On April 5, 2022, the Third Panel of the Superior Tribunal of Justice (STJ, the highest court for non-constitutional matters) unanimously denied Special Appeal no. 1.965.982/SP (“Special Appeal”), in a suit involving the stock investment fund Pinheiros Fundo de Investimento em Participações (current name of Bertin Fundo de Investimento em Participações – “FIP Bertin”) and BASF S.A. (“BASF”).
This case originated from a third-party intervention motion filed by FIP Bertin in a suit to enforce an extrajudicial instrument (“Collection Suit”) filed by BASF against Xinguleder Couros Ltda. and it guarantors. In that case, the court determined the inverse disregard of legal entity of Bracol Holding Ltda. (“Bracol Holding”), leading to the inclusion of FIP Bertin as a defendant in the Collection Suit and the freezing of the financial assets held in its bank account.
According to FIP Bertin, the financial assets deposited in an investment fund belong to each of the investors in a joint-ownership, or condominium, arrangement, in proportion to their investment, so the money cannot be used to satisfy a debt of a company integrating the same business group as one of the investors.
The decision by the Third Panel of the STJ addressed some important aspects related to the legal nature of investment funds, including establishing the impossibility of attaching a fund’s assets due to debts of the investors and the possibility of disregarding the legal entity to reach the assets of investment funds.
According to the leading opinion of the reporting justice assigned to the case, Justice Ricardo Villas Bôas Cueva, investment funds are constituted in the form of condominiums (as established in various laws and other normative acts, such as Art. 50 of Law 4,728/1965; Art. 1 of Circular 2,616/1995 from the Central Bank of Brazil; Arts. 3 and 4 of CVM Instruction 555/2014; and Art. 1368-C of the Civil Code (added by Law 13,874/2019).
Justice Cueva, however, held that not all legal provisions governing civil condominiums are applicable to investment funds. Therefore, although not having legal personality, investment funds have rights and duties, both in their internal and external relations. In other words, although they engage in activities through the intermediation of their administrator and/or portfolio manager, investment funds can hold rights and be subject to obligations in their own name.
Therefore, the fact that investment funds have the legal nature of a condominium and do not have legal personality is not able to prevent, by itself, the application of the mechanism of disregard of legal entity in cases of proven abuse of rights due to deviation of purpose or commingling of assets.
In this sense, the reporting justice stated that the investors in investment funds do not have the prerogatives of Art. 1314 of the Civil Code¹, since the investors do not fully enjoy the rights over the underlying assets of the fund; but only the rights related to the notional fractions representing their proportional participation in the investment fund (i.e., their shares).
Therefore, Justice Cueva indicated that in theory, the assets of investment funds belong, in a condominium arrangement, to all the investors, so that the fund cannot be held liable for the debt of a single investor. Only the respective shares can be attached to satisfy the debt of one of the investors.
For the same reasons, in an inverse sense, the shares of investment funds cannot be attached to satisfy debts of the fund.
Notwithstanding the interpretations of the rules described above, which must be observed in normal circumstances, Justice Cueva held that they must yield in face of unequivocal proof that the investment fund was constituted fraudulently, as a way to evade the law and conceal assets of companies belonging to the same business group, “always exercising caution not to affect the shares owned by investors that had no relationship with the debtor”.
In the Collection Suit at issue here, the inverse disregard of legal entity of Bracol Holding to reach the assets of FIP Bertin was declared by the lower court judge, based on the presence of the requirements of deviation of purpose and commingling of assets, as set forth in Art. 50 of the Civil Code. For this reason, the investment fund – holder of rights and obligations – was included as a defendant in the Collection Suit, as one of the members of the business group of Bracol Holding.
In this respect, the reporting justice also took into consideration that at the moment of the constraint, the investment fund had only two investors, which also were members of the business group of Bracol Holding. Thus, the restraint of the assets of FIP Bertin did not pose a risk of affecting the assets of third parties.
Hence, the following conclusions can be drawn from the decision in Special Appeal no. 1.965.982/SP:
(i) investment funds can be holders, in their own name, of rights and obligations;
(ii) as a general rule, the shares held by the investors in investment funds cannot be attached to satisfy the personal debts of another investor;
(iii) only the shares owned by the debtor can be attached to satisfy its creditors; and
(iv) in exceptional conditions, of abuse of rights, the mechanism of disregard of legal entity can be applied to reach the assets of the investment fund itself, but with the need to safeguard the rights of third parties (i.e., the investors not subject to the disregard).
More information, including the full text of the decision rendered in Special Appeal no.1.965.982/SP, can be found at the website of the STJ (www.stj.jus.br/sites/portalp/Inicio).
¹ Art. 1314. Each joint owner can use the object according to its purpose, exercising over it all the rights compatible with inseparability, claims against third parties, defense of possession and alienation of the notional interest, or encumbrance of it.
Sole paragraph. None of the joint owners can alter the purpose of the common object, or give possession, use or enjoyment of it to outside parties, without the consensus of the others.
