On July 7, 2004, the Brazilian Senate, the Upper Chamber of Congress, approved the new Law on Bankruptcies, incorporating amendments to the version which had been approved by the Lower Chamber of Congress in October 2003. The new project will now return to the Lower Chamber. The new Law has been considered in Congress for 10 years already in view of the complexity of all the issues involved.

The existing Law on Bankruptcy, which has been in force since 1945, does not offer flexibility for voluntary composition of creditors and in many cases causes the extinction of companies regardless of social or creditor interests.

The project approved by the Senate replaces the current forced plan for payment of debts (“concordata”, which is limited to two years, with payments of 40 per cent of debts in the first year and 60 per cent in the second year, monetarily adjusted, plus interest of 1 per cent per month) with a much more flexible plan of recovery to be agreed with creditors. There is also a special proceeding for micro and small companies.On July 7, 2004, the Federal Senate also approved the basic text of the Project of Constitutional Amendment (PEC) 29/00, known as the Reform of the Judiciary, a very complex piece of legislation which has been under consideration in Congress since 1992. Requisite further voting will have to recommence in August, after the parliamentary recess. Main points so far approved, but still to be confirmed, include the following:
“h external control – a new National Council of Justice would be created to monitor the activities and budget of each court;
“h binding directives (“súmulas vinculantes”) – rules issued by the Supreme Federal Tribunal, establishing the interpretation of the law, would become binding on judges. Today, those rules only serve as a reference for the final interpretation of the court;
“h bar – judges would be prevented from acting as lawyers in courts in which they acted as judges for a period of two years, as well as in other courts for a period of 40 days, both periods starting after they retire as judges.