Aline Pardi Ribeiro
Lawyer at Marcos Martins Advogados
On July 11, 2011, Law No. 12,441 was enacted, amending the Brazilian Civil Code in order to introduce the individual limited liability company (“EIRELI”) as a new type of legal entity under private law.
In theory, any person who wishes to explore a specific activity without the cooperation of other partners, with liability limited to the value of the paid-in share capital, can set up an EIRELI if they meet minimum requirements, such as the value of the share capital corresponding to at least one hundred times the minimum wage in force and the natural person who sets up an EIRELI can only appear in a single company of this type.
This institute initially served the purpose of formalizing the individual entrepreneur sector, as well as constituting a specific legal entity for those who own limited companies, but who, in practice, have their business managed by just one partner.
However, since its creation, the EIRELI has been the subject of controversy in the legal world in relation to the understanding of its ownership, whether held by a natural or legal person, which is due to the existence of a gap in the legislation that conceived it, specifically the “caput” of art. 980-A of the Civil Code, transcribed below:
Art. 980-A. The individual limited liability company shall be set up by a single person who holds the entire share capital, duly paid up, which shall not be less than 100 (one hundred) times the highest minimum wage in force in the country.
The legislator did not specify the type of person who would be the owner of the EIRELI, whether natural or legal, leaving room for different interpretations. Nevertheless, the now defunct National Department of Trade Registration – DNRC (now the Department of Business Registration and Integration) published Normative Instruction No. 117 of November 22, 2011 (“IN No. 117”), which came into force in January 2012, restricting the understanding that the owner of the EIRELI should only be a natural person, Brazilian or foreign, resident and domiciled in the country or abroad. By issuing IN 117, the DNRC went beyond its regulatory powers and started restricting the ownership of the EIRELI to legal entities, which had not been done by the legislation itself, as can be concluded from a simple reading of art. 980-A of the Civil Code.
From then on, the figure of the EIRELI had restricted application, contrary to the provisions of institutes similar to the EIRELI existing in countries such as Portugal, France and Germany, which do not restrict ownership to natural persons only, but allow it to be held by legal entities as well.
The country’s jurisprudence has begun to express its opposition to the provisions of IN No. 117. Recently, a decision was handed down by the 13th Federal Court of São Paulo on the subject, by Federal Judge Wilson Zauhy Filho, who contested the provision contained in IN No. 117, stating his understanding that the prohibition is not in line with the provisions of Law No. 12,441, which instituted the EIRELI, in the sense that “there is no distinction between natural and legal persons as the owners of EIRELI”.
there is no distinction between natural and legal persons such as those who own an individual limited liability company”. As a result, an injunction was granted for the São Paulo State Board of Trade (“JUCESP”) to register the EIRELI as a legal entity, in the manner sought by the plaintiff. Another ruling on the subject was obtained in the state of Rio de Janeiro. In a decision handed down by the 9th Public Finance Court, Judge Gisele Guida de Faria also ruled that DNRC Instruction No. 117 went beyond the provisions of the law that established the EIRELI, and stated in the case file that “since the constitutional principle of legality derives from the maxim that no one is obliged to do or refrain from doing anything except by virtue of the law, it was not up to the DNRC to regulate the matter by inserting a prohibition not provided for in the law”.
It is to be hoped that with more favorable rulings on the existence of an EIRELI to be held by legal entities, the DNRC’s rules will be updated in order to speed up Brazilian Corporate Law, since the change in understanding of the ownership of the EIRELI could serve as an attraction for foreign investors, reduce the bureaucracy involved in setting up companies in Brazil, in addition to the tendency to increase the formality of limited companies that maintain minimum shareholdings of partners just to meet the legal requirement of plurality.
