Limited Liability Companies And The New Brazilian Civil Code

By Walter Douglas Stuber, Manoel Ignácio Torres Monteiro and Vera Lúcia Pereira Neto

The New Civil Code (Law Nº 10406, of January 10, 2002 - "NCC"), effective in Brazil as of January 11, 2003, brings several important changes to the rules applicable to the Brazilian Limited Liability Company ("LLC"), which was previously governed by Decree Nº 3708, of January 10, 1919 ("Decree Nº 3.708/19").

The changes of the NCC affect not only the LLC whose quotas are held by one single conglomerate but also those whose capital is distributed among several members who may have distinct interests in relation to how the corporate business is conducted.

Included in the several changes brought by the NCC, some of them are deserving of special attention, specially those to LLC whose corporate capital is distributed among several members that are not members of the same controlling group.

The first issue to discuss is the management of a LLC, which pursuant to Decree Nº 3708/19 would be performed by all members, notwithstanding any statutory provision to the contrary. A member had automatically management powers.

The NCC expressly determines that provisions applicable to the management should be regulated statutorily. Thus, the articles of association must clearly indicate whether the LLC can or will be managed by a non-member, whose appointment will be conditioned upon (i) unanimous decision (if the capital is not paid up) or (ii) approval of two thirds of the capital in the case of paid up capital. Besides the appointment of non-members to manage the LLC, the NCC does not allow that the position as managing member be automatically extended to those that subsequently take the position, to the extent that all members are in charge of the LLC management.

An officer appointed in a separate document (Management Appointment Instrument or Minutes of the Members Meeting for Appointment of Manager) will take office by means of the signature of the respective office taking record on the Book of Management Meetings Minutes, within ten days of taking office. Therefore, a Book of Management Meeting Minutes is set where, in addition to the office taking records, the minutes of the meetings or resolutions of the offices are recorded.

Removal of a member that has been statutorily appointed officer will be conditioned upon approval of members representing no less than two thirds of the corporate capital, except in the case of statutory requirement of a higher or lower...