The Limits of the Director’s Performance as Per Law 14195/2021

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Popularly known as a bureaucratic country, the “infamous” Brazilian government requirements also reflect internationally and, in the business scenario, it could not be different. The World Bank’s ranking Doing Business is known for evaluating business and investments in economies around the world, to encourage countries to compete for more efficient business environments.

In this sense, on August 26, 2021, Law 14195/2021 [1] was sanctioned. Its objective was precisely to present initiatives aimed at facilitating the business environment, making provisions, among others, about the business scope, seeking an evolution of Brazil’s position with the respective ranking.

One of the main changes was the repeal of the sole paragraph of article 1015 of the Brazilian Civil Code [2], which provided for exceptional situations in which the company could disengage from obligations assumed by the Directors, if they had acted beyond the powers provided for in the articles of association, or if they were carrying out operations apparently foreign to the common business of the company.

This last situation was known in the law theory for being inspired by the Ultra Vires Societatis Theory, which argues that if the Director practices management acts in violation of the corporate purpose established in the articles of association, this act cannot be imputed to the company.

Although the Theory at first showed safety and protection for companies, its practical application did not follow the provisions of the Civil Code.

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