Can the Tax Authority Petition for a Company’s Bankruptcy? According to the STJ, Yes. Here’s Why.

This precedent—considered the first squarely addressing the issue—arises within a legislative and case‑law evolution that, according to the reporting Justice Nancy Andrighi, has eliminated the historical incompatibility between tax collection and the bankruptcy regime.

With the amendment of the Judicial Reorganization and Bankruptcy Law by Law No. 14,112/2020, bankruptcy proceedings came to admit the standing of “any creditor,” without distinguishing between public and private entities. The STJ had already recognized, under Theme 1092, the possibility of proof of claim (habilitação) of public credits in bankruptcy.

According to the Justice, when tax execution proves ineffective—particularly due to asset concealment, lack of attachable assets, or deliberate asset stripping—bankruptcy litigation becomes not only possible but necessary to reach the debtor’s estate more broadly. The bankruptcy regime offers instruments such as avoidance (revocatory) actions, piercing/manager liability, and the universal marshaling of assets, which are not available in ordinary tax execution. In the case at hand, more than eight years had elapsed since the filing, with no settlement of the debt, which reinforced the Treasury’s procedural interest.

The PGFN views the holding as an additional tool to address persistent (contumacious) debtors who rely on intercurrent prescription and asset shielding. In its view, the decision rebalances the positions of private creditors and the State, enabling a more effective response to prolonged default.
That said, the precedent should be approached with caution, amid concerns that bankruptcy petitions might devolve into a collection pressure tactic, distorting the collective and exceptional nature of insolvency proceedings.

It is also worth noting that the 2020 reform limited the Treasury’s standing to specific scenarios (e.g., breach of tax settlements/transactions), and that the new orientation could affect the business environment by allowing the State to initiate the liquidation of otherwise viable companies.

Importantly, in its decision the STJ places on the Treasury the burden to demonstrate exhaustion of all available collection mechanisms before resorting to the bankruptcy forum, so as to avoid premature use.

In practical terms, the precedent is likely to affect companies with large tax exposures and stale tax executions, raising strategic risks and calling for heightened attention to tax governance.

Although formally confined to the specific case, the STJ’s ruling opens a new phase in tax authorities’ enforcement strategies and will undoubtedly guide future disputes involving corporate insolvency in Brazil.