The Third Panel of the Superior Court of Justice (STJ) rendered, on February, a relevant decision on the Special Appeal nº 1.861.306/SP regarding the impossibility of extending the disregarding of the corporate entity to a minority partner who has never (i) taken part in the management of the company or (ii) demonstrably participated in acts of abuse of legal entity or fraud.
With this decision, the Superior Court of Justice reinforced the subjective criteria that must be adopted in order to grant requests for piercing the corporate veil that affects assets of administrators and partners, understanding that it is not feasible to apply the institute to those who, provenly, have not contributed to the practice of events characterizing abuse of the legal entity.
The case in question involved an action for compensation for moral and material damages, in which, in the course of the enforcement of the judgment, a request for piercing the corporate veil was granted to include all the company’s partners as defendants in the executive proceedings after it was concluded that the dissolution of the company took place irregularly. Later, in light of the death of one of the partners, his heiress was summoned to also join the defendants, and challenged the decision.
The First Chamber for Private Law of the Higher Court of Justice of the State of São Paulo (TJSP) granted the heiress's appeal and excluded her from the enforcement proceeding. According to the opinion of the judging body, the piercing must reach "only the assets of the managing partners or of the ones who have effectively contributed to the practice of abuse or fraud in the use of the legal entity" and, since the deceased shareholder had a minority stake in the company (with only 0.0004% of the company's capital stock) and had no management powers, his personal liability could not be recognized. Consequently, the assets of his heirs should be excluded from the enforcement proceeding.
A special appeal was brought before the Superior Court of Justice against the decision by the Higher Court of Justice of the State of São Paulo (TJSP), in which the plaintiffs of the enforcement proceeding raised, among other arguments, that the court would have breached the provisions of Article 50 of the Brazilian Civil Code, because the condition of minority partner, without management powers, would not exempt that partner’s liability for the acts performed by the company.
Indeed, after the changes promoted by the Economic Freedom Act (Law No. 13,874/19), the legal provision in question (Article 50 of the Brazilian Civil Code), in addition to providing more detail on the objective criteria that authorize the piercing of the corporate veil due to "abuse of the legal entity" (i.e., deviation of purpose and confusion of assets), received a new wording. According to the current text, the disregard will be applied so that the effects of certain obligations are extended to the private assets of managers or partners of the legal entity who " directly or indirectly benefited from the abuse." In other words, the legal text in question brought new subjective limits for the application of the institute, restricting its effects to those directly or indirectly benefited by the deviation of purpose or the confusion of assets.
Despite the wording given to the article by the Economic Freedom Act with regard to who have their assets reached, the Third Panel of the Superior Court of Justice, when analyzing the case, upheld the decision rendered by the Higher Court of Justice of the State of São Paulo (TJSP), which is based on a different criterion. It was considered that, although Article 50 of the Brazilian Civil Code does not provide for any restriction on the liability of minority shareholders indirectly benefited by the practice of acts of abuse of legal entity, it would not be coherent "that partners without management powers which are, in principle, unable to perform acts that constitute abuse of legal entity", could have their personal assets reached. In fact, as pointed out in the judgment, when one is faced with a partner who has no management and administration functions and who did not to contribute[1] for the deviation of purpose or confusion of assets, there is no reason to depart from the principle of the patrimonial autonomy of the legal entity and authorize the piecing of the corporate veil in relation to this partner.
Therefore, it is possible to note that, according to the criteria adopted by the Superior Court of Justice, it would be possible to rule out the personal liability of partners not only by the demonstration, required by law, of the absence of direct or indirect benefit (elements that undoubtedly carry significant subjectivity, especially the "indirect benefit"). Personal liability could also be ruled out by the objective proof that the partner, either due to the relevance of his stake and/or the role played by him in the company, would be unable to perform any of the acts that characterize the abuse of legal entity.
In the exact terms of the decision: "The piercing of the corporate veil, as a rule, should only reach the managing partners or those in relation to which it has been proven to have contributed to the practice of acts characterizing the abuse of legal entity."
The position of the Superior Court of Justice in this case, even if only reinforcing previous understandings on the matter, raises additional questions about the applicable parameters to cases in which the assets of the managing partner are sought to be reached, in light of the new wording given to Article 50 of the Brazilian Civil Code. In particular, it is important to determine whether the status of managing partner will be enough to have the assets reached, presuming the direct or indirect benefit, or whether it will be necessary to prove the existence of this benefit, to the extent that it is an element expressly provided under Article 50 of the Brazilian Civil Code.
This question reminds us of the existence of different theories coined by scholars about the piercing of the corporate veil that also contemplate the subjective limits for the application of the institute.
Minor theory (“teoria menor”). There are those who support the minor theory, according to which all partners and administrators must have their personal assets reached, regardless of the assessment of benefit or of the fact that they effectively participated in the management of the company. This is the theory adopted, for example, in consumer matters, under Article 28 of the Brazilian Consumer Protection Code, and, in the context of environmental responsibility, by means of Article 4 of Law No. 9,605/98 – which provides for criminal and administrative sanctions arising from conducts and activities harmful that are to the environment.
Larger theory (“teoria maior”). On the other hand, there is the larger theory, according to which the piercing of the corporate veil is an exceptional measure, which is subdivided into two different groups with regard to the subjective limits of the disregard. While for some it is necessary to prove that the partners and administrators (including managing partners) directly or indirectly benefited from the fraudulent acts, for others it would be sufficient to prove that the partner participates or has participated in the management or administration of the company, to the extent that it had a duty to at least prevent the occurrence of the acts in question.
Considering these theories and sub-theories and the decision commented herein, it is possible to envision an answer to the proposed question: the Superior Court of Justice once again aligned itself with the larger theory of piercing of the corporate veil and, more importantly, reiterated the relevant understanding that not all partners will necessarily be affected by the application of the institute. On the other hand, the decision seems to make it clear that, if the partner was an administrator at the time the acts were perpetrated, there will be a strong presumption in favor of the existence of benefit (direct or indirect), thus applying Article 50 of the Brazilian Civil Code. In any case, it will always be necessary to make an analysis of the factual evidences of the case, seeking proof both on the participation of partners and/or administrators in the acts of abuse of legal entity and on the obtention of direct or indirect benefit from such acts.
[1] Obviously, as pointed out in the judgment, the piercing may reach those who do not have management and administration powers depending on the circumstances; for example, when there is explicit bad faith by collusion with the acts perpetrated.
