The Superior Court of Justice (STJ) decided that partners are not secondarily liable for debts of civil associations. In a ruling handed down on April 4, the Third Panel of the Superior Court of Justice (STJ) rejected special appeal no. 1.398.438 - SC (2013/0269598-4), which sought to pierce the corporate veil of a civil association in order to reach the assets of its partners and, thereby, pay off unpaid debts of the association.
The appellate decision reported by Superior Court Judge Nancy Andrighi clarified that the issue was not exactly piercing of the corporate veil (a practice set forth in article 50 of the Civil Code), but rather the partners’ secondary liability, or lack thereof, for a civil association’s unpaid debts.
Having made this distinction, the ruling clarified that, because civil associations have as a fundamental characteristic the pursuit of non-profit activities, article 1023 of the Civil Code does not apply to them, according to which, “if the company’s assets do not cover its debts, the partners are liable for the balance in proportion to their stake in the company’s losses, except in the event of a joint and several liability provision."
According to the decision, the secondary liability of the partners is applicable only for general partnerships established for the pursuit of business activities, for profit. In the case of civil associations, in addition to there being no profits, there is no assumption of reciprocal obligations between partners.
In justifying this understanding, Superior Court Judge Nancy Andrigh considered the distinction made by the legislator in the 2002 Civil Code in not using the term “company" for civil associations, given the clear difference between their natures and purposes.
In her written opinion, the Superior Court Judge also explained that, although not the issue in the case under discussion in the special appeal, the possibility of piercing the corporate veil of a civil association requires a broader doctrinal debate and is not well established in the case law, ”principally because of its own very peculiar characteristics when compared with for profit companies."