Law reform, would inevitably have to be addressed through judicial restructuring.
In other words, the mediation gives the debtor another shot of pushing for a quicker and simpler extrajudicial restructuring. With the 60-day stay, the debtor has a reasonable possibility of gathering the minimum support of creditors and avoiding the judicial restructuring.
Possibility of Recognition in Other Jurisdictions
Similar to other Brazilian restructuring proceedings (e.g., extrajudicial restructuring and judicial restructuring), the filing of the protective injunction associated with mediation proceedings and the subsequent order staying collection proceedings for 60 days has been granted recognition by a U.S. Bankruptcy Court under Chapter 15 proceedings.
In the case of InterCement Group, the first Brazilian protective injunction associated with mediation to achieve such recognition under Chapter 15 proceedings, the U.S. Bankruptcy Court for the Southern District of New York granted provisional relief to prevent noteholders and other creditors from adopting measures that could endanger InterCement’s assets located in the territorial jurisdiction of the United States.
Potential Future Developments
Despite the major advantages related to the protective injunctions associated with mediation, there are still important issues related to the phase of mediation and corresponding protective measures for which the development of case law will be essential.
For instance, Brazilian bankruptcy courts have not yet evaluated the possibility of securing protections for liquidity initiatives taken during the mediation period—e.g., protections applicable to debtor-in-possession financing or to the transfer of a division or assets of business divisions (unidades produtivas isoladas). In cases where the debtor requires such additional liquidity, especially in the short term, this uncertainty could cause a debtor to determine that a full judicial restructuring is necessary even when the debt profile or other factors indicate that an extrajudicial restructuring would otherwise be the preferred alternative.
For that reason, adding tools (or developing case law) that secure legal certainty to liquidity initiatives prior to the confirmation of a restructuring plan – and absent a judicial restructuring filing – would further support the use of protective injunctions associated with mediation in promoting less judicialized restructuring paths in Brazil.
Potential Future Developments
Despite the major advantages related to the protective injunctions associated with mediation, there are still important issues related to the phase of mediation and corresponding protective measures for which the development of case law will be essential.
For instance, Brazilian bankruptcy courts have not yet evaluated the possibility of securing protections for liquidity initiatives taken during the mediation period—e.g., protections applicable to debtor-in-possession financing or to the transfer of a division or assets of business divisions (unidades produtivas isoladas). In cases where the debtor requires such additional liquidity, especially in the short term, this uncertainty could cause a debtor to determine that a full judicial restructuring is necessary even when the debt profile or other factors indicate that an extrajudicial restructuring would otherwise be the preferred alternative.
For that reason, adding tools (or developing case law) that secure legal certainty to liquidity initiatives prior to the confirmation of a restructuring plan – and absent a judicial restructuring filing – would further support the use of protective injunctions associated with mediation in promoting less judicialized restructuring paths in Brazil.
An Effective “Bridge” Restructuring Tool
Not long after the 2020 Brazilian Bankruptcy Law reform, protective injunctions associated with mediation proceedings have already become a key part of the Brazilian restructuring toolkit. In general, it is not used as a definitive solution for debtors and creditors, but rather as a “bridge” restructuring tool, capable of promoting an initial standstill in a moment that may be key to preserve the feasibility of a predominantly out-of-court solution.
The growing number of filings and the decisions rendered so far in relation to filing requirements and scope of the available protections have played an important role in the effective deployment of this new “bridge” restructuring tool. Debtors and creditors will likely continue testing the limits of this tool, including regarding the possibility of protections associated with liquidity initiatives during the mediation period.
Looking ahead, we expect that protective injunctions associated with mediation proceedings will lead to restructurings that increasingly require less judicial process. We expect this shift to be most pronounced in the context of highly sophisticated restructurings, such as those involving cross-border debt, resulting in more favorable restructuring outcomes for debtors and creditors.
An Effective “Bridge” Restructuring Tool
Not long after the 2020 Brazilian Bankruptcy Law reform, protective injunctions associated with mediation proceedings have already become a key part of the Brazilian restructuring toolkit. In general, it is not used as a definitive solution for debtors and creditors, but rather as a “bridge” restructuring tool, capable of promoting an initial standstill in a moment that may be key to preserve the feasibility of a predominantly out-of-court solution.
The growing number of filings and the decisions rendered so far in relation to filing requirements and scope of the available protections have played an important role in the effective deployment of this new “bridge” restructuring tool. Debtors and creditors will likely continue testing the limits of this tool, including regarding the possibility of protections associated with liquidity initiatives during the mediation period.
Looking ahead, we expect that protective injunctions associated with mediation proceedings will lead to restructurings that increasingly require less judicial process. We expect this shift to be most pronounced in the context of highly sophisticated restructurings, such as those involving cross-border debt, resulting in more favorable restructuring outcomes for debtors and creditors.
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