On January 3rd, 2019 the Brazilian Government enacted Law No. 13,792/2019, which amended the quorum for the removal of quotaholders from the position of managers in the articles of association of limited liability companies.
The new regulation also dismissed the requirement to call a quotaholders’ or general meeting for the exclusion of a quotaholder in limited liability companies composed of only two quotaholders.
The quorum for the removal of a quotaholder from the position of manager in the articles of association, in accordance with paragraph 1st of article 1,063 of the Brazilian Civil Code, which used to be of at least two thirds (2/3) of the corporate capital, was reduced to more than 50% of the corporate capital, except if otherwise provided for in the articles of association. The new quorum is now the same as the quorum for the removal of managers who are not quotaholders, as contemplated in articles 1,071, item II, and 1,076, item II, of the Brazilian Civil Code, which already provided for the quorum of more than 50% of the corporate capital in such case.
The Law also amended the sole paragraph of article 1,085 of the Brazilian Civil Code, by creating an exception for the extrajudicial exclusion of a quotaholder in limited liability companies composed of only two (2) partners, in order to permit the exclusion to be determined without quotaholders’ or general meeting specially called for such purpose. This change aims to contribute to the current scenario of limited liability companies (in accordance with recent studies, 85.7% of the limited liability companies incorporated in São Paulo have only two quotaholders) by way of facilitating the exclusion of a quotaholder in such cases and avoiding that the issue be discussed in court rather than resolved administratively. It is important to point out that the extrajudicial exclusion of partners with cause is only possible if it is expressly contemplated in the company’s articles of association, based on acts of undeniable gravity executed by the quotaholder subject to exclusion that may be putting the continuity of the business at risk.