De Facto Management in Business Companies: Liability of Non-Formally Appointed Managers

This article examines the concept of the de facto manager in business companies, particularly regarding their liability in situations involving abuse of power, mismanagement, fraud against creditors, or acts with significant legal implications. Although the Brazilian Civil Code provides for the formal appointment of managers, business practice reveals the existence of individuals who, without contractual designation, perform typical management functions. The article explores the legal criteria for identifying de facto management, its distinction from formally appointed (de jure) managers, and the legal grounds that support their liability toward third parties, including in corporate veil piercing and tax enforcement proceedings.

Under the Civil Code, the management of a business company is assigned to partners or third parties formally appointed in the articles of association or by resolution of the partners. However, Brazilian business reality shows that some individuals exercise control or management functions without regular appointment.

This figure, known as the “de facto manager,” is especially relevant in disputes involving civil, tax, labor, or bankruptcy liability, as it raises the question of who is truly responsible for corporate acts when the manager is not formally constituted.

This article examines the legal criteria for characterizing a de facto manager, the legal consequences of this status, and the ways such individuals may be held liable both in relation to the company and to third parties.

2. Distinction Between De Jure and De Facto Managers

• A de jure manager is someone formally appointed to manage the company, with powers defined in the articles of association and registered with the Commercial Registry, in accordance with Article 997, VII of the Civil Code.

• A de facto manager, on the other hand, is someone who, without formal appointment, exercises typical management powers and represents the company before third parties, even in an informal, irregular, or concealed manner.

The distinction is not in the title, but in the actual exercise of decision-making authority within the company’s structure. A de facto manager may be a hidden partner, a relative of a partner, a service provider, or any third party with real decision-making influence over the company.

3. Legal Grounds for Holding De Facto Managers Liable

The liability of de facto managers arises from the combination of several provisions within the Brazilian legal system:

3.1 Civil Code – Articles 50 and 927

Art. 50 – In cases of abuse of legal personality, characterized by deviation of purpose or asset commingling, the judge may extend the legal obligations of the company to the personal assets of its managers or partners.

Art. 927 – Anyone who, by an unlawful act, causes harm to another is required to repair it.

Case law admits that these effects may also extend to de facto managers when their conduct significantly contributes to the wrongdoing or resulting damage.

3.2 National Tax Code – Article 135, III

Company directors, managers, or de facto representatives are personally liable for tax debts when they act with abuse of power or in violation of the law, articles of association, or company bylaws.

3.3 Bankruptcy Law (Law No. 11.101/2005) – Article 82, §1

The liability of de facto managers is recognized in cases of fraudulent bankruptcy or mismanagement.

4. Case Law on De Facto Management and Liability

“When the de facto manager is proven to be the decision-maker in the company’s operations, they may be held liable for obligations undertaken in the name of the company, including under veil-piercing claims.” (STJ, REsp 1.775.091/SP, Justice Ricardo Cueva, judgment on 03/24/2022)

“De facto management liability in tax matters is permissible when the exercise of management powers involves abuse or legal violations.” (STJ, AgInt in AREsp 1.640.721/SP, judgment on 08/17/2020)

“The lack of formal appointment does not prevent the recognition of liability for a third party who actually performs management functions.” (TJSP, Civil Appeal 1039293-26.2021.8.26.0100, judgment on 11/21/2023)

5. Criteria for Identifying De Facto Management

To hold a de facto manager liable, it is necessary to demonstrate that they:

• Performed typical management acts, such as bank transactions, signing contracts, deciding on suppliers, and hiring;

• Participated in the company’s operational and strategic decisions;

• Personally benefited from the profits or structure of the company, despite lacking formal appointment;

• Assumed commitments or represented the company before third parties.

Documentary and testimonial evidence is essential to demonstrate the individual’s actual management role, even if their name does not appear in public records.

6. Practical Effects of Liability

A de facto manager may face liability on various fronts:

• Civil: compensation for mismanagement, abuse of power, asset commingling, or fraud;

• Tax: personal liability for tax debts where legal violations or overreach are proven;

• Bankruptcy: attribution of fraudulent bankruptcy, disqualification from business management, and personal liability;

• Labor: joint liability for unpaid labor obligations arising from informal management conduct.

7. Best Practices to Prevent De Facto Management

• Formally register all managers with the Commercial Registry;

• Prevent unauthorized third parties from performing management acts on behalf of the company;

• Maintain clear separation between investor-partners and operational managers;

• Control access to bank signatures, powers of attorney, and accounting documents;

• Properly document corporate resolutions and decisions.

8. Final Considerations

De facto management is a recurring phenomenon in Brazilian companies and, although often tolerated for practical or informal reasons, it can lead to serious legal consequences for those who assume control or managerial roles without formal appointment.

The liability of de facto managers is recognized under Brazilian law, especially when it is shown that their conduct contributed to illegal acts, fraud, evasion of obligations, or deviation from the company’s lawful purpose.

Documentary formalism and compliance with legal representation requirements are essential to ensure legal certainty in corporate structures and to protect the legitimate interests of partners, creditors, employees, and contracting third parties.