The Civil Code allows the distribution of profits without observing each partner’s proportional participation in the capital stock of limited liability companies, provided that (i) the criteria and parameters for determining the disproportionate distribution of profits fixed, and (ii) no partner is excluded from the right to participate in the profits.
The establishment of such criteria is essential so that the disproportionate distribution of profits is not left to the majority of partners’ discretion, without any justification.
There is no legal definition regarding these criteria, which must be agreed upon and approved by the unanimity of the partners, otherwise, in the absence of previously established criteria, any disproportionate distribution of profits will be subject to questioning by the partner who feels jeopardized.
As an example, the criteria may include: the dedication time and involvement of each partner in the company’s business; each partner’s equity and administrative commitment; direct contribution to the generation of revenues and results for the company; among others.
Therefore, in order to avoid possible corporate disputes or conflicts in limited liability companies, it is not enough to merely contractually provide for the payment of disproportionate profits. It is essential to previously define objective criteria to justify the disproportionate distribution of profits, whether in the articles of incorporation or in a policy approved at a general meeting or partners’ meeting, without excluding partners from sharing in the profits.
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