The Second Section of the Superior Court of Justice (STJ, Brazil’s high court for federal non-constitutional matters) established an important milestone for legal certainty in the Brazilian corporate environment. In a ruling under the repetitive appeals system (Theme 1,210), the court held that, in civil and commercial law relations, piercing the corporate veil requires concrete proof of abuse.
The mechanism of piercing the corporate veil
Separate legal personality is the principle that distinguishes a company’s assets from the personal assets of its partners or shareholders. Piercing this veil is an exceptional measure that allows reaching partners’ personal assets to satisfy the corporate entity’s obligations.
According to the opinion of the reporting Justice, Raul Araújo, applying this mechanism requires robust and specific evidence. The Justice highlighted that the measure is warranted only when the legal entity is used as a shield for illicit acts.
The application of the Major Theory and the Civil Code
The STJ ruling reaffirms the application of the so-called Major Theory (Teoria Maior), provided for in Article 50 of the Brazilian Civil Code. The court explained that while the law protects the institution of corporate legal personality, it also provides mechanisms to combat its abuse.
For veil piercing to be authorized, the courts require proof of one of the following criteria:
- Diversion of purpose: using the company for purposes distinct from those for which it was incorporated.
- Commingling of assets: the absence of clear separation between corporate assets and the personal assets of the partners.
Limits defined by the STJ
The decision, rendered in REsp 1,873,187, clarifies circumstances that are insufficient to bypass asset protection. The STJ consolidated the view that the mere absence of seizable corporate assets does not authorize the application of the doctrine.
Furthermore, the irregular shutdown of company operations is also not an isolated justification for targeting partners. The reporting Justice pointed out that such scenarios, on their own, do not constitute the abuse required by statute.
The exceptional measure is only warranted if it is demonstrated that the irregular dissolution or inactivity had the direct purpose of defrauding the law through diversion of purpose or commingling of assets.
Certainty for investors and executives
The establishment of this binding precedent guides courts across Brazil and offers greater predictability for founders, executives, and foreign investors. The decision confirms that partners’ personal assets remain protected, absent concrete evidence of bad faith and abusive misuse of the corporate form.
This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.
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