Directors and officers occupy critical governance and management roles that drive the company’s performance and create value for shareholders and other stakeholders. The relevance of these roles must be accompanied by the constant observance of their fiduciary duties and certain behavioral parameters in the performance of their activities.
In this regard, directors and officers must act with diligence and loyalty and perform their duties strictly within the limits of applicable law, the company’s bylaws or articles of association, and any internal corporate policies to which they are subject, in full compliance with the Brazilian Civil Code and Law No. 6,404/76 (the Brazilian Corporation Law). These provisions not only define the scope of their duties but also prescribe the consequences of non-compliance.
Corporate governance expects directors and officers to act diligently by remaining well informed, overseeing operations, and investigating potential issues when red flags arise; to pursue the company’s best interests within the limits of applicable law and the governing corporate documents; to observe duties of loyalty and confidentiality by identifying and avoiding conflicts of interest and recusing themselves when conflicted; and to ensure that shareholders and all governing bodies receive adequate, timely, and accurate information.
As a rule, directors and officers are not personally liable for losses arising from ordinary acts of management—i.e., actions undertaken in the company’s best interests and in compliance with applicable law and governing documents. Liability may arise, however, where directors or officers (i) violate the law, the bylaws or articles of association, or other binding corporate policies, or (ii) engage in negligence or willful misconduct. Such liability may be civil and, in more serious cases, criminal. This framework is designed to safeguard the integrity of the company and the market and to promote confidence among stakeholders.
From a corporate perspective, when directors or officers act outside the bounds of applicable law, the company’s governing documents, or their fiduciary duties, they may face: (i) personal civil liability for losses caused to the company or to third parties, subject to causation and the degree of fault; (ii) removal from office by the competent corporate body; (iii) an obligation to indemnify the company for losses arising from unlawful acts or acts performed with abuse of authority; and (iv) internal disciplinary measures under applicable policies and codes of conduct. The company, in turn, should adopt adequate governance responses, including investigating the facts, documenting deliberations, and, where appropriate, seeking recovery of losses through the applicable corporate channels.
Given the responsibilities inherent in office and the potential personal consequences, in addition to acting in compliance with applicable law and governing documents, directors and officers should ensure that deliberations are properly formalized by recording minutes that accurately reflect discussions, dissent, and abstentions; act within the governance framework established by law, the bylaws or articles of association, and internal policies; maintain financial discipline by properly preparing financial statements and management accounts and obtaining timely approvals, among other risk mitigation measures.
Additionally, liability may survive The End of their term of office until the relevant management accounts are approved and/or applicable limitation periods expire. Directors and officers should preserve documentation of their acts accordingly and, where appropriate, ensure that their votes or dissents are recorded to circumscribe their exposure.
In this setting, the growing demand for effective corporate governance and for a business environment grounded in ethics and transparency reinforces the need for robust oversight of managerial performance and reaffirms that good faith and diligence are essential pillars of corporate sustainability and credibility.
Ultimately, the liability of directors and officers is not a trapdoor—it is a framework. When directors and officers act diligently, loyally, and within the company’s governance architecture, the law protects regular business judgment. Liability arises at the margins—when duties are disregarded, authority is exceeded, or material facts are withheld. The practical path is clear: document decisions, comply with the bylaws or articles of association, and foster a healthy board–management dialogue.