Among the various decisions that need to be taken in the corporate and business sphere, one of the most relevant is what should be done with the corporate participation of the individual partner or shareholder after his death. It is an issue that often goes unaddressed in companies' legal instruments and can give rise to huge disputes.

When a partner of a limited company dies, the general rule is, under Article 1.028, caput, of the Civil Code, to liquidate his share and partially dissolve the company. This involves calculating the value of his stake and paying the corresponding amount to the heirs.

However, as provided for in Article 1,028 of the Civil Code itself, the general rule of partial dissolution can be waived by:

• miscellaneous provision in the contract;
• option of the remaining partners to dissolve the partnership; and
• Agreement with the heirs, regulating the replacement of the deceased partner with the consequent entry of the heirs in the social framework.

On the other hand, in privately held corporations, the general rule is usually the transfer of shares to the heirs.

It is common (and recommended), however, for the parties to make a prior agreement on the subject to define specifically whether or not the heirs can remain in the partnership, how the value of his share will be calculated and what will happen to specific rights that the deceased had.

This type of arrangement, both in joint stock companies and in limited partnerships, usually occurs through a partners' agreement, but can be included directly in the contract or bylaws.

Under Article 118 of Law 6,404/76 (Lei das S.A.), shareholders' agreements must typically deal with purchase and sale, acquisition preference, voting rights and power of control. However, they may also deal with other related matters, such as non-compete clauses, rules for exercising the right to vote, and provisions on succession.

Given this, the question arises: with the death of the partner/shareholder, do the parasocial agreements signed by him bind his heirs? That is, is the heir contractually obliged to follow the provisions of the agreement signed by the deceased?

The basic principles of succession law indicate that it does. This happens because, with the opening of the succession upon the death, the inheritance is automatically transmitted to the heirs of the deceased (Article 1.784 of the Civil Code, known as the principle of saisine).

The heirs, however, have the prerogative to accept the inheritance or renounce it, provided that they do so completely. Legislation prohibits partial acceptance or waiver, under condition or term.

Inheritance is the set of assets, rights and obligations transmitted to heirs through succession. When the heirs accept the inheritance, they also assume all the obligations of the deceased, including those existing in the agreements entered into in relation to the companies in which he held a stake.

The heirs take the place of the deceased in the positions contractually assumed by him and are responsible for paying the debts left up to the limit of the value of the inheritance.

The share of each heir will only be delivered and the division materialized after the payment of the creditors and the extinction of the debts.

Thus, just as it is not possible to accept the inheritance "with conditions", it is not possible for the heir to assume the position of the deceased, receiving the shares/shares held by him, without agreeing and assuming parasocial agreements previously signed.

If there are very personal rights attributed to the deceased, it is necessary to make clear how they will be treated so that there is no doubt about what rights and duties will be transmitted to the successors.

Although there are legal provisions, the appropriate and specific treatment of the subject in the agreements of members and, when necessary, in the contracts or bylaws is relevant for all involved:

• for the company, it represents the regulation of the succession of its management, transition planning of decision-making and financial programming, considering that, depending on the treatment adopted, the death may represent the payment of assets to the heirs;
• for the heirs, it indicates clarity about the destination of the equity interests held by the deceased and guides the best way to conduct that business, either by sale or by joining the company; and
• For the remaining partners, it gives security to the fate of the company, especially with regard to the relevance of the personal participation of each partner for the conduct of activities.

The absence of adequate treatment opens the door to questions about the fate of the shareholdings, the value to be considered for their calculation and the exercise of rights.

Thus, it is essential to regulate the transfer of shares in the event of the death of the partners/shareholders for two reasons: in addition to helping plan the transition and the future of the company, the regulation binds any heirs who may become holders of the equity interest after the death of the owners.