Show Your Administrator the Way Out

Brazilian companies formed as limitadas are governed by their contrato social the same way a US limited liability company is governed by its operating agreement. But it's not always possible (or in some cases desirable) to include governance rules for all situations. Nobody wants a 100 page document that covers hypothetical after hypothetical.

So instead, there are default rules imposed by statute. In Brazil, these rules are codified in the Civil Code. Like member-managed LLCs in the US, a Brazilian limitada can be managed by a shareholder or sócio-administrador. In the past, the law provided that a sócio-administrador could only be removed from office after a vote of two-thirds of the company’s capital.

But in 2019, with the passage of Law 13.729, the default rules for limitadas changed. And one of the new rules addresses the removal of administrators who are also shareholders. Now, it takes just a simple majority vote of the company’s equity interests.

As a result of the change, any administrator - whether a shareholder or not, and no matter if appointed in the contrato social or otherwise - can be removed with a simple majority vote of the company’s capital. There’s one caveat though. If the contrato social says otherwise, that provision will govern.

Having the ability to remove someone who manages the business yet is no longer serving the company’s interests is critical. And now, it’s far easier to do so. Assuming the contrato social is silent, all it’ll take is a majority of the voting interests.