Family Crimes

Typically caused by mismanagement or linked to factors external to the company, such as the 2008 crisis and the current crisis affecting Brazil, so-called economic, financial, and asset crises can lead to companies becoming delinquent or, in more severe cases, insolvent.

Insolvency is characterized not only when liabilities exceed the company’s assets, but also when the company lacks the capacity to generate sufficient cash to honor its commitments. These crises are defined in Articles 748 to 750 of the Code of Civil Procedure.

When identified and prolonged, these crises can render companies unable to carry out their activities, in which case Brazilian business owners may seek judicial reorganization or bankruptcy.

In this regard, Law No. 11,101 of 2005 addresses the procedures adopted in out-of-court and judicial reorganization processes, bankruptcy, and the crimes known as bankruptcy crimes, which are primarily committed when fraudulent activity is identified that aims to harm the creditors of a company undergoing judicial reorganization or bankruptcy.

Bankruptcy crimes are classified and divided into:

– Fraud against creditors:

Fraud against creditors is defined in Article 168 of Law No. 11,101/2005 and consists of the practice of a fraudulent act to obtain an undue advantage for oneself or others, resulting in losses for creditors.

– Misleading:

Misleading is defined in Article 171, Caput, of Law 11.101/2005, and consists of withholding or omitting information, as well as providing false information in the bankruptcy proceedings, in order to mislead the Court, the Public Prosecutor’s Office, Creditors, or the judicial administrator to obtain any advantage over them.

– Favoring Creditors:

Favoring Creditors is defined in Article 172 of Law 11.101/2005, and consists of the diversion of assets to benefit one or more creditors, causing harm to others.

– Illegal Activity:

Illegal Activity is defined in Article 176 of Law 11.101/2005, and consists of performing tasks or performing functions for which one is not qualified or is incapacitated by a court order.

– Failure to Provide Mandatory Accounting Documents:

Failure to provide accounting documents is covered by Article 178 of Law 11.101/2005 and consists of failing to prepare, record, or authenticate the company’s mandatory accounting records.

Bankruptcy crimes, in addition to being punishable by fines, are punishable by detention and even imprisonment.

Law 11.101/2005, in its Article 181, defines the consequences of a conviction for a bankruptcy crime, which are:

Disqualification from engaging in business activities;
Disqualification from holding a position or role on the board of directors, executive board, or management of companies subject to the Bankruptcy and Judicial Reorganization Law;
The inability to manage a company by mandate or through business management. These effects are not automatic and must be specified in the sentencing ruling, lasting up to 5 (five) years from the end of the sentence served by the convicted offender.

Although these practices may seem far-fetched from the law, bankruptcy crimes are very common among struggling companies, such as those that end up favoring one creditor over another in order to maintain their operations.

In these cases, when a company begins to make decisions about prioritizing one payment over another, among other things, the golden tip is to seek specialized consulting to help navigate the crisis, so as not to miss the timing of a possible recovery, for example, or even to avoid committing bankruptcy.

For a better understanding of bankruptcy and judicial reorganization, see the article: https://tmassociados.com.br/falencia-e-recuperacao-judicial-quais-sao-as-principais-diferencas/

Leonardo Theon de Moraes – Attorney, graduated in law, with an emphasis on business law, from Mackenzie Presbyterian University (2012), registered with the Brazilian Bar Association, São Paulo Section (OAB/SP) (2012). He holds a postgraduate degree and a specialist degree in business law from the Getúlio Vargas Foundation São Paulo School of Law (2014), a master’s degree in political and economic law from Mackenzie Presbyterian University (2017). He is the author of books and articles, a speaker, a university professor, and a member of the São Paulo Bar Association (AASP). He is a founding partner of TM Associados.

Pedro Anselmo Boaventura – Graduated in law from Padre Anchieta University Center (2021). Postgraduate student in Civil and Business Law at Damásio de Jesus College. Paralegal in the Advisory Department of TM Associados.