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The Brazilian Anti-Corruption Act (Law #12,846/2013) represents a fundamental milestone in Brazil's fight against corruption by establishing, among other provisions, the objective liability of legal entities for acts harmful to the public administration.
One of the most relevant and debated topics concerning this legislation has been the extent of liability, particularly regarding joint and several liability between companies within the same economic group.
On June 3 of this year, the First Panel of Brazil’s Superior Court of Justice reaffirmed and solidified the understanding that the unrestricted application of joint and several liability, as provided for in Article 4, Paragraph 2 of said Act, is mandatory. This highly significant judgment has eliminated any remaining interpretive differences on the issue. The ruling was delivered during the judgment of Special Appeal #2.209.077-RS, as reported by Justice Paulo Sérgio Domingues. The details are presented below.
1. Contextualization of the judgment
The Superior Court of Justice's First Panel ruling consolidated the denial of the Special Appeal filed by SUL CONCESSOES RODOVIARIAS S/A. In effect, the decision confirms the validity of the Brazilian Anti-Corruption Act's provisions on joint and several liability between controlling, controlled, affiliated, and consortium companies, as expressly stated in the judgment's summary:
SUMMARY “CIVIL AND ADMINISTRATIVE PROCEDURE. SPECIAL APPEAL. VIOLATION OF ARTICLE 1,022 OF CODE OF CIVIL PROCEDURE. NOT ESTABLISHED. ARTICLE 4, PARAGRAPH 2, OF THE BRAZILIAN ANTI-CORRUPTION ACT (LAW #12,846/2013). INTERPRETATION. PASSIVE LEGITIMACY. JOINT AND SEVERAL LIABILITY. PERMISSIBILITY. APPEAL DENIED.”
The higher court thus upheld the thesis that liability for acts harmful to the public administration, under the Brazilian Anti-Corruption Act, broadly encompasses corporate relations. This aims to prevent asset shielding between companies in the same economic group and the evasion of liability.
The core of the Special Appeal filed by SUL CONCESSOES RODOVIARIAS S/A was an alleged violation of Article 1,022, I, of the Brazilian Code of Civil Procedure, due to claimed obscurity in the appealed decision from the Regional Federal Court of the 4th Circuit regarding the interpretation of Article 4, Paragraph 2, of the Brazilian Anti-Corruption Act. The appellant argued that joint and several liability should not be applied broadly and without restriction, contending that the head provision of Article 4 conditions such liability on the occurrence of specific corporate changes (such as contractual changes, transformation, incorporation, merger, or spin-off).
The appellant's statement is explained in the vote report: “It is claimed that there was an infringement of Article 11, III, of Complementary Law 95/1998 and Article 4, Paragraph 2, of Law #12,846/2013, on the grounds that joint and several liability should not be applied broadly and unrestrictedly, since the head provision of Article 4 conditions solidarity to the occurrence of corporate modifications.”
The Court, however, rejected the appellant's arguments. First, the alleged violation of Article 1,022 of the Code of Civil Procedure was dismissed, asserting that the jurisdictional provision was adequately addressed and that the Regional Federal Court ruling was not flawed. On the merits, the Court emphasized that the interpretation of Article 4, Paragraph 2 must be teleological, seeking to fulfill the rule's purpose of preventing legal entities from evading their responsibilities through legal artifices or corporate restructuring.
2. Validation of the interpretation of Article 4, Paragraph 2 of the Brazilian Anti-Corruption Act
Law #12,846/2013 provides in its article 4 and in the respective paragraph as follows:
Article Four and Paragraph Two
Article 4. The legal entity shall remain liable in the event of a contractual change, transformation, incorporation, merger, or spin-off.
Paragraph 2. The controlling, controlled, or affiliated companies, or, within the scope of the respective contract, the consortium members, shall be jointly and severally liable for the acts provided for in this Law, with such liability being limited to the obligation to pay a fine and fully compensate for the damage caused.
The Superior Court of Justice, corroborating the Regional Court's understanding, clarified that the head provision of Article 4 does not establish a condition for attributing joint and several liability. On the contrary, the provision aims to guarantee the continuity of the legal entity's liability despite corporate changes. In other words, liability persists even if corporate transformations or reorganizations occur, and these cannot be used as a subterfuge to exempt the entity from its obligations.
The essence of the Superior Court of Justice's interpretation lies in the purpose of Paragraph 2, which is to “cover the greatest possible number of situations within the scope of the creation, transformation, grouping and dissolution of companies, thus preventing the absence of liability due to a legislative gap.” This understanding primarily seeks to prevent economic groups from using complex corporate structures to avoid liability for illegal acts.
Said decision cites the following legal scholarship: “With the same purpose already expressed in other articles, the law intends here to prevent certain situations from being excluded from its scope due to the absence of certain formalities or legal gaps; in this case, the situation of economic groups.”
The court of origin (Regional Federal Court of the 4th Circuit), in a passage endorsed by the Court of Justice, was more incisive, stating: “Although the head provision and Paragraph 1 concern changes made to the legal entity subsequent to the establishment of a relationship between the private company and the Public Administration, Paragraph 2 states, in a general and broad manner, that controlling, controlled, affiliated and consortium companies are jointly and severally liable for the acts provided for in that law The intention of the rule is clear in the sense of preventing business conglomerates from avoiding responsibility.”
Furthermore, the decision emphasizes that the date on which the controlled or affiliated legal entities were created is irrelevant; what matters is whether the illegal acts occurred or produced effects after the Brazilian Anti-Corruption Act came into force. This prevents leading conglomerate companies from evading liability by controlling interposed legal entities created before the law.
3. Implications of the decision
The Superior Court of Justice decision has profound implications for corporate liability. In this specific case, the Court upheld the inclusion of a company holding more than 20% of the concessionaire's share capital — which was directly responsible for the harmful acts — as a passive party in the action based on the Anti-Corruption Act. This inclusion was based on the company falling within the definition of “affiliate” and thus being subject to joint and several liability.
The Regional Federal Court ruling, ratified by the Superior Court of Justice, explains this qualification: “Regarding the concept of affiliates (…) The aforementioned provision characterizes an affiliated company as one that holds 10% (ten percent) or more of the capital of another company, without controlling it. In the case at hand, the appellant holds more than 20% of the concessionaire’s share capital.”
This reinforces that the mere existence of a significant corporate link, as defined by civil legislation, is sufficient to attract joint and several liability under the Anti-Corruption Act, regardless of whether the affiliated company directly committed or contributed to the illicit acts. According to Article 1,099 of Brazil’s Civil Code, an affiliation is characterized by a participation of 10% or more of the share capital. The logic is that by joining a conglomerate and benefiting from its actions, even indirectly, the company assumes the inherent risks of the association.
This interpretation aligns with the objective nature of liability established by the Act and its purpose of holding entities accountable that, while not directly performing the unlawful act, are part of a corporate complex that benefited from or should have prevented the harmful practice. The thesis that the controlling or affiliated company, due to its prominent position, “concretely contributed to the final result” or “in some way benefited from possible undue advantages” is a key basis, eliminating the need to prove direct participation in the corrupt act itself and instead focusing on management responsibility and the benefits derived by the group as a whole.
This decision is crucial for a number of reasons:
• Combating impunity: It hinders the use of corporate restructuring and complex corporate networks to evade accountability for acts of corruption.
• Strengthening governance: It imposes a greater burden on companies within economic groups, encouraging the implementation of robust compliance programs and thorough due diligence across all subsidiaries and affiliates.
• Alignment with the Law's Purpose: It ensures that the purpose of the Brazilian Anti-Corruption Act — to hold legal entities objectively liable for acts harmful to public administration — is fully achieved, without loopholes that could allow evasion of responsibility.
For companies operating in economic groups, the message is clear: corporate interconnection implies shared responsibility. A simple significant stake in another company's share capital may be sufficient to attract joint and several liability, even without proof of direct involvement in the unlawful acts. Therefore, diligence and integrity must permeate all operations and relationships within a group, both as a preventive measure and to comply with the strictness of the Brazilian Anti-Corruption Act. The evolution of case law, as demonstrated by this judgment, signals an increasingly demanding legal scenario for corporate integrity in Brazil.
This reinforces the caution companies must exercise when conducting due diligence on acquisition or merger targets, as acts committed in violation of the Act can leave a bitter legacy for those who neglect to adequately assess these risks in their decision-making. With this in mind, Licks Attorneys' services for preparing such due diligence can save partners and directors significant money and headaches.
