By Giuseppe Giamundo Neto and Fernanda Leoni

The Federal Court of Auditors, as a sui generis body in our legal system, derives its powers directly from the constitutional text, which means recognizing a broad range of powers, as clearly set out in article 71 of the Constitution, combined with limited regulatory powers, ensuring both that its powers remain compatible with its purpose and the integrity of the constitutional structure of established Branches.

In this context, there is frequent debate about the court’s actual competence to adopt measures that cannot be derived directly from the constitutional text or even from the TCU’s organic legislation. For many years, this debate was limited to precautionary withholding of payments [1]; later, to freezing the assets of responsible parties [2]; and now, to the disregard of legal personality (veil piercing).

Limits of the TCU’s disregard of legal personality

As is well known, the disregard of legal personality — abbreviated here as DLP — a measure of extreme seriousness in terms of reaching private assets, is not among the many powers granted to the TCU by the constitutional text; nor is it supported by its Organic Law (Federal Law No. 8,443/1992) or Internal Rules, although it is frequently adopted through direct application of the Civil Code.

Without even entering into a debate about a possible reservation of jurisdiction for exercising this power — strongly advocated by legal scholars [3] based on a literal interpretation of article 50 of the Civil Code, which refers to disregard of legal personality as a judicial power — the fact is that the TCU not only considers that it has such power [4] but also has the endorsement of the Federal Supreme Court to exercise it [5].

In this context, more than discussing the TCU’s competence to adopt this measure — which, despite the opposing view of much of the legal doctrine [6], with which the authors agree, is now a reality endorsed by the STF — it is important to discuss the limits of this power, so that the institution is both effective for the Court of Auditors to carry out its audits and protective of the rights guaranteed to legal entities that are parties to proceedings conducted by the body.

The view of legal scholars and the TCU’s position

In general, Brazilian legal scholars recognize two theories applicable to the disregard of legal personality, generically called the “major theory” and the “minor theory”. Despite their different developments, the difference between these theories lies precisely in the level of intervention allowed in the specific situation. Thus, while the major theory requires proof of fraud or abuse by the partners to disregard the company’s legal personality, the minor theory is based on mere harm to the creditor [7].

The Civil Code provision used by the TCU to apply the institution clearly adopted the major theory, which, legal scholars point out, has two different perspectives to be observed in its application. In the subjective formulation, proof of fraudulent or abusive use of legal personality is required. In the objective formulation, commingling of assets must be demonstrated [8].

Thus, as an initial caveat to improve the TCU’s application of the institution, it is indispensable to investigate and demonstrate the measure’s objective and subjective legal requirements, and this proof should even change the logic of the burden of proof generally observed by the court, which, when judging accounts, usually reverses this argumentative duty. In the case of DLP, moreover, it is important that the court move away from the general view that mere signs of irregularity are sufficient to prove these requirements, which demand more robust evidence.

Another aspect to be observed in clarifying the scenario that permits the use of DLP concerns limiting the reach to the assets of partners or managers who directly benefited from the abuse. This rule, drawn from the current wording of article 50 of the Civil Code, represents a significant change from the previously provided joint and several liability, ensuring greater coherence and fairness for the institution. It is also another evidentiary aspect to be observed by the TCU, which must ensure that evidence is gathered showing this advantage or benefit.

Procedural requirements

In addition to the factual prerequisites related to DLP, it is also important to guarantee minimum procedural requirements, which also allow the existence of the objective and subjective aspects discussed above to be assessed separately from the discussion of the merits of the case, ensuring greater certainty when imposing such a significant measure.

This is, after all, what happens in judicial proceedings since the 2015 revision of the Code of Civil Procedure, through the incident of disregard of legal personality, governed by articles 133 to 137 of the procedural code. Under the procedure set out in the CPC, upon a request by a party or the Public Prosecutor’s Office, an incidental inquiry will be opened, which may even suspend the main inquiry in certain cases.

Given the subsidiary application of the Code of Civil Procedure to administrative proceedings, so often accepted by the TCU itself, the analogous application of the incident of disregard of legal personality, or similar rules in the court’s internal regulations, would certainly produce better-qualified evidence for the analysis underlying the measure.

Final considerations

In conclusion, the absence of a legal provision granting this power to the TCU and, consequently, of clearer limits on the measure, may create risks not only of excessive use of the institution but also of use inconsistent with its intended principles. For this reason, investigating and demonstrating the objective and subjective legal requirements, combined with guaranteeing minimum procedural requirements, ensures not only the effectiveness of the measure but also the protection of the rights of the parties involved, so that the analogous application of the incident of disregard of legal personality, or similar rules in the TCU’s internal regulations, would contribute significantly to a more qualified and fair analysis of the measure.

[1] A very frequent debate in the Judiciary between 2010 and 2015. Later, the TCU itself began to limit the use of the measure.
[2] See, in this regard: “Writ of Mandamus. 2. Federal Court of Auditors. Special audit. 3. Damage to Petrobras’s assets. Precautionary measure freezing the assets of those responsible. 4. General precautionary power recognized for the TCU as a consequence of its constitutional powers. 5. Compliance with the legal requirements for freezing assets. 6. Measure required by the exceptional seriousness of the facts investigated. Writ denied” (STF, MS 33092, Reporting Justice Gilmar Mendes, Second Panel, decided on 03/24/2015).
[3] On this subject, see: SUNDFELD, Carlos Ari and CÂMARA, Jacintho Silveira Dias de Arruda. Limites da jurisdição dos tribunais de contas sobre particulares. Revista Justiça do Direito. Vol. 33, No. 02, p. 198-221. May/Aug., 2019. p. 215.
[4] A case law search using the TCU’s tool shows that in 2023 alone about twenty cases involved discussion of the subject.
[5] By way of example: “(…) The TCU’s disregard of legal personality, so as to reach the assets of individuals or companies involved in acts harmful to the public treasury, is legally and constitutionally grounded, subject to adversarial proceedings and a full defense” (STF, MS 35920 ED, Reporting Justice Gilmar Mendes, Full Court, decided on 10/30/2023).
[6] See: “The TCU does not have the power to disregard legal personality and extend the effects of debarment to third parties. In addition to not being the addressee of the Law, the TCU is not expressly indicated as the holder of this power. Powers, especially coercive ones, are not presumed. The rule of law does not admit implied powers to restrict, limit or condition rights. There is a serious failure on the part of the Legislature in not indicating who is responsible for such a power – yet another example of power without accountability. But this does not mean that the TCU holds it just because it assumes so” (PALMA, Juliana Bonacorsi. TCU pode desconsiderar personalidade jurídica e estender efeitos da inidoneidade? Jota – Coluna Controle Público. Available at: https://www.jota.info/opiniao-e-analise/colunas/controle-publico/tcu-pode-desconsiderar-personalidade-juridica-e-estender-efeitos-da-inidoneidade-29092021. Accessed on 04/02/2024).
[7] GONÇALVES, Carlos Roberto. Direito civil brasileiro: Parte Geral. Volume I. São Paulo: Saraiva, 2012. p. 158.
[8] COELHO, Fábio Ulhoa. Curso de direito comercial: Direito de empresa. Volume II. São Paulo: Saraiva, 2012, p. 32.

Published by Conjur (in Portuguese).