The seizure of shares and the principle of affectio societatis

The limited liability company represents the type of company adopted by Brazilian entrepreneurs in the vast majority of cases, largely due to its contractual nature: the partners assume mutual obligations for the fulfillment of the company’s purposes, acting as true business partners, and establish the rules of structure and operation of the company by which they will remain reciprocally bound under the terms of the articles of association, the constitutive act of the company.

In fact, every business company is born from the agreement of will of its partners, from a combination of efforts to exploit economic activity in partnership – regardless of the type of company chosen. Called by the doctrine affectio societatis, animus contrahendi societatis or corporate spirit, it refers to the common interest in constituting and maintaining a company for the achievement of a specific purpose.

Affectio societatis is presented as an important principle of corporate law, with the Superior Court of Justice having affirmed that it is a “specific element of the commercial company contract”, which is characterized “as a will to unite and accept the common risks of the business” (1). As will be seen later, the importance of collaboration and mutual trust between partners in relation to the intended social purpose will be greater or lesser, depending on the type of company adopted, a point where contractual and statutory companies differ.

In contractual companies, the partners maintain clear legal relationships with each other, so that the personal characteristics of the contracting parties become an essential element for their existence. It is therefore characterized by the personal nature of its corporate organization (intuitu personae), insofar as it can only be maintained if harmony is preserved between the contracting partners, who will act together to achieve the social purpose. In contrast, in statutory companies, the identity of the partner is, as a general rule, only an accessory element, being constituted primarily based on the capital to be invested and without major concerns about the person of its holders (intuitu pecuniae).

In this sense, the transfer of shares between partners or in favor of third parties will be subject to greater or lesser legal limitations, depending on the type of company chosen. In the case of a public limited company, the principle of free transfer of shares applies, whereby the entry of outsiders into the company structure is independent of the consent of the other shareholders (2). In a limited liability company, when the articles of association are silent on the matter, the opposition of holders of more than one quarter of the share capital is sufficient to prevent the transfer of shares to a third party (3), in which case it is understood as a ‘partnership’. On the other hand, it is also possible that the articles of association authorize the free transfer of shares to third parties, thus characterizing a ‘capital company’.

Given the personal nature of a limited liability company, the question arises regarding the possibility of seizing shares for the personal debts of a partner: could a creditor, unrelated to the company’s structure, acquire the debtor’s shares and become a partner in a contractual company?

First, it is important to clarify that the debtor is liable for the fulfillment of their obligations with all their assets, present and future, as established in Article 591 of the Code of Civil Procedure (4). The same legal instrument makes no mention of a limited liability company share when dealing with absolutely unseizable assets, therefore, its seizure is permitted.

Even if the articles of association require the consent of the other partners for the entry of a third party into the company, jurisprudence accepts the seizure of shares (5). This is because patrimonial liability is a principle of public order, which evidently overrides any possible enforceability of a private agreement between the partners; the creditor cannot have their legitimate interest frustrated due to a limitation that the law did not create.

Although the attachment of shares is permitted, this does not necessarily imply the creditor’s entry into the company’s membership, given that the law offers alternatives for the satisfaction of their credit while preserving the affectio societatis: (i) the execution may fall on the profits to which the debtor would be entitled, up to the amount of the debt, in accordance with Article 1,026, caput, of the Civil Code (6); (ii) the company may redeem the execution, under the terms of Article 651 of the Code of Civil Procedure (7); (iii) the company may be notified by the court of execution, ensuring preference to the partners to adjudicate the attached shares, in accordance with Article 685-A, §4 of the Code of Civil Procedure (8); or (iv) if no satisfactory solution is reached, the creditor may request the partial dissolution of the company, with the liquidation of the debtor’s share, the value of which, after being determined in accordance with the law, will be deposited in the execution court, as determined by the sole paragraph of Article 1,026 of the Civil Code (9).

In view of the foregoing, it is clear how such alternatives seek to resolve the antagonism of the interests involved: on the one hand, the legitimate creditor seeking satisfaction of his credit cannot be prejudiced by an obstacle without legal provision; on the other hand, the partners who aim to maintain the company cannot be forced to accept the entry of a stranger into their undertaking, which would mischaracterize its very constitutive nature.

(1) STJ – Unanimous decision of the 3rd Chamber, published in the Official Gazette of 15-4-96, page 11,531 – Appeal No. 90,995-RS – Rapporteur: Minister Cláudio Santos – Attorneys: Cláudio Leite Pimentel and Luiz Carlos E. Piva. (2) “Article 36. The bylaws of a closed corporation may impose limitations on the transfer of registered shares, provided that it meticulously regulates such limitations and does not prevent negotiation, nor subject the shareholder to the discretion of the company’s administrative bodies or the majority of shareholders. Sole paragraph. The limitation on transfer created by a bylaw amendment shall only apply to shares whose holders expressly agree to it, by means of a request for registration in the ‘Register of Registered Shares’ book.” (Law No. 6,404/1976) (3) Art. 1,057, caput: In the absence of a contract, a partner may transfer his quota, in whole or in part, to another partner, regardless of the opinion of the others, or to a third party, if there is no opposition from holders of more than one quarter of the share capital. (Law No. 10,406/2002) (4) Art. 591. The debtor is liable for the fulfillment of his obligations with all his present and future assets, except for the restrictions established by law. (Law No. 5,869/1973) (5) “This Court has already established the understanding that it is possible to seize a social quota, including the contractual provision prohibiting the free alienation of quotas in a limited liability company, which does not prevent the seizure of such quotas to guarantee the payment of a partner’s personal debt. This is because said seizure does not encounter legal prohibition nor does it affront the principle of affectio societatis, since it does not necessarily entail the inclusion of a new partner.” (STJ – 3rd Panel – AgRg in AREsp 231266 / SP – 2012/0194699-8 – Rapporteur Min. SIDNEI BENETI. 10/06/2013) (6) Art. 1,026, caput: The private creditor of a partner may, in the insufficiency of other assets of the debtor, enforce execution against what is due to him in the profits of the company, or in the part that corresponds to him in liquidation. (Law No. 10,406/2002) (7) Art. 651. Before the assets are adjudicated or sold, the debtor may, at any time, redeem the execution by paying or depositing the updated amount of the debt, plus interest, costs and attorney’s fees. (Law No. 5,869/1973) (8) Art. 685-A. It is lawful for the creditor, offering a price not lower than the appraised value, to request that the seized assets be adjudicated to him. (…) § 4 In the case of seizure of a share, carried out by a creditor unrelated to the company, the company shall be notified, ensuring preference to the partners. (Law No. 5,869/1973) (9) Sole paragraph. If the company is not dissolved, the creditor may request the liquidation of the debtor’s share, the value of which, determined in accordance with art. 1.031, will be deposited in cash, in the court of execution, within ninety days after that settlement. (Law No. 10.406/2002)