by Andre Bruno de Lins e Silva
April 24, 2017
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In a judgment held in December 2016, the Superior Court of Justice (RE no. 1,602,240 – MG), decided that the withdrawal right of a partner in an indefinitely term Limited Liability Company (“LLC”) may be effected only by sending a prior notice of at least sixty (60) days to the other partners.
Under Brazilian law, the right of withdrawal of the partner is foreseen in article 1.029 of the Civil Code. It is a right that the partner has to leave the partnership when he no longer intends to remain, which means that the affectio societatis – an essential requirement for constitution of a multi-person society – is no longer present.
The case relates to a partner who sent a notice to the other quotaholders of the LLC using the 60-day term to inform: (i) the decision of the partner to withdraw from the company, (ii) requesting the beginning of the valuation process and subsequent payment, and (iii) amendment of the articles of association to provide its exclusion from the corporate structure.
In this sense, the Superior Court confirmed that the unilateral notice to leave the company is a valid exercise of the quotaholder, as long as the 60-days term is respected. Such formality is the only extrajudicial requirement necessary for the withdrawal of an indefinitely term LLC, without the need of consent given by the other partners, judicial intervention or complete dissolution of the company.
Therefore, according to the court, it is not required, nor essential that a quotaholder who does not wish to be part of a indefinitely term LLC file a partial dissolution action, since the partner should simply send the extrajudicial notice foreseen in the Brazilian Civil Code. However, in the case of a term LLC, the judicial decision for partial dissolution is still required.
The requirement of an extrajudicial notice for the exercise of the aforementioned unilateral right of withdrawal also is not applied to the corporations, which are those governed by the law of corporations no. 6404/76, more precisely in Article 137.
In addition, it is appropriate to bring the court’s view on the base date (last date of the partner’s action) to determine the valuation process of the retiring partner. The case law of the High Court understands that it must be considered as the base date the following day after the expiration of the sixty (60) day term from the date of sending the extrajudicial notice, i.e., the 61st day – date in which the partial dissolution of the company was materialized.
Despite the truism, we emphasize that the sixty (60) days of notice must be included in the valuation process, considering that the retiring member has not yet left the company in fact.
As a conclusion of the withdrawal process – and as provided in article 1.031, paragraph 2 of the Brazilian Civil Code – the payment of assets resulting from the valuation process regarding the retiring member shall occur within ninety (90) days from the liquidation and in cash, unless otherwise foreseen in the quotaholder agreement and / or in the articles of association.
If the payment does not occur within the aforementioned period or in accordance with the company’s own agreement, it will be included in the calculation interest rate with the initial period of incidence at the end of the term.
This is without any doubt a highly relevant court precedent, since it confirms the possibility of a member achieving his right of withdrawal in a quick, less costly manner and without interference from the Judiciary.
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