Enforcement Claims: What Determines Returns Happens Before the Acquisition

With growing interest in alternative assets, many investors are seeking above-market returns in distressed or judicialized claims, whether through investment funds or direct acquisitions.

However, when proper upfront analysis is lacking, investors who acquire such claims expecting higher returns often find themselves trapped in slow-moving proceedings, with limited recovery prospects and low liquidity. In many cases, the issue was already embedded in the asset prior to acquisition—and the cost of failing to identify it early can be significant.

There are various classes of judicial assets, each with distinct characteristics. This article focuses on claims already under enforcement based on enforceable instruments.

The value of these assets depends on several factors: the legal basis of the claim, the strength of the instrument, the evidentiary support, the procedural stage and track, the predictability of judicial decisions, and, above all, the actual ability to convert the right into cash.

Acquiring a claim under enforcement requires addressing, in advance, two key variables that directly impact returns: uncertainty and time. Uncertainty arises because the asset may be partially or entirely unproductive for various reasons, including structural weaknesses. Time matters because any delay erodes present value and increases carrying costs, particularly when the strategy relies on enforcement and asset seizure measures.

This is precisely where legal due diligence creates value. It allows investors to clearly understand what is being acquired and the potential scenarios ahead, avoiding surprises that often arise after closing.

Legal diligence goes beyond a simple “go or no-go” decision. It involves a comprehensive assessment of factors that may delay, reduce, invalidate, or even prevent recovery—and how these risks should be reflected in pricing, deal structuring, and post-acquisition strategy.

For claims under enforcement, the first aspect to be analyzed is the quality of the claim, the supporting evidence, and, most importantly, the enforceable instrument itself. What matters is not only the existence of the claim, but its ability to withstand challenges and procedural incidents likely to be raised by the debtor. This requires verifying whether the documentary support is sufficient to sustain the claim and resist objections, and whether there is a risk of the case shifting from enforcement proceedings to a lengthy evidentiary dispute. This assessment directly impacts the likelihood of success, the recovery timeline, and the expected litigation costs.

The second key aspect is validating the chain of title and the claimant’s standing. While Article 109, §1 of the Brazilian Code of Civil Procedure is often invoked to argue that substitution in knowledge proceedings depends on the opposing party’s consent, there is a specific rule applicable to enforcement proceedings: Article 778, §1, III grants standing to the assignee to initiate or continue enforcement upon proof of assignment. In practice, debtors frequently raise “lack of standing” arguments as a delaying tactic rather than a substantive risk—particularly when the documentation is complete and consistent.

This issue has been addressed in Repetitive Theme No. 1 (REsp 1.091.443/SP) by the Brazilian Superior Court of Justice (STJ), which established that substitution of the original claimant by the assignee does not require the debtor’s authorization or consent. This precedent reinforces legal certainty for assignees entering enforcement proceedings, effectively neutralizing standing challenges where the assignment is properly documented.

The third aspect involves mapping procedural risks that may affect the asset, particularly nullities and limitation periods—especially in long-running cases, where formal defects, improper service, representation issues, and other irregularities may invalidate acts, reopen deadlines, or, in more severe cases, compromise the recovery itself.

Legal analysis must distinguish between mere procedural noise and real risks of delay, value erosion, or case dismissal. Pricing cannot be based on an overly optimistic snapshot if there is a concrete risk that the case may regress procedurally or lose value due to recognized defects.

The fourth—and decisive—aspect is the debtor’s asset viability and the risk of competing claims. Enforcing a claim against a debtor with no attachable assets is futile; enforcing against a debtor whose assets are already encumbered may be equally ineffective. The analysis must go beyond the claim itself and examine the enforcement landscape: availability of attachable assets, quality of registrations, existing liens, prior attachments, multiplicity of proceedings, and the risk of creditor competition.

The key question is not simply “Are there assets?”, but rather “Are there assets from which this claim can realistically achieve priority (where applicable) and be converted into payment within a reasonable timeframe?”

This also includes issues such as fraud, asset shielding, and irregular corporate succession. Measures such as alleging fraudulent conveyance, piercing the corporate veil, or asserting successor liability may be effective—but their success depends on strong evidentiary support. Legal advisors must be candid in distinguishing between indicators and actual proof, and in recommending strategies proportionate to the available evidence. This prevents post-acquisition strategies from devolving into a series of unproductive procedural incidents that prolong the process without delivering real value.

To move the analysis of enforcement claims from intuition to a replicable decision-making framework, due diligence should apply three core screening questions: (i) can this claim withstand adversarial scrutiny? (ii) is the chain of assignment complete and defensible without the need for extensive evidentiary proceedings? and (iii) is there a concrete path to enforcement and cash recovery?

These questions address the uncertainty surrounding the claim. Only after this assessment should the investor evaluate the expected timeline for actual recovery.

At that point, the investor will be in a position to properly price the asset and assess the real return potential—allowing for an informed decision as to whether the investment is truly attractive.