What Cannot Be Inherited: Wills and Guardianship in Safeguarding and Ensuring Predictability for Family Businesses

For the founders of a family business, what is shared goes far beyond quotas or shares. They share a history, a purpose, and a set of values and, above all, a mutual desire to remain business partners and work together toward a common goal. Corporate law doctrine has traditionally associated this relationship with the expression affectio societatis: simply put, the intention to establish and maintain a corporate relationship centered around a common purpose.

The challenge is that this corporate bond does not necessarily form part of a shareholder’s estate. Therefore, it cannot be transferred to successors in the same way as tangible assets, such as real estate, financial investments, or an ownership interest in a company. The next generation may inherit the economic rights associated with the shares or quotas, but not necessarily the same long-term vision, the same level of trust among the partners, or the same commitment to the business.

This distinction lies at the heart of one of the greatest challenges and risks to the continuity of family businesses.

Upon the death of a founder, their successors become involved not only in the succession of assets, but potentially also in decision-making concerning the company. Their admission as shareholders or quotaholders, however, will depend on applicable law, the company’s articles of association, and any existing agreements. In a limited liability company, the death of a shareholder or quotaholder may result in the liquidation of their ownership interest, the admission of their heirs, or even the dissolution of the company, depending on the rules previously established and the decisions made by those involved, as duly provided for in the articles of association and/or shareholders’ or quotaholders’ agreements.

When nothing has been planned or discussed within the family, these decisions arise at the worst possible time: amid grief, operational urgency, and, often, disagreement among family members themselves.

Cousins who rarely interact, different branches of the family, and successors with varying degrees of involvement may find themselves disputing the economic and governance implications of the same ownership interest. Profit distributions can become a source of conflict; strategic decisions may be paralyzed; and financially sound companies may lose value due to the absence of clear rules governing control, management, and succession.

Beyond the assets themselves, an even more difficult asset to rebuild is put at risk: the reputation built over decades, which, in a family business, is often closely intertwined with the family’s own name.

Succession planning means reducing this margin of uncertainty. For this purpose, it is not enough to consider only the natural succession event: the founder’s death. It is also necessary to consider the period during which the founder remains alive but loses, fully or partially, the capacity to manage their personal, financial, and corporate affairs.

While the Shareholder Is Alive: The Stage of Incapacity

An illness, an accident, or advancing age may impair a shareholder’s civil capacity to express their wishes or perform certain legal acts.

If the corporate structure depends excessively on that individual, their incapacity may affect the company’s entire decision-making process. Meetings may fail to reach the required quorum, urgent decisions may be delayed, and family disputes may be brought before the courts precisely when the company most needs stability.

Guardianship (curatela) is a protective measure established by court order and generally limited to acts of a financial and transactional nature. The court will determine its scope according to the individual’s specific needs, preserving their autonomy to the greatest extent possible.

While still fully capable, a shareholder may formally express their preference regarding the person they consider suitable to serve as their guardian should guardianship become necessary and, consequently, to ensure the continuity of their asset management, thereby maintaining legal certainty and corporate stability.

In a family business, this measure should be coordinated with the articles of association, shareholders’ or quotaholders’ agreement, management rules, and mechanisms for replacing managers or directors. Guardianship should not be treated in isolation, since the civil representation of the shareholder and the operation of the company’s corporate bodies are interconnected, yet legally distinct, matters.

The objective is not merely to choose a person of trust, but to build a structure that allows the company to continue operating even when one of its members can no longer participate in decision-making as they previously did.

After Death: Estate Succession and Corporate Succession

A will is the instrument through which a founder organizes, within the limits established by law, the transfer of their assets. There is an important limitation to observe: Brazilian law reserves a portion of the estate—the legítima, corresponding to one half of the estate—for forced heirs (herdeiros necessários), namely descendants, ascendants, and a spouse or partner, where applicable. This portion cannot be freely disposed of. The other half, known as the disposable portion, may be freely allocated by the testator. This is where succession planning takes shape, in conjunction with the other instruments comprising the corporate structure.

One example is a usufruct, which separates ownership of an asset from the right to receive its benefits or income. A founder may transfer ownership of shares or quotas to the person who will lead the company while, at the same time, ensuring that a family member—such as the surviving spouse or partner—receives the income generated by the company during their lifetime, without assuming control of the business. This provides financial protection to those who need it without fragmenting control of the business among those who will actually be responsible for decision-making.

The same care should be taken when there are minor children among the heirs. It may not always be advisable for all rights associated with the company to be concentrated in someone who is not involved in the business, particularly in the presence of potential conflicts of interest. Brazilian law allows a will to designate the person whom the shareholder considers most suitable to handle these matters, always within the limits established by law and subject to judicial and prosecutorial oversight until the minor reaches adulthood.

What Is Ultimately Being Protected?

No succession plan can eliminate the conflicts inherent in family relationships. The goal is to establish, in advance and with clarity, rules capable of preventing such disagreements from jeopardizing the continuity of the business: who will become a shareholder or quotaholder, who will exercise each right, and within what limits and with which responsibilities.

This predictability provides security to those who take over the business. It also preserves the confidence of employees, clients, suppliers, and partners who depend on the company’s continuity.

From this predictability come both the security of those who take over the business and the preservation of the values and reputation that distinguish it in the market.

The affectio societatis cannot be inherited; it must be supported by processes and structures developed and discussed among all those involved, covering all possible stages and scenarios, so that the company does not depend on a bond that dies with the person who created it. Protecting the corporate structure for future generations means preserving the founder’s true legacy: not only the company they built, but also the conditions necessary for it to continue to exist.