07/8/2024
A committee of jurists presented a draft bill to the Senate for the review and reform of various points of Law No. 10,406, of January 10th, 2002 (“Civil Code”), which was officially received on April 17th, 2024 (“Draft Bill”).
Although adaptations to the text of the Draft Bill may still occur due to the preliminary stage it is in, we highlighted some of the main proposed changes and impacts included so far in the Draft Bill, specifically regarding limited liability companies, and how these changes may affect the reality of such corporate type in Brazil.
- Single-Member Limited Liability Company (Article 1,052-A)
Currently, the Civil Code allows the formation of single-member limited liability companies by both individuals and legal entities. The proposal brought by the Draft Bill aims to restrict the constitution of this type of company exclusively to individuals. If this change is approved, it is essential that a regulation is established to manage the transition rules for current single-member limited liability companies so they can adjust to this change. This restriction can be seen as limiting, considering that many companies structured as legal entities use this corporate form in an effective and productive manner.
- Agreement of Quotaholders (Article 1,054, Sole Paragraph)
The quotaholders’ agreement is a legal instrument used to regulate the relationships among the partners of a limited liability company, establishing specific rights and duties among them. Although the quotaholders’ agreement is already considered a common practice, currently regulated by Law No. 6,404/1976 (“Brazilian Corporate Law”), it is essential that its supplementary provision is expressly included in the articles of organization of limited liability companies for its application. The Draft Bill proposes the explicit inclusion of this instrument in the Civil Code, dispensing the need for its specific provision as a subsidiary application of the Brazilian Corporate Law in the articles of organization, bringing greater clarity and legal protection to companies that adopt this practice.
- Preferred Quotas (Article 1,055)
Brazilian Regulatory Instruction No. 81 of the Department of Business Registration and Integration (“IN DREI 81/2020”) already allowed the establishment of articles of organization for limited liability companies that held preferred quotas clauses, with restriction or absence of voting rights, leaving it to the articles of organization to govern the rights associated with these quotas. The amendment to Article 1,055 of the Civil Code, which provides for the creation of preferred quotas, in line with the Brazilian Corporate Law, aims to grant unique rights to quotaholders of different classes and brings greater legal backing to a practice already existing in corporations, allowing for more sophisticated corporate structures and facilitating investment contributions and employee incentives through quota purchase options.
- Meeting of Members (Articles 1,072 and 1,072-A)
The proposed change to Article 1,072 and the inclusion of Article 1,072-A, which address the rules for notice of meetings, recognize and incorporate the practicality of digital communications for remote or mixed format meetings, as already established in IN DREI 81/2020. This change also provides that, in the absence of a provision in the articles of organization, meetings and other corporate acts will preferably be held in a virtual setting with the option of holding them in a mixed format.
- Single Quorum (Article 1,076)
Law No. 14,451/2022 already brought significant changes to Articles 1,061 and 1,076 of the Civil Code, reducing some important quorums for deliberations in limited liability companies. The new proposal to change Article 1,076 of the Civil Code intends to establish the adoption of a fixed quorum of more than half of the share capital for all quotaholders’ deliberations. Although this change simplifies practical application and provides greater transparency to quotaholders regarding quorum formation for the approval of their proposals, nothing prevents the articles of organization from establishing different increased quorums if necessary, as the unification of the quorum may not meet all specific needs of different companies and may generate resistance from minority partners, who may feel a reduction in their influence in the most relevant corporate deliberations.
The proposed amendments to the Civil Code presented in the Draft Bill aim to modernize and make the regulation of limited liability companies in Brazil more efficient and dynamic. However, it is crucial that companies, and especially their partners, remain attentive to these possible changes and take all necessary legal precautions in the implementation of these and other changes that may be approved due to the Draft Bill.
Coauthored by: Luis Guilherme Regados Galbetti and Nathalia Fernandes Gonçalves
