Family Holding Companies and Asset Protection: Legal Structure, Statutory Limits, and Risks of Piercing the Corporate Veil

This article analyzes the formation and use of family holding companies as a tool for asset and succession planning, focusing on the legality of asset protection and the legal risks associated with potential disregard of the legal entity. Although holding companies are legitimate mechanisms, there has been a growing misuse of this structure for shielding assets from creditors or concealing property. Based on civil legislation, case law, and contemporary legal doctrine, this article examines the limits of patrimonial autonomy and the precautions necessary to validate the corporate structure.

Family holding companies have become one of the main legal instruments used by Brazilian entrepreneurs and families for asset organization, planned inheritance, and tax efficiency. This structure aims to centralize the ownership of assets or shares in other companies under a single legal entity held by members of the same family.

Despite their legality and utility, holding companies have raised concerns when used improperly as a means of illegitimate asset shielding—especially when designed to avoid civil obligations or defraud judicial enforcement. This article aims to explore the legal foundations of holding companies, their limitations, and the risks of piercing the corporate veil when used abusively.

2. Concept and Purpose of a Family Holding Company

A holding company, under Brazilian legal doctrine, lacks a specific statutory definition. The term derives from the English verb “to hold,” meaning “to keep” or “to retain.” Its primary function is to control assets and manage businesses or investments owned by a family group.

Legitimate purposes include:

Succession planning, avoiding traditional probate proceedings;

Reduction of conflicts among heirs;

Optimization of tax burden;

Centralized management of real estate and financial investments;

Legal and organizational protection of family assets.

The formation of a holding company must comply with the Brazilian Civil Code (Articles 997 et seq.), including tax and accounting regularity, registration with the Board of Trade, and adherence to corporate law requirements.

3. Asset Protection: When Is It Legitimate?

Asset protection through a holding company is legally permitted and widely accepted, provided the structure is transparent and serves a lawful purpose. Legitimate asset shielding occurs when:

The company is duly incorporated and registered;

There is a clear separation between personal and corporate assets;

Assets are formally transferred to the holding company;

Accounting records are maintained accurately and regularly;

There is no fraudulent concealment or intent to defraud creditors.

In this context, the holding functions as an organizational extension of the business family—not as a fraudulent mechanism.

4. Legal Limits and Risks of Piercing the Corporate Veil

Article 50 of the Brazilian Civil Code provides for the piercing of the corporate veil in cases of abuse of legal personality, including misuse of purpose or asset commingling:

“In the event of abuse of legal personality, characterized by misuse of purpose or asset commingling, the court may, upon request, extend liability to the personal assets of the administrators or partners of the legal entity.”

In the holding context, the risks of veil piercing may arise from:

Simulated transfers of assets or transfers without proper registration;

Disorganized or informal asset management;

Formation of the holding company only after debts have arisen;

Mixing of funds and lack of accounting separation;

Omission of relevant information in tax or civil enforcement actions.

5. Relevant Case Law

Brazilian courts have upheld both the legitimacy of family holding structures and the lifting of the corporate veil in cases of abuse, as shown in the following decisions:

“The establishment of a holding company for succession and tax purposes does not, in itself, constitute fraud on execution. However, if the intent to shield creditors or conceal assets is demonstrated, veil piercing is admissible.” (TJSP, Civil Appeal No. 1007247-92.2022.8.26.0100, judged on 08/16/2023)

“The mere creation of a legal entity to protect family assets does not justify veil piercing. Proof of asset commingling or misuse of purpose is indispensable.” (STJ, AgRg in AREsp 1.425.884/MG, Reporting Justice Marco Buzzi, judged on 10/06/2020)

6. Best Practices for Holding Formation and Management

To ensure the validity of the holding company and avoid liability risks, the following best practices are recommended:

Drafting a detailed articles of incorporation with governance and anti-dilution clauses;

Formally registering the assets under the holding’s name, with proper accounting and tax documentation;

Maintaining separate and consistent accounting records, with regular bookkeeping and financial statements;

Implementing internal compliance procedures, particularly in linked operating companies;

Structuring succession planning with clearly defined usufruct and management clauses.

The adoption of these practices distances the company from any appearance of sham and reinforces the presumption of legality.

7. Final Considerations

The family holding company is a legitimate and effective instrument for asset and succession planning, provided it is established with lawful intent and maintains a clear separation between personal and corporate assets. However, its improper use—especially when aimed at evading civil, tax, or labor obligations—may lead to the disregard of the legal entity, exposing the holding's or shareholders’ assets to enforcement actions.

Legal professionals must guide clients in structuring holding companies with both formal and functional integrity, ensuring compliance, transparency, and proper documentation. Legitimate asset protection must be based on organization—not concealment.