BRAZIL Trends and Developments Contributed by: Lucas Akel Filgueiras, Pedro Miranda, Giovana Bosso and Caroline Cidri, Akel Advogados
What remains to be determined is whether the trus- tee may also seek disregard of the debtor company’s corporate personality. Given that the lists in Article 22 of the LRF are non- exhaustive, and that the trustee is expected to take all measures needed to preserve the integrity of the judicial reorganisation, there is no logical or legal rea- son to deny the trustee standing to apply for said dis- regard. Proper respondent All executives or shareholders of the legal entity who were directly or indirectly benefited by the abuse must be joined to the application to pierce the corporate veil (Civil Code, Article 50, caput). Any third parties who likewise benefited may also be sued, so that they are made answerable for the debt. Court’s jurisdiction Finally, because there is exclusive jurisdiction (cen- tralising cases and with an automatic stay of preex- isting litigation elsewhere, known as juízo universal ) in judicial reorganisation, there are two distinct – and equally possible –scenarios regarding the court with jurisdiction to hear an application to disregard corpo- rate personality involving companies in distress. The first scenario is to file the application to disregard corporate personality within the reorganisation case records. In such cases, once the application is admitted, the personal assets of any shareholder, executive or third party who benefited from the abuses will be answer- able for all debts addressed in the judicial reorganisa- tion. The second scenario may arise in individual actions brought by non-bankruptcy creditors or by creditors seeking to obtain a court judgment, in which an appli- cation to disregard corporate personality is made to reach the assets of third parties who are not on the claimant side of the judicial reorganisation. Filing the disregard application as an individual action, ie, outside the reorganisation case, is lawful and, in
practice, more favourable to the creditor, since any recognition of joint liability will not extend to the other creditors in the judicial reorganisation, but will benefit only the claimant. In both scenarios, as against a shareholder, execu- tive or third party who was not the original debtor, the claim is preserved in full on its original terms – ie, it is unaffected by any new conditions introduced by a judicial reorganisation plan confirmed by the court. This follows from a straightforward application of Arti- cle 49, paragraph 1, of the LRF, which provides that “creditors of a debtor in judicial reorganisation retain their rights and privileges against co-obligors, guaran- tors and those with rights of recourse.” In such cases, having regard to the debtor’s eco- nomic-financial distress and the risk that sharehold- ers, executives or third parties may dissipate assets in anticipation of being held liable, it is open to the court to grant credit protection measures, in particu- lar a freezing injunction over the respondents’ assets ( arresto liminar ) in the application to disregard corpo- rate personality. Aspects of substantive law Understanding the source of liability that arises when an application to disregard corporate personality is granted is crucial to identifying the subject matter on which evidence must be presented, as well as to assessing the scope of the liability. Accordingly, it is worth noting that the liability of a shareholder or executive who becomes a co-obligor because of a successful application to disregard cor- porate personality stems from the commission of an unlawful act consisting of misuse of the company’s separate personality, under Civil Code Articles 50, 187 and 927. There are several significant consequences of this conclusion. First, recognising that liability arising from disregard of corporate personality is grounded in an abuse of rights affects the evidential burden: “civil liability for abuse of rights does not depend on fault and rests solely on an objective, purpose-based criterion” (Enunciation
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