Extrajudicial Exclusion Of Partners From Brazilian Limited Liability Companies

The rules for the extrajudicial (or administrative) exclusion of partners from Brazilian limited liability companies are established in the Civil Code (Law 10,406/2002). Although the former Civil Code - as well as certain articles of the Commercial Code and Brazilian doctrine and case law - already provided for the exclusion of partners for cause, Article 1,085 of the existing Civil Code stipulates expressly that, through an amendment to the company's articles of association, partners representing more than half of the company's capital may exclude any partners that place the company's continuity at risk or perform acts of undeniable severity, provided that exclusion for cause is expressly contemplated in the articles of association. The Civil Code also states that the extrajudicial exclusion procedure must be deliberated and voted on at a general partners' meeting called especially for that purpose, and that the accused partner has the right to receive reasonable advance notice of the meeting in order to prepare a defence and attend the meeting. The main parameters for the introduction of this express provision in the Civil Code were:

the need to protect and preserve companies, regardless of any disputes among their partners; the requirement of affectio societatis (ie, a spirit of cooperation) among the partners on incorporation of the company and during its existence; and the observance of the majority principle for company resolutions, including the exclusion of partners, with the aim of protecting the company's interests. A number of legal requirements must be met for an extrajudicial exclusion to be carried out, including:

a quorum of partners representing more than half of the company's capital; the performance of an undeniably grave act by the accused partner; and express provision for extrajudicial exclusion in the articles of association. Therefore, a minority partner that jeopardises a company's interests and creates obstacles to the way in which business activities are conducted may be...