Brazil’s Superior Court of Justice rules that a company's lack of assets alone does not warrant

Takeaway: The Second Section of Brazil’s Superior Court of Justice (STJ), which is responsible for harmonizing the Court’s case law on private law matters, ruled that the mere absence of attachable assets or the irregular winding-up of a company is not sufficient to pierce the corporate veil. To hold shareholders personally liable for corporate debts, there must be evidence that the corporate structure was abused, either through misuse of purpose or commingling of assets. The decision was issued under the repetitive appeals regime, a procedure through which the STJ selects representative cases to establish a uniform legal rule that lower courts must follow in similar disputes.

The case addressed whether a company’s lack of attachable assets or its irregular winding-up would, by itself, justify holding its shareholders personally liable for corporate debts. The reporting justice explained that, under Brazilian law, the separation between a company’s assets and those of its shareholders may be disregarded only in exceptional circumstances, where there is evidence that the corporate form was abused. This may occur through misuse of purpose, such as using the company for unlawful or improper ends, or through commingling of assets, where corporate and personal assets are not kept separate. The mere difficulty in locating company assets, or the irregular closure of its business, is not enough to satisfy this requirement.

One member of the Court dissented, arguing that an irregular winding-up should create a rebuttable presumption of abuse and shift the burden to the shareholders to demonstrate that the company was properly dissolved and that the corporate form had not been misused. The majority rejected that approach and reaffirmed that proof of abuse remains a necessary condition for piercing the corporate veil.

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The decision clarifies the requirements for piercing the corporate veil in civil and commercial disputes, providing greater legal certainty in cases involving shareholder liability and debt recovery.

The decision to pursue, or resist, a request to pierce the corporate veil carries significant strategic and economic consequences, both for those seeking to reach the personal assets of shareholders and directors and for those who may become targets of such a measure. The MAC Advogados team is ready to advise clients navigating this decision.