What is the personal liability of the former partners of a company?

The controversial Brazilian labor union fees and Provisional Measure No. 873
Imagining better at the Order of Attorneys of Brazil

What is the personal liability of the former partners of a company?

What is the personal liability of the former partners of a company?
State courts and the Superior Court of Justice occasionally bring up the topic of what would be the personal liability of a company’s partners, particularly its former partners. With every new case there is a new approach to the issue.

The Superior Court of Justice (STJ) has recently discussed again the personal liability of a company’s former partners through Special Appeal 1.537.521-RJ. In this trial, the appellant partner left the company on June 2014 after making a deal to pay debts related to a lease agreement in installments. One year and a half later, on December 2015, the company started to default on its obligation towards the lessor, resulting in an execution procedure.

Considering the company’s termination as irregular, the trial court pierced its corporate veil and accepted the inclusion of partners, both current ones and those who left in 2014, as pleaded by the judgment creditor, based on the two-year liability rule of former partners. This is therefore the case of debts due by June 2016.

The Court of Justice of Rio de Janeiro (case No. 0017694-89.2014.8.19.0000) reached the same conclusion, and the STJ had the last word regarding the liability of former partners.

The STJ then considered that the statutory provision should be applied for up to two years, but only referring to episodes with taxable event by the date of withdrawal.

The Superior Court understood that if the company started defaulting on its obligations after a long time, when already managed by someone else and with no involvement or influence of the partner subject to withdrawal, it cannot be held responsible for these situations, since it was not even indirectly part of them.

The STJ decision dismissed an evident injustice, which ensured a bit more safety (even if the decision is not binding) to future corporate relations.

It would indeed be a violation of logic and of the most primitive feelings of justice that any person be considered liable for something that was not part of or responsible for in any way, not having an established causal connection between their conduct and the event.

Under these terms, it may seem obvious, but both the trial court and the Court of Justice of Rio de Janeiro do not understand it that way.

Going against this most basic feeling of justice, the Court of Justice of Rio de Janeiro examined the issue, limiting itself to analyzing only the time lapse between the partner’s withdrawal and the start of the debt, without taking into consideration when the debt was incurred, by whom, and how.

It is similar to a severe shortsightedness, in which the person decides to observe an impressionist painting within two centimeters of distance from their eyes. The person will say it is all smears and inkblots because they do not understand that stepping back is essential to understand the work of art as a whole.

Therefore, in this sense, judicial decisions are extremely cruel in focusing on the time lapse, ignoring other facts at stake.

Sometimes, the partner subject to withdrawal is even directly held liable, as if their withdrawal in itself were an absolute probable cause of flight or fraud to avoid their obligations to the company.

In this case, the Labor Court System can be even stricter than all other courts. In what seems to be sort of a culture, it is guided by a principle according to which all employers are always acting, a priori, in bad faith.

STJ itself did not restrict the personal liability of partners subject to withdrawal in different occasions (Internal Interlocutory Appeal in Special Appeal 1.034.255/PE, Special Appeal 1.259.066/SP, 1.312.591-RS).

This is the type of precedent history that discredits the Brazilian and the entire Latin-American justice system, and reaffirms the stigma of legal unreliability in the region.

Entrepreneurs and investors expect — and Brazil certainly needs — that this recent decision made by STJ (Special Appeal 1.537.521-RJ) is not met but also becomes a new reference to the liability of a company’s partners for the benefit of generating wealth and jobs in the country.

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