The Brazilian Superior Court of Justice (STJ) has recently established new parameters for the disregard of legal entity, a institute that allows creditors of a company to seek accountability for the assets of its partners or other companies in the group under certain circumstances.
The STJ’s decision introduces a significant change for creditors: the mere existence of an economic group or the conduct of commercial transactions between companies is no longer sufficient to justify the disregard of legal personality.
To apply this measure, it is necessary to clearly and objectively demonstrate the existence of asset confusion or diversion of purpose. Asset confusion occurs when the assets of the company and its partners become so intertwined that it is impossible to identify ownership of each asset. Diversion of purpose is characterized by the use of the legal entity for purposes unrelated to its social objectives, to the detriment of creditors.
With this new guidance, creditors must be prepared to present robust evidence demonstrating the occurrence of these requirements. Simply alleging that there has been harm to the bankrupt estate will no longer suffice. It is necessary to clearly and objectively show how the legal entity was used to defraud creditors or divert assets.
This STJ decision provides greater legal certainty for business relations by defining the boundaries of disregarding legal personality. However, it is important to emphasize that the disregard of legal entity remains a crucial tool for protecting creditors, especially in cases of fraud and abuse.
