A New Brazilian Commercial Code And Its Effects On Brazilian Corporate Law

In 2002, with the enactment of the new Brazilian Civil Code, the Brazilian Commercial Code lost much of its relevance and content, since the rules that regulated business activity were largely incorporated into the new Civil Code. More importantly, the changes introduced by the Civil Code in corporate law brought uncertainty and changes to known concepts and rules. From the perspective of foreign investors, the introduction of unreasonable supermajority quorums for decisions in limited partnerships were particularly disruptive to the business environment.

Because of all the controversy surrounding the Civil Code, since 2011 Brazilian Congress has been discussing a new Commercial Code. To expedite the discussion, projects go in parallel in the House and Senate, and the latest version of the latter has recently been published for public consultation (http://bit.ly/NovoCodigoComercial), on which this article is based.

The project of the new Commercial Code revokes the corporate rules introduced by the new Civil Code, restores certain traditional concepts while modernizing others. As far as corporate law is concerned, the project of the new Commercial Code is desigend based on four main concepts: increased legal certainty, improvement of the business environment, simplification and modernization of rules.

An example of legal certainty brought by the new project can be seen in the articles dealing with the disregard doctrine, whereby by piercing the corporate veil assets of quotaholders and officers of a limited liability company may be called to answer for company debts in the event of of fraud. While the doctrine is universal and useful to inhibit the misuse of corporate form by abusing entrepreneurs, in Brazil it is often applied by labor and tax courts without giving the defendand the right to be heard before his or her assets are frozen as guarantee by the court. The project of the new Commercial Code formalizes the notion that the mere failure of assets in equity of the company does not authorize the piercing of the corporate veil and that the freezing of any personal assets can only be ordered by a court after the defendant is assured the right to legal defense.

The improvement of the business environment is addressed by both from the point of view of the companies as well as entrepreneurs. On the companies level, the project introduces the concept that companies involved in litigation with other companies have a presumption of equality...