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Reverse Piercing of the Corporate Veil in the New Civil Code and Its Implications for Business Law


Reverse piercing of the corporate veil has become a significant tool for holding shareholders and administrators accountable when they use legal entities to defraud creditors or conceal assets. With the recent amendments to the Civil Code, this mechanism has been refined, and its requirements better defined, ensuring greater legal certainty for both creditors and businesses. This article examines the impact of these changes and their implications for Business Law.


Legal personality is a fundamental principle of business law, ensuring the separation of assets between a company and its shareholders. However, in certain situations, this separation can be abused for fraudulent purposes.


Reverse piercing emerges as a solution to curb abusive practices, allowing the judiciary to reach the assets of a legal entity to satisfy the debts of an indebted shareholder.


1. The Concept of Reverse Piercing of the Corporate Veil

Unlike traditional piercing, which seeks to hold shareholders’ assets liable for corporate debts, reverse piercing aims to target the company’s assets when there is evidence that it was used to hide the personal assets of a delinquent shareholder.

2. Changes in the New Civil Code

With the reform of the Civil Code, provisions were introduced to:


Define objective criteria for the application of reverse piercing;


Reinforce the need to prove misappropriation of purpose and asset commingling;


Better regulate the involvement of good-faith third parties in piercing cases;


Create preventive mechanisms to avoid creditor abuses and protect legitimate businesses.


3. Implications for Business Law

These modifications directly impact the business environment by:


Increasing legal certainty for companies operating in good faith;


Reducing the risk of improper asset shielding through shell companies;


Imposing new accountability obligations on managers and administrators;


Benefiting creditors who previously faced difficulties in recovering debts due to fraudulent asset structuring.


4. Jurisprudence and Trends

The Superior Court of Justice has established precedents indicating that reverse piercing should be applied cautiously, requiring robust proof that the company was used as a means to conceal a shareholder’s assets.


With the new rules, courts are expected to demand an even more rigorous analysis before granting such measures.


Conclusion

The reform of the Civil Code has improved the regulation of reverse piercing of the corporate veil, creating clearer criteria for its application and enhancing security for both creditors and business owners.


However, its effectiveness will depend on judicial interpretation and companies' adherence to the new regulations.

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