On January 3, 2019, the President of Brazil sanctioned Law No. 13.792 which amends articles 1.085 and 1.063 of the Brazilian Civil Code, thus bringing forth two important changes to limited companies.
The first innovation relates to the necessary quorum for removal of a certain quotaholder holding the office of manager of the firm, formally designated in the articles of association of said company. With the new language, a deliberation to approve removal of a managing partner certain quotaholder shall be taken by members representing more than half of the equity capital, except as otherwise provided in the relevant articles of association, rather than the previously required 2/3 of the equity capital. The change in the law evidences a more flexible approach to eventual disputes in the firm, considering that the simple majority – i.e., 50% plus one quota – expands the rights of partners and enables the removal of a manager formally designated in the articles of association themselved. In this regard, it is important to note that no justification is now necessary for the removal of a managing partner.
The second innovation relates to the exclusion of a quotaholder. There was a modification in the language of the sole paragraph of article 1.085 of the Civil Code, a minority quotaholder can be removed for cause by the equity hold with the majority of equity capital, in firms with only two partners. For companies with more than two members, summons to the member about to be removed is required in order that the meeting is duly attended by said member who, if so willing, may submit the proper defense. The previously language defined that an out-of-court removal could only be approved in a quotaholders’ meeting especially convened for this purpose, and within the necessary time to guarantee the exercise of the right of defense by the quotaholder about to be removed.
Nevertheless, despite this more flexible approach, the removal of a certain quotaholder for just cause, duly established within the company’s articles of association, is still necessary. Hence, for such an exclusion, an equity holder must have acted in such a manner as to jeopardize the continuity of the company, performing acts or facts of undeniable gravity. The simple breach of the affectio societatis is not a sufficient motive for the removal of an equity holder, pursuant to the new language.
With the new law, as we can see, the right of the quotaholder that owns 50% plus one quota is strengthened. His minority partner can be excluded, for just cause, without the need to initiate a court proceeding, which means, without having to notify the excluded quotaholder or to summon any sort of meeting for this purpose.