It is a matter of Brazilian Law that partners of a limited liability company may regulate, in the articles of association, the effects of the death of a shareholder over his shares, provided that all applicable legal requirement are met.
In this sense, in case the articles of association regulate the assignment of shares of a deceased partner, such provision must prevail over the heirs’ will or even over a judicial decision, if the following validity requirements are met:
- capable agent;
- licit, possible, determined or determinable object; and
- prescribed form, pursuant to article 104 of the Civil Code.
In a recent decision, issued on March 21st this year, the Brazilian Department of Registration of Business and Integration, also named as DREI, upheld the Board of Trade of the State of Rio de Janeiro’s decision which ordered the registration of an amendment to a company’s articles of association that contained a clause which authorized the automatic assignment and transfer of a deceased partner’s shares, irrespective of a judicial order or public deed of apportionment of assets (Appeal to the DREI No. 14022.116144/2022-57).
This is because the Boards of Trade’s competence to register the articles of association of a limited liability company is restricted to analyzing the essential and legal formalities of the document, without examining the merit or investigating the causes that involve the partners’ own interests, such as establishing the conditions for the assignment of their shares in the event of death.
It is also important to emphasize that the Economic Freedom Law establishes rules to protect free enterprise and the free exercise of economic activity, prioritizing the will of the parties, minimal State intervention and the exceptionality of judicial contractual revision.
In light of this context, the provisions of a limited liability company’s articles of association concerning the assignment of shares in the event of death must be respected, without the need to resort to the Judiciary or to obtain the heirs’ consent, as long as all legal requirements are met.
Our Corporate Team is available to provide clarifications and guidance on the matter.
