Brazil's case law and opinions on time bars for joint stock companies to seek monetary compensation against officers/directors

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André Luiz Marcassa Filho

Pinheiro Neto Advogados, São Paulo



João Pedro Simini Ramos Pereira

Pinheiro Neto Advogados, São Paulo



An important characteristic of Brazilian law is that there are two different legal concepts to bear in mind when referring to limitation periods: prescrição and decadência. All legal actions will be subject to a prescrição or to a decadência limitation period, depending on what the statute provides.

The importance in distinguishing prescrição from decadência lies in the different effects that such legal institutes have. The prescrição limitation period affects the claim, the exercise and the enforceability of a right. The decadência limitation period affects the right itself. Once the decadência period has elapsed, there is no longer any right, because it has been extinguished.

It is possible to toll the prescrição limitation period. The party entitled to a claim can unilaterally interrupt the limitation period for actions subject to prescrição at any time. Once tolled, the limitation period starts to run again. On the other hand, the decadência limitation period cannot be tolled. Once it starts to run, it is impossible to toll unless expressly provided by law.

Civil liability action against officers and directors and the prior annulment action

Article 159 of Law No. 6,404 (the Brazilian Corporate Law) provides that a joint stock company may bring a civil liability action against its officers and directors seeking monetary compensation for losses they have caused to the company’s property.[1]

The company must prove that these officers and directors have acted with fraudulent intent or in violation of the law or the bylaws[2][3]. The prescrição limitation period for filing this action is three years, which runs from the date of publication of the meeting resolution that approved the balance sheet for the year in which the violation occurred. [4]

However, if the wrongful acts have been carried out in a financial year for which the officers' and directors’ accounts have already been approved in the shareholder’s annual or special meeting, the company will not be able to bring this action because the shareholders' approval of the accounts exonerates the officers and directors from any civil liability.[5]

Hence, to hold officers and directors liable, it will be necessary to annul the shareholders’ meeting resolution that approved the officers’ accounts prior to filing the civil liability action seeking compensation. Therefore, an annulment action must be filed under Article 286 of the Brazilian Corporate Law.[6] The annulment will depend on the evidence that that the resolution of the general meeting that approved the accounts is riddled with error, bad faith, fraud or misrepresentation. It means that the joint stock company bears the burden of proof that the wrongful acts committed by the officers or directors were deliberately omitted from the shareholders during the shareholders' meeting in order to secure approval.

The relevant portion of Article 286 of the Brazilian Corporate Law states that the prescrição limitation period to file an annulment action elapses after two years from the date of the general or special meeting that approved the directors' and officers’ accounts. When the statute specifically uses the word prescreve, it is intuitive to think that the law created a prescrição limitation period which may be tolled under certain circumstances. However, Brazilian case law and scholars’ opinions strictly construe this statutory provision governing annulment action as a decadência limitation period.[7][8]

As a rule, the decadência limitation period cannot be tolled unless expressly provided by law. Therefore, Brazilian case law and scholars’ opinions shield the officers and directors from any civil liability by creating this time constraint of two years.

First, before making the decision on the convenience of filing an annulment action, it is necessary to investigate officers' and directors’ misconducts. Second, once the wrongful acts are uncovered, the companies must assess all the risks that an annulment of a resolution of a shareholder meeting may bring. This risk assessment must analyse all litigation, compliance, tax, corporate and criminal risks related to an annulment of resolution of a shareholder meeting. Lawyers, auditors, investigators and accountants may need to work together to weigh the pros and cons of bringing an annulment action. This time-consuming task needs to be reconciled with the two-year time constraint. For this reason, it is unusual in Brazilian case law to find cases in which the company has been successful in holding its officers and directors liable for misconduct. The courts dismiss the cases in most situations, finding that the joint stock companies’ right to file an annulment action has been extinguished due to the lapse of the decadência limitation period.

Even considering these negative consequences related to the two-year time constraint, Brazilian case law and scholars’ opinions base their reasoning on public policy. Case law and scholars’ opinions suggest the aim of the Brazilian Corporate Law is to protect directors and officers from a long-running civil liability exposure due to the risks they need to assume in running the company’s business. This encourages them to take risks in favour of the companies, ultimately benefitting the growth of business activity, generating jobs and the collection of taxes.


The arguments used by the case law and scholars, although pertinent from a doctrinal point of view, are incorrect based on a literal interpretation of Article 286 of the Brazilian Corporate Law.

The statutory language cannot be construed more restrictively when the statutory text is clear in establishing a prescrição limitation period. There is no possibility to interpret this statutory provision in a different sense (as a decadência limitation period) – the statutory text language and the Brazilian Congress political option mustprevail when enacting the Brazilian Corporate Law.

Finally, one question remains: ‘since it is so difficult to hold officers and directors liable in the civil sphere, why does the company not try to punish them in the criminal sphere?’

This may be an option but it also brings numerous risks to the company, which are sometimes even greater than those under a civil prosecution. However, there is not enough space to enter this debate in this article, so should be saved for another time.


[1]Article 159, Law No. 6,404: ‘By resolution adopted in a general meeting, the company may bring an action for civil liability against any senior manager for the losses caused to the company’s property’.

[2]Ibid: ‘A senior manager shall not be personally liable for the commitments he undertakes on behalf of the company and by virtue of action taken in the ordinary course of business; he shall, however, be liable for any loss caused when he acts: I – within the scope of his authority, with negligence or willful misconduct; II – contrary to the provisions of the law or of the bylaws’.

[3]Ibid: ‘ [...] § 6º A judge may excuse the senior manager from liability, when convinced that he acted in good faith and in the interests of the company’.

[4]Article 287, Law No. 6,404: ‘The prescrição shall apply: II – after three years, in the case of: (b) proceeding against the founders, shareholders, senior managers, liquidators, fiscal board members or lead company for malicious or culpable actions taken otherwise than in accordance with the provisions of the law, bylaws or a group bylaws; the period running: (2) as regard shareholders, senior managers, fiscal board members or lead companies, from the date of publication of the minutes which approved the balance sheet for the relevant financial year.’

[5]       '[...]it is shocking to admit that someone should be required to issue a release for acts and operations of which they are not even aware, and, in the future, to be prevented from freely acting when they become aware of the manager's dishonesty. Much more could be said, but because our lawmaker's poor choice is so manifest, it would not even be necessary. We are left with our criticism and the hope that the issue will merit reform by the Brazilian lawmakers’ (ADAMEK, Marcelo Vieira von. Responsabilidade civil dos administradores de S/A (e as ações correlatas). São Paulo: Saraiva, 2009, pp. 255/256).

[6]Article 286, Law No. 6,404. ‘Proceedings to annul resolutions made at a general or special meeting of shareholders which has been called or opened otherwise than in accordance with the law or bylaws, or which has been the subject of error, bad faith, fraud or misrepresentation, shall not be commenced after two years have elapsed from the date of the resolution’. In Portuguese: ‘A ação para anular as deliberações tomadas em assembléia-geral ou especial, irregularmente convocada ou instalada, violadoras da lei ou do estatuto, ou eivadas de erro, dolo, fraude ou simulação, prescreve em 2 (dois) anos, contados da deliberação’.

[7]In this sense, see: ‘It should be noted, however, that although it refers to prescrição, these, in fact, appear more properly to refer to decadência [...] In the case of decadência, the time runs continuously, and the precepts on interruption and suspension do not apply. This prevents interruptive and suspensive causes, which are pertinent to some shareholders, from spreading the risk of challenge for a long time’ (Borba, José Edwaldo Tavares. Direito Societário. 16ª ed. São Paulo: Atlas, 2018. pp 555/556); ‘[...] it seems to be evident that the term established in article 286 of the LSA [Brazilian Corporate Law] is a term of decadência [...]’ (Pereira, Guilherme Setoguti J. Impugnação de Deliberações de Assembleia das S/A. São Paulo: Quartier Latin, 2013. pp. 56/57); Lucena, José Waldecy.Das Sociedades Anônimas Comentários à Lei. Vol. III. Rio de Janeiro: Renovar, 2012. p 1147; França, Erasmo Valladão Azevedo e Novaes. Invalidade das Deliberações de Assembleia das S/A. São Paulo: Malheiros Editores Ltda., 1999, pp. 128/130.

[8]See the São Paulo State Higher Court’s case law: TJSP, Civil Appeal No. 0137033-28.2006.8.26.0000, Reporting Judge: Douglas Iecco Ravacci, trial on 29 April 2015; TJSP, Civil Appeal No. 1011064-58.2015.8.26.0068, Reporting Judge: Hamid Bdine, 1st Reserved Corporate Law Chamber, trial on 8 February 2017; TJSP, Appeal No. 0264023-21.2007.8.26.0100, 14th Extraordinary Private Law Chamber, Reporting Judge: Paulo Alcides, trial on 31 August 2017; TJSP, Civil Appeal No. 0138386-84.2012.8.26.0100, Reporting Judge: Ricardo Negrão, 2nd Reserved Corporate Law Chamber, December 11, 2017; TJSP, Civil Appeal 1010575-47.2016.8.26.0048, Reporting Judge: Augusto Rezende, 2nd Reserved Corporate Law Chamber; trial on 18 June 2018; TJSP, Civil Appeal No. 1075839-54.2013.8.26.0100, 1st Reserved Corporate Law Chamber of the Court of Justice of São Paulo, Reporting Judge: Alexandre Lazzarini, trial on 17 April  2019; TJSP, Civil Appeal No. 1134332-19.2016.8.26.0100, Reporting Judge: Cesar Ciampolini, 1st Reserved Corporate Law Chamber, trial on 25 September 2019. The Superior Court of Justice’s case law also follows the same approach, which can be seen in AgRg in Ag em REsp nº 752.829/SP, Reporting Judge: Min. Marco Buzzi, Forth Panel of the Superior Court of Justice, trial on 19 April 2016.


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