BRAZIL Law and Practice Contributed by: Ricardo Barretto Ferreira da Silva and Camila Sabino Del Sasso, Azevedo Sette Advogados
nently or on a temporary basis, depending on decisions made during shareholders’ meetings. In limited liability companies, a board of directors is optional, and the management is exercised by one or more executive officers, who may or may not be quotaholders. The officers must meet one of the following criteria: • be Brazilian citizens; • be foreign nationals with permanent resi - dence visa in Brazil; or • be foreign individuals residing abroad, provided they appoint a legal representative residing in Brazil with the authority to receive processes and notifications in judicial or administrative proceedings. The appointment and election of officers/direc - tors is governed by Brazilian law and is a deci - sion of the quotaholders/shareholders. Accord - ing to Article 997, item VI of the Brazilian Civil Code, only individuals can be responsible for the management of a company and the AoA must clearly define the number of officers/directors responsible for the company management, as well as their powers and responsibilities. 3.5 Directors’, Officers’ and Shareholders’ Liability Brazil has a well-established legal framework governing the liability of directors and officers, including the concept of “piercing the corpo - rate veil” ( desconsideração da personalidade jurídica ). Directors and officers, whether in corporations or limited liability companies, are not personally liable for debts or obligations incurred on behalf of the company and in the ordinary course of management. However, directors may be held liable for damages caused to the company if –
while performing their duties or exercising their powers – they act: • with negligence or wilful misconduct; • in violation of the law or of the company’s AoA; and • in a way that causes harm to the company or third parties. The Brazilian Corporate Law (6,404/1976) and the Civil Code establish specific duties of con - duct for directors, which include: • diligence – exercising the care and diligence that a prudent and honest individual would use in managing their own affairs; • loyalty – acting in the best interests of the company and demonstrating loyalty, meaning they must not use their position for personal gain or for the benefit of third parties; and • transparency – disclosing material facts to the shareholders. The corporate veil may be pierced when there is abuse of legal personality characterised by fraud, mixing of personal and corporate assets, misuse of purpose, or an evasion of law or con - tractual obligations. When the veil is pierced, directors, officers or shareholders/quotaholders may be held person - ally liable for the company’s debts – even if they did not directly commit wrongful acts – if they benefited from or facilitated the abuse. In the case of limited liability companies, the liability of quotaholders is limited to the value of their subscribed quotas, provided these have been fully paid in. Quotaholders are jointly liable for the unpaid portion of the capital. The rules governing shareholder liability in corporations
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