Holding the company’s assets liable for the obligations of its partners
Is it possible to hold the company’s assets liable for the obligations of its partners? In Brazil, the law establishes that the company’s assets and the assets of its partners must remain separate. This rule, provided for in the Civil Code, is called independence of assets and ensures that, as a rule, partners are not held liable with their personal assets for debts assumed by the company. This distinction is one of the foundations that support business activity, as it allows investors and entrepreneurs to take risks without compromising their personal assets.
However, this protection is not absolute. When the company is used improperly, such as in cases of fraud, misappropriation of purpose or confusion of assets, the courts can temporarily set aside this separation to hold accountable those who really benefited from the irregularity.
This legal mechanism is known as disregard of the legal entity and emerged in Anglo-American law under the name of “piercing the corporate veil”. In other words, lifting the veil that separates the company from its partners, allowing, in specific cases, personal assets to be held liable for the company’s obligations. In Brazil, this concept was incorporated into the legislation in the Civil Code (art. 50) and in the Code of Civil Procedure (art. 133 et seq.), which provide for the requirements and procedure for its application.
In addition to the traditional form, in which the aim is to reach the partners’ personal assets to satisfy the company’s debts, there is also the so-called reverse disregard of the legal entity. This modality began to be expressly provided for in the law in 2019, with the enactment of the Economic Freedom Law, although already exiting in the Code of Civil Procedure since 2015. Reverse disregard occurs when a partner tries to hide his personal assets within the company he controls, in order to protect himself from collections. In this case, the objective is the opposite: to hold the company responsible for the partner’s debts, when he uses the business structure to defraud creditors. In practice, the aim is to prevent anyone from taking advantage of the legal protection given to companies to commit acts of bad faith. For example, if a partner transfers his assets to the company of which he is a partner with the sole purpose of avoiding personal debts, he is acting abusively. When this is confirmed, the courts may allow creditors to access the company’s assets that have been used improperly as if they were an extension of the partner’s personal assets. Thus, the “veil” of the separation of assets is lifted, and the protection of the legal entity is temporarily suspended.
It is important to emphasize that the application of this type of measure cannot be trivialized. The number of requests for disregard of the legal personality has increased, but the current understanding of the Superior Court of Justice is clear: there must be proof of emptying or concealment of the partner’s assets under the guise of the business partnership. It is not enough for the company to be inactive or for the partner to have no assets in his name. According to case law, it is necessary to demonstrate that there was a misuse of purpose, confusion of assets between the partners and the company, or even bad faith and impropriety in the business activity[1].
The reverse disregard of the legal entity is, therefore, an essential tool to combat fraud and ensure that the rights of creditors are respected. Although it represents an exception to the rule of separation between the partners’ assets and those of the company, its application is justified when there is evident abuse. In this way, the legal system seeks to balance the protection of businesses with the liability of those who act in bad faith.
It is essential to be aware of the rules that involve the legal structure of the company to avoid unwanted consequences and undue liability of the partner’s assets.
By Beatriz Tokechi Amaral, lawyer at Candido Martins Cukier Advogados.
[1] (STJ; Recurso Especial nº 2150227/SP 2023/0153264-7; Terceira Turma; Relator: Ministro Humberto Martins; Data de Julgamento: 10/12/2024; Data de Publicação: 23/12/2024); (STJ; Agravo Interno no Agravo em Recurso Especial nº 2433789/SP 2023/0258819-2; Quarta Turma; Relator.: Ministro Raul Araújo; Data de Julgamento: 04/03/2024; Data de Publicação: 11/03/2024).
