Even with tax debt, administrator of a bankrupt company must be rehabilitated

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Article 191 of the National Tax Code states that the bankrupt's obligations are only extinguished with the payment of all taxes due. But an adequate interpretation of the provision, in accordance with the Constitution and Comparative Law, demonstrates that non-payment of taxes cannot be an obstacle to the rehabilitation of the company administrator. This is because he cannot be subject to civil punishment that lasts indefinitely.


This was the understanding of judge Daniel Carnio Costa, of the 1st Bankruptcy and Judicial Recovery Court of São Paulo, when extinguishing the obligations of Tony Arazi, managing partner of the bankrupt company Visioner do Brasil, and declaring his rehabilitation.

Arazi asked the court to order the termination of the company's obligations, so that he could return to carrying out business activities — the process has been going on for more than 10 years. The bankruptcy court administrator opined on the economic rehabilitation of the partner. However, the Public Prosecutor's Office, based on article 191 of the CTN, asked that the request be denied.

In his decision, the judge pointed B2B Lead out that article 102 of the Bankruptcy Law (Law 11,101/2005) establishes that “the bankrupt is disqualified from carrying out any business activity from the date of the bankruptcy declaration and until the sentence that extinguishes his obligations”. Article 158 of the same law determines that the company administrator's obligations will only be extinguished at the end of the process with full payment of the credits or more than 50% of the unsecured credits. If there are no assets or money to do so, the manager's duties will only end five years after the bankruptcy closes. If he has been convicted of a bankruptcy crime, this period is extended to 10 years.


But linking the start of the bankrupt's rehabilitation period to the end of the bankruptcy process represents a “serious violation of the citizen's fundamental rights”, said Costa.

“Bearing in mind that the bankruptcy process does not have a specific deadline to be concluded and, in most cases, due to the most diverse reasons — including state bureaucracy — such closure takes many years to occur, the bankrupt submits , in practice, to an almost perpetual sentence that will definitively exclude him from economic life and the free exercise of his business initiatives. This situation violates the fundamental rights to work and free enterprise, in addition to violating to a certain extent the very dignity of the human person.”



According to the judge, the period for rehabilitation of the bankrupt must be seen in a similar way to the limitation periods for the State's punitive claim in relation to those who committed crimes. In other words: people cannot answer for these facts for the rest of their lives.

As the Federal Supreme Court understood, in Precedent 147, that the beginning of the statute of limitations period could not be linked exclusively to the closure of the bankruptcy process, the beginning of the bankrupt's rehabilitation period could also not be linked to this event, Costa assessed, highlighting that such term must begin before the end of the procedure when its progress is “excessively lengthy.