Heloisa Nogueira and Thamara Belinatti
Recently, the 2nd Specialized Business Law Chamber of the São Paulo Court of Justice (TJSP) ruled that a proposal for the assignment of quotas (membership interests) is not binding if the contractual terms are not clear and complete. In the specific case (Civil Appeal No. 1082803-48.2022.8.26.0100), one of the partners initially accepted the assignment proposal but later rejected it without providing a justification. The lack of essential details in the proposal also contributed to the court's conclusion that the deal could not be considered concluded.
A binding proposal must be clear and complete, obliging the parties to proceed with the formalization of the transaction. In M&A (Mergers and Acquisitions) operations—such as the case analyzed—a binding proposal generally occurs after due diligence and must cover all essential aspects of the deal.
Given that due diligence is part of the process of buying and selling companies, such a procedure is essential for the parties to understand the company's assets, liabilities, opportunities, and future risks, ensuring that no unpleasant surprises arise at the end of the process—as occurred in the present case.
The selling partner argued that their proposal should be binding, even though certain clauses were not fully defined. However, the court concluded that, due to the absence of essential terms and the buying partner's disagreement regarding liability for unknown obligations, the proposal did not meet the necessary requirements to be considered binding. The ruling highlights the importance of detailed and comprehensive proposals in equity negotiations—in accordance with Article 429 of the Civil Code—to prevent rejection due to a lack of clarity and to safeguard the parties' interests.
Therefore, negotiations should not be conducted based merely on an assumed value for a company share—as happened in this instance; the process of determining share value is far more complex. Consequently, a competent team should be involved, and meetings held to establish appropriate values and share allocations before a proposal becomes binding on the parties. This approach helps avoid litigation regarding partner exits and fosters greater stability and efficiency in business operations.
