Brazil: Liability Of Former Members For Debts Of Limited-Liability Companies
July 2022 – Brazil – Rossetti Advogados
As a rule, in limited-liability companies the members are not liable for the obligations assumed by the company. In fact, companies have what is called “legal personality,” which results in acknowledgment of their separation and independence from their members.
However, in certain situations the law permits the piercing of corporate veil for the members to be liable for the payment of debts incurred by the company. Pursuant to the provisions of art. 1.052 of the Brazilian Civil Code, this liability of the members is not unlimited, but rather limited to the exact proportion contributed by each of them to the formation of the company’s share capital.
This has originated the discussion on the liability of former members, in the event of piercing of the corporate veil and after they have formally left the company, i.e., after annotation of the amendment to the articles of association with the competent registry.
In fact, the sole paragraph of art. 1.003 of the Brazilian Civil Code provides that those that assign shares are jointly liable with the assignee, to the company and to third parties, for their obligations in the capacity as members, for two (2) years after annotation of the amendment to the articles of association.
The Superior Court of Justice analyzed this issue in a recent judgment that settled the understanding, applicable to limited-liability companies, that the liability of former members resulting from piercing of the corporate veil extends for a term of up to two (2) years after annotation of the respective amendment to the articles of association and is limited to the corporate obligations assumed in the period during which they were still a member, i.e., before they left the company.
The current decision of the Superior Court of Justice granted certainty with respect to the fact that in principle, former members are not liable for corporate obligations due and/or originated after they leave the company, and it reaffirmed the 2-year term of liability of former members, to third parties, for debts incurred by the company, pursuant to the provisions of art. 1.003, sole paragraph of the Civil Code, subject to the limitation of liability.
Finally, we note that, on the other hand, there is a line of argument that differs from what is currently being settled and propagated by the Superior Court of Justice, which shifts the provisions of article 1.003 of the Civil Code to another branch of the obligations, understanding that the term of two years refers exclusively to the obligations of former members in their capacity as members, such as paying up the share capital.
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This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.