The Burden of an Unfounded Request for Piercing the Corporate Veil: Procedural Liability of the Claimant in Contemporary Case Law

This article aims to analyze the legal consequences arising from the improper use of the incident of piercing the corporate veil within the Brazilian legal system, highlighting the growing jurisprudential understanding that imposes on the claimant the burden for recklessly filing such a request. The discussion encompasses the legal foundations for disregarding the corporate entity (Article 50 of the Civil Code and Articles 133 to 137 of the Code of Civil Procedure of 2015), addressing the duty of procedural caution, the principle of objective good faith, and the consequences of an unfounded request, including the award of attorney's fees and sanctions for bad faith litigation. The article further discusses the balance between the protection of credit and the undue imputation of liability to shareholders.

Piercing the corporate veil is an exceptional remedy that seeks to set aside the legal separation between a business entity and its shareholders, thereby allowing the shareholders to be held liable when there is abuse of the legal entity. Although the doctrine is well established in the Brazilian legal system, there is a growing tendency to misuse the mechanism, particularly in enforcement proceedings and debt collection actions, aiming to reach the assets of shareholders automatically, without proper legal grounds.

In this context, contemporary jurisprudence has reaffirmed the necessity of respecting due process, including the right to be heard and the need for concrete evidence of misuse of the legal entity or commingling of assets. Most importantly, it stresses the claimant's duty of caution, under penalty of being held liable for the rejection of the request, including the obligation to pay attorney's fees.

2. Legal Foundation and Legal Nature of the Incident

The legal provision for piercing the corporate veil is found in Article 50 of the Civil Code, which stipulates that the disregard of legal personality is only admissible in cases of abuse, characterized by:

• Misuse of purpose; or

• Commingling of assets.

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With the enactment of the 2015 Code of Civil Procedure, the incident gained a specific procedural structure in Articles 133 to 137, requiring:

Formal initiation of the incident;

Notification of the affected party;

Full rights to adversarial proceedings and ample defense;

A judicially grounded decision for granting the request.

Therefore, the measure requires procedural caution, evidentiary support, and adherence to due process, under penalty of nullity and liability for unjustified requests.

3. Procedural Liability of the Claimant: Attorney’s Fees and Bad Faith Litigation

Recent case law has established that the party filing an unfounded request for disregard of the legal entity may be held procedurally liable, based on the following legal grounds:

Article 85, §2 of the CPC – liability for attorney’s fees of the prevailing party;

Articles 79 and 80 of the CPC – sanctions for bad faith litigation;

The principle of objective procedural good faith – duty of loyalty and diligence.

Jurisprudential examples:

“The dismissal of the request for disregard of the corporate entity, due to lack of evidence of legal requirements, results in the claimant’s obligation to pay attorney’s fees, as a means to deter reckless use of the incident.” (TJSP, Civil Appeal No. 1002377-98.2023.8.26.0011, judged on 02/12/2024)

“Where abuse of the right of action is established, with repeated and manifestly unfounded requests for disregard of the corporate entity, the imposition of sanctions for bad faith litigation is appropriate.” (TJMG, Civil Appeal No. 1.0000.21.016184-4/001, judged on 11/29/2023)

This understanding reinforces the notion that the responsibility for a reckless claim is not only moral, but also legal and pecuniary.

4. Balancing Credit Protection and Shareholder Asset Safeguard

The application of the disregard doctrine must not undermine legal certainty for shareholders acting in good faith. The mere default of a legal entity does not justify such a request. Evidence of abusive behavior, deceit, or simulation is required.

The Brazilian Superior Court of Justice (STJ) has ruled accordingly:

“The default of a business corporation, by itself, is not sufficient to justify granting a request for disregard of the corporate veil.” (STJ, REsp 1.775.091/SP, Reporting Justice Paulo de Tarso Sanseverino, judged on 05/06/2021)

Thus, the legal system seeks to ensure the effectiveness of credit protection without indiscriminately compromising the principle of separate legal personality.

5. Final Considerations

The indiscriminate use of the incident of disregard of the legal entity compromises the rationality of the procedural system and endangers the principles of patrimonial autonomy. Holding the claimant liable for an unjustified request represents not only a jurisprudential evolution but also a necessary safeguard against the abusive instrumentalization of the Judiciary.

Attorneys and parties must, therefore, ensure that any request for disregard is based on robust factual and documentary grounds, under penalty of bearing the burdens of procedural loss and bad faith litigation.