Until the advent of Law 13.874/19 (Economic Freedom Law), there was much debate about the legal nature of investment funds and the extent of liability of their quotaholders for unsettled liabilities of these funds.

With the exception of real estate funds – the only type of investment fund that was regulated by specific law and which limited the liability of quotaholders[1] – the majority doctrine, based on the regulations issued by the Brazilian Securities and Exchange Commission (CVM), understood that investment funds:

  • presented a condominium nature (although covered with special characteristics that differentiated them from the civil condominium), without their own legal personality; and
  • were subject – given the legislative gap on the limitation of liability of quotaholders (with the exception of real estate funds) – supplementarily to the rules on the general condominium. As a consequence, it was understood that the quotaholder was liable for all the fund’s unsettled liabilities (respected only its quota-share in the condominium).[2]

With the enactment of the Economic Freedom Law, investment funds were finally regulated and included into the civil law (via the insertion of the new Chapter X in the Civil Code) and had their legal nature defined as a "condominium of a special nature". According to the new law, the rules of the general condominium set forth in Articles 1,314 and following of the Civil Code are not applicable to investment funds. The unlimited liability of the condominium members, therefore, was expressly excluded.

The law also expressly allowed the bylaws of an investment fund to provide for the limitation of the liability of a quotaholder (for liabilities of the fund) to the value of the quotas subscribed by that quotaholder[3].

Currently, the draft of the CVM resolution which shall provide for the constitution, operation and disclosure of information of investment funds, as well as the provision of services to the funds, is under discussion. The same resolution will regulate the Economic Freedom Law and the outlines of the legal nature of investment funds and the limitation of liability of their quotaholders.

Without prejudice to this regulatory advance, which is still pending, it can be concluded that the liability of quotaholders is now regulated and may be limited.

The question that arises is: how will the judiciary interpret this limitation and what are the hypotheses in which it can be derogated so that creditors of an investment fund may access the equity of the quotaholders of that fund? Will the same arguments used for disregarding the legal personality of companies be valid? Will the rules on economic group joint and severe liability, used in labor matters, be applied? Or, furthermore, will subsidiary liability be applied in tax matters?

Liability of the quotaholder

Although the Economic Freedom Law has granted to the investment funds the nature of a condominium, the special characteristics of this condominium mean that quotaholders do not have the same prerogatives that condominium members have in relation to the common property, in particular to "use the property in accordance with its purpose, exercise all rights compatible with the indivisibility, claim it from third parties, defend its possession and alienate the respective ideal part or encumber it" (Art. 1,314).

Differently from what occurs in the civil condominium, the quotaholders of an investment fund only have rights over the equity fractions of the fund proportional to the investment made (represented by quotas), including the respective earnings, right of redemption and right to participate in the liquidation of the common equity.

The assets of the special condominium called fund are not, strictly speaking, direct assets of its quotaholders, nor are they available to be pledged to satisfy creditors of these quotaholders.

Accordingly, the quotas of an investment fund cannot be held liable for debts or liabilities of the investment fund itself, unless the fund's Bylaws do not limit the liability of the quotaholder.

Each quotaholder holds rights exclusively over the quotas representing the investment made by him/her for the achievement of the common equity of the fund, and, therefore, the quotas belonging to the other co-investors cannot be affected by debts incurred by a quotaholder.

STJ Decision

Recently, the Third Panel of the Superior Court of Justice (STJ) decided[4] that investment funds may be subject to inverse disregard of legal personality if they are used to shield the assets of their quotaholders with the clear intention of harming creditors.

Despite the facts of the decision predate the enactment of the Economic Freedom Law, the decision reveals that the limitation of liability, even if established via Bylaws and now supported by law, will not be absolute, and there will be cases in which it may be relativized or derogated from.

The rules designed to protect the equity of the investor (quotaholder) shall lose applicability when there is unequivocal proof that the investment fund itself was constituted in an abusive manner, either with the intent to defraud creditors or to serve purposes that are not appropriate to the nature and objectives of investment funds. An example would be removing the assets of the fund (cash, receivables, real estate, shares) from the universe of assets available for pledge and, consequently, harming the creditors of a quotaholder.

This fraudulent intent is not related to the activities of the fund – which are conducted by professional service providers duly registered with CVM (as determined in CVM Instruction 555/14) – but rather to the interests of their quotaholders (individuals or legal entities), who use its umbrella to hide assets.

The STJ’s decision was rendered in this context. In the case under analysis, a private equity investment fund (FIP) had two companies from the same economic group as its quotaholders. Both – in view of the derisory value of the transfer of FIP quotas between them (extremely inconsistent with the market value) – acted with misuse of purpose and patrimonial confusion to hide the true wealth of the economic group to which they belong – with the clear intention of harming creditors.

That is, in view of the abuse of the entity's purpose and the absence of third parties (quotaholders) acting in good faith, it became possible to apply the inverse disregard of the legal personality of the quotaholders (in parallel with Art. 50, § 3, Civil Code), directly affecting the net equity of the FIP.

It seems, therefore, that the tendency is for the Judiciary to adopt the hypotheses of disregard of legal personality (in direct or inverse modalities) contained in Art. 50 of the Civil Code for similar abuse cases involving investment funds and their quotaholders. In view of the misuse of the investment vehicle, the rules applicable to the equity protection of quotaholders should not prevail, under penalty of emptying the characteristic purpose of the entity.

Cases of disregard of legal personality of invested companies of investment funds, which lead to liabilities of these companies being attributed to their partners, including investment funds, may also affect the quotaholders of these funds, especially under the arguments of "economic group" used in labor matters.

From the tax perspective, investment funds have been repeatedly subject to assessments by the Brazilian Federal Revenue Service. As a rule, the legislation attributed to the fund administrator the responsibility for the taxes levied on the income earned by the quotaholders or by the fund portfolio itself – in these cases, the administrator is the taxpayer of the tax obligation as the responsible party.

In this context, there are cases of assessment at the administrative level (Administrative Council of Tax Appeals - Carf) against the administrator of investment funds. With regard to quotaholders, there are also cases of assessments arising from abusive tax planning, as the one that involved the decision of STJ.

Based on these considerations, the contours of the liability of investment fund quotaholders will still depend on a more in-depth examination, by the Judiciary, of the concepts brought by the Economic Freedom Act and the CVM regulation that is yet to come.


[1] Pursuant to item II of Art. 13 of Law 8,668/93, the quotaholder "II - is not personally liable for any legal or contractual obligation, in relation to the properties and undertakings that are part of the fund or of the administrator, except for the obligation to pay the full amount of the subscribed quotas".

[2] Refer to Articles 1,315 and 1,320 of the Civil Code.

[3] Refer to Article 1,368-D of the Civil Code.

[4] Refer to the judgment of Special Appeal 1965982 - SP, of April 5, 2022.