Legitimacy of partners to attack business entered by the partnership

In accordance with the principle of contractual relativity inferred from Article 1602 of the Civil Code ("CC"), initially, only the parties that enter into a contract have an interest in its existence, validity and effectiveness, and third parties are not allowed to discuss such matters. If we combine the provisions of this principle with the fact that, according to Article 98 of the Commercial Code ("CC"), "the partnership, once legally constituted, forms a legal person different from the partners individually considered", the forced conclusion will be that the partners are third parties with respect to the business entered into by the partnership and, therefore, in principle, they cannot directly discuss the existence, validity and effectiveness of such contracts. But what happens when the company contracts in open opposition to its interests and those of the shareholders, and the mechanisms tending to hold the directors liable prove to be ineffective (for example, because the directors have no assets to pursue)? Can the shareholders, instead of or at the same time as pursuing the liability of the directors, attack the existence, validity and effectiveness of such business?

Traditionally, the answer to these questions has been adverse to the interests of the shareholders. A strict application of the aforementioned principles of contractual relativity and autonomous corporate personality led to the conclusion that the only parties legitimately interested in disputing the existence, validity and effectiveness of the contracts entered into by the company would be the company and the contracting third party and, to some extent, the creditors of the latter, through the mechanisms of extraordinary legal standing (pauliana, oblique, simulation and actions for the maintenance, improvement or replacement of the guarantee). Therefore, the shareholders or partners, as third parties with respect to the corporation, would not have standing to dispute its business.

According to this position, by entering into or adhering to the corporate agreement, the partners would be consenting to the fact that the corporation is another person, and therefore, at the same time, they would be accepting, in some way, the risks implied by the decisions taken by the corporation, in relation to the destiny of the contribution. Likewise, this position affirms that, within corporate law and the normal corporate development, there would be suitable mechanisms to hold the partners harmless, such as the possibility of challenging the decisions of the shareholders' meeting or the shareholders' meeting, as referred to in Article 191 of the Code, or the possibility of pursuing the administrators so that they respond for the damages they cause through fault or fraud, in accordance with Article 200 of the Code, as well as the possibility of taking legal action against the directors for the damages they cause through fault or fraud, in accordance with Article 200 of the Code.

Finally, the position analyzed refers that legitimizing the direct action of the partners against the business entered into by the corporation would bring insecurity to commerce and would hinder commercial contracts, since third parties interested in contracting with a corporation would begin to demand that the decision to contract by the corporation come from the shareholders' meeting or the partners' meeting, with the presence of all the partners, in order to shield the contracts.

These arguments are easily refutable. Thus, evidently, the interest of the associates, when entering into or adhering to the corporate contract, is the formation of a person different from themselves, since this is a clear effect of the regulatory framework in which such contract is included and, in addition, it implies limiting the risk of the associates in relation to the destination of the business incorporated to the corporate purpose. But this in no way means that the associates condone ex ante the fraud or clumsiness in the mismanagement of their contribution: on account of what if, in accordance with article 98 of the Cco and the economic logic, the contribution is affected to the investment for profit? On the other hand, it is also not certain that the existing mechanisms within the corporate law are sufficient for the protection of the interest of the associates.

In relation to the possibility of challenging the decisions of the shareholders' meeting or partners' meeting, it would suffice to point out that the initiative, contracting and execution of business within a corporation, as a general rule, come from its legal representatives and that it is in relation to these that the associates usually have disagreements. Nor is it true that the liability action against these administrators is sufficient, since they may not have a sufficiently solid patrimony to respond for all the damages caused by their bad decisions or that the objective perversity of a business cannot be imputed to them by way of malice or negligence. Finally, the best guarantee of the durability of a business is not the simple formal mechanism of subjecting its execution to the express authorization of the highest corporate body, but the commercial reasonableness of its object and the good faith observed during its execution. In other words, a good business, in which both parties win, according to the healthy uses of commerce, defends itself.

This is how the Supreme Court of Justice ("CSJ"), through a Ruling of February 8, 2016, with Dr. Ariel Salazar Ramírez's report, found the majority partner of a limited liability company to have standing to seek the declaration of enormous injury in relation to the purchase and sale agreement entered into by such company, at the initiative of its liquidator, on a real estate property that represented the largest asset of such company.

In analyzing the standing of the plaintiff, the CSJ determined that it is "the interest in the litigation [the] determining factor in the standing in the litigious cause, [which] may be attended by several persons actively and passively, even if only some of them are the holders [of the contract], hence it must be recognized to some and others". Thus, although the action of enormous damage in the purchase and sale is initially provided for the buyer and seller, it is undeniable that, whenever one of said parties is a corporation, the shareholders of the latter will have an interest in the discussion of the terms of the business, since they directly affect the economic result of the corporation and, therefore, what they would receive from it.