By Vitor de Menezes Venancio Martins / Antonio Carlos C. Mazzucco

After much discussion between doctrine[1] and the practice[2] regarding the issuance of preferred shares by limited companies, the Department of Business Registration and Integration (“DREI”) published, on March 2, 2017, through Normative Instruction No. 38 (“IN 38/17”), the new wording of the Limited Company Registration Manual, to allow, among other things[3], the issuance of preferential shares for limited companies.

The changes to IN 38/17, which came into force on May 2, 2017, are demands that the market has long required from the competent authorities, so that the changes made aim to allow the elaboration of more complex and flexible corporate arrangements, aligned with the characteristics of public limited companies (coming closer to the characteristics prior to the enactment of the Civil Code, favoring the freedom of contracting of the partners).

Despite several changes brought about by IN 38/17, on this occasion, we will highlight the authorization of limited companies to issue “preferential shares”, with other topics being addressed on other occasions.

Discussions regarding the possibility or not of issuing preferential shares began after the new Civil Code came into effect, which:

• elected the character of a society of people (personal intuition), for limited companies, which favors the principle of one share and one vote (Art. 1,010 of the Civil Code). Despite having favored the personal intent the new Civil Code, at no time, prohibited in any of its legal provisions, the issuance of preferential quotas; in fact, there is a provision that allows the creation of equal or unequal quotas (Art. 1,055 of the Civil Code); and
• revoked Decree No. 3,708/19, which allowed the issuance of preferential shares, because it privileges the autonomy of the partners' will, as long as legal limits are respected.

The analysis of the position of the Commercial Boards will demonstrate that the uncertainty regarding the topic is not something recent, with the subject and the interpretation given to it being debated and modified over the years.

Before the enactment of the Civil Code, commercial boards allowed the issuance of preferential shares. For example, on August 20, 1981, JUCESP recognized, through Opinions 71/78 and 137/81, the possibility of issuing preferential shares.

After the enactment of the Civil Code, the then National Department of Commercial Registration (“DNRC”), currently replaced by DREI, issued Normative Instruction No. 98/2003, which expressly prohibited the issuance of preferred shares in limited companies, so that the country's Commercial Boards refused to file corporate acts and contracts with the stipulation of the issuance of preferred shares.

Currently, with the new positioning of DREI, through IN 38/17, the Commercial Boards of the country must standardize their understanding, allowing the registration of acts and corporate contracts with the stipulation of preferential quotas for their partners.

Another point, no less important, is that the articles of association of limited companies that issue preferred shares will not need to describe in their wording the supplementary regulation by the Corporations Law, Law No. 6,404, of November 15, 1976, (“LSA”), since the Commercial Boards will consider, in a presumed manner, the supplementary regulation by said law, as long as there are any elements of the LSA.

In relation to the above, there appears to be an inaccuracy from a technical-legal point of view, namely, the confrontation between the rule set out in Art. 1,053 of the Civil Code[4] and the insertion, by IN 38/17, of the supplementary regulation of limited companies by the rules governing corporations. The aforementioned article establishes that limited companies are governed, in the omissions of the respective Chapter, by the rules of simple companies and not by the rules of corporations. Thus, the DREI, by assuming, ex officio, that the regulation of limited companies will be carried out by the rules of corporations – when there are elements related to the LSA – instead of simple companies, ignores the aforementioned legal provision and legislates without the authority to do so. This issue could have been left for regulation between the partners themselves.

As is generally known, the DREI, as an administrative body, does not have the power to legislate, its power being restricted to verifying formal aspects relating to documents to be registered and prohibitions on archiving.[5]. In other words, it is not the responsibility of DREI to introduce or restrict, through normative instructions, legal issues that must be addressed by current legislation, and it is up to DREI to verify the formal aspects of the acts and corporate contracts registered, as already mentioned.

We would like to remind you that there are bills being voted on in the Federal Senate and the Chamber of Deputies that could, once and for all, solve this issue. Below we detail these legal bills that aim to make the issuance of preferred shares by limited companies legal, namely, (i) in the Federal Senate, Bill No. 487/2013, authored by Senator Renan Calheiros, also expressly provides for the authorization of the creation of preferred shares for limited companies; (ii) in the Chamber of Deputies, there is a bill to amend the Bill of the New Commercial Code.[6], Amendment No. 192/2013, which expressly provides for the creation of preferential quotas.

[1] Salles, Denise Chachamovitz Lion – Preferential Shares, in AZEVEDO, Luis André N. de Moura. CASTRO, Rodrigo R. Monteiro (Coordination). Contemporary Limited Liability Company. São Paulo: Quartier Latin, 2013.

[2] DNRC, Normative Instruction No. 98/2003.

[3] Among the changes, we highlight: EIRELI having as its sole shareholder a national and foreign business corporation, limited liability companies may (i) issue shares with unequal value (without nominal value), hold shares in treasury, acquire their own shares and, if it uses any characteristics of corporations, the registration body will assume that the company will be governed by Law No. 6,404, of November 15, 1976 (“LSA”)

[4] Art. 1,053. A limited liability company shall be governed, in the event of omissions in this Chapter, by the rules of a simple company.

[5] Articles 53 and 54 of Decree No. 1,800 of January 30, 1996, and Article 35 of Law No. 8,934 of November 18, 1994

[6] Bill No. 1572/2011 by Deputy Vicente Cândido