Corporate; Governance | Profit Distribution of Brazilian Companies: 3 Points of Attention for Controlling Shareholders

However, carrying it out without proper organization can generate conflicts, harm cash flow and even jeopardize the fiscal health of the business.
Organizing this process becomes a strategic pillar for sustainable growth and, mainly, for corporate harmony. We highlight 3 essential steps in this process in Brazilian companies, taking into consideration the legal limitations existing in Brazil:
1. Provision in the Articles of Association: the general form of distribution of dividends in a limited liability company in Brazil must be included in the articles of association, especially in cases where there is the possibility of disproportionate distribution of profits, in order to meet the legal requirements for validity.
2. Shareholders’ Agreement: instrument that allows regulating the form of distribution, including establishing conditions, obligations and goals so that profits can be distributed according to each partner’s contribution to the company, and not just reflecting the percentage of participation. Issues such as minimum cash and reserve for investments may also be the subject of the shareholders’ agreement.
3. Periodic Shareholders’ Meeting: essential for the governance of the profit distribution process, as it is not only the appropriate instrument for organizing distribution among the shareholders, based on an assessment of the requirements set out in the shareholders’ agreement, but also the most appropriate tool in Brazil for paying the shareholders the amount distributed, eliminating the possibility of future disputes.
Having a well-defined procedure aligned with corporate governance practices is essential for safe and efficient profit distribution. In addition to ensuring legal compliance, this approach strengthens trust among the shareholders, minimizing the risk of internal disputes.
An organized process reflects the maturity of management, ensuring that decisions are made in a transparent, fair and strategic manner, allowing the distributed profits to drive both the individual development of the shareholders and the continued growth of the company.
By Fernanda Ferla via Feijó Lopes Advogados