Legal disputes involving publicly traded firms on the rise in Brazil

To illustrate the surge, 1,760 new cases were filed in 2024 at the 1st Business Law and Arbitration-Related Disputes Court of the São Paulo Court of Justice (TJ-SP), up 8.4% from the previous year.Compared to 2021, the number more than doubled, rising 104%, according to a survey by law firm Yazbek Advogados for Valor. At the 2nd Business Court, filings totaled 1,782 last year—an 11.6% increase from the previous year and a 124% jump over three years. Arbitration chambers estimate that around 90% of cases involve corporate disputes.

Otavio Yazbek, a former director of Brazil’s Securities and Exchange Commission (CVM) and partner at Yazbek Advogados, said the rise in litigation is a consequence of Brazil’s cyclical economy. “They’re highly correlated. In times of market stress, economic relationships that started off well begin to deteriorate,” he explained.

Mr. Yazbek noted that the surge has become more apparent in recent years, especially after the Operation Car Wash probe, which marked a turning point in the legal landscape, prompting law firms to specialize in disputes involving listed companies. That was also when associations emerged that now lead many of these legal battles.

He added that lawsuits today are “multifaceted,” often extending into criminal courts and prompting complaints with the CVM, Brazil’s capital markets regulator.

The rise isn’t limited to high-profile cases like Americanas. At Toky (formerly Mobly), a dispute involves the founders of Tok&Stok, who attempted a takeover through a public tender offer (OPA) to gain control of the company. The case went not only to court but also to the CVM.

At Oncoclínicas, special situations fund manager Latache has petitioned the regulator to trigger a mandatory OPA due to a change in control. Other minority shareholders are also reportedly considering court action.

At Grupo Azzas, tensions between its two main shareholders—Alexandre Birman of Arezzo and Roberto Jatahy of Grupo Soma—have raised the possibility of a split due to business disagreements. While both parties have hired legal counsel, no court proceedings have begun.

Minority shareholders

Shareholder disputes also featured prominently during this year’s annual general meetings, particularly in board elections. One case involved Hypera, where EMS owner and rival Carlos Sanchez tried to appoint representatives, while Hypera’s main shareholder, João Alves de Queiroz Filho, opposed the move and raised the issue with Brazil’s antitrust authority, CADE.

“The stock market is down, companies are suffering, paying fewer dividends, and naturally, litigation increases,” said Guilherme Setoguti, a litigation partner at Monteiro Castro & Setoguti. He added that Brazil’s capital markets have matured, leading to more active minority shareholders.

“In the past five years, we’ve seen specialized funds defending their positions,” he noted. He also pointed to the evolution of the litigation funding market, with so-called special sits firms financing legal actions. “Litigation finance has matured in Brazil, creating the financial conditions for parties to pursue claims,” he said.

Some arbitration cases backed by litigation funds involve major companies such as Braskem, Vale, and Petrobras. These cases remain confidential under arbitration rules.

A growing number of companies undergoing bankruptcy protection also explains some of the disputes. More than 20 publicly traded companies are currently in court-supervised reorganization, as previously reported by Valor. In Agrogalaxy’s case, creditors challenged the recovery plan. In the textile firm Teka, creditors are in court seeking to prevent its bankruptcy.

Financial stress

Luís Flaks, a corporate law partner at BMA, said that during financial stress, his firm sees a rise in certain types of cases. These include shareholder lawsuits against capital increases that would lead to dilution, as well as liability claims against executives and disputes over shareholder voting conflicts.

He also pointed to an increase in administrative litigation, such as complaints filed with the CVM, and noted that more shareholders are now resorting to legal action to recoup losses.

Diogo Rezende de Almeida, a partner at Galdino, Pimenta, Takemi, Ayoub, Salgueiro e Rezende de Almeida, agreed that lawsuits tend to increase during financial crises. “In this environment of court-supervised or pre-bankruptcy proceedings, with companies restructuring debts, reviewing contracts, and renegotiating terms, creditors are turning to the courts to enforce their rights,” he said. At the same time, he added, companies are seeking ways to avoid enforcement actions.

Another sign of a maturing capital market, Mr. Almeida said, is the growing number of companies with dispersed ownership, pushing minority shareholders to assert their rights.

Mr. Yazbek pointed out that Brazilian law places limits on shareholder lawsuits. One example is the interpretation that only the company—not individual shareholders—can be compensated for damages. “This conservative reading of the law discourages direct shareholder actions,” he said. In the fund industry, however, this interpretation does not apply, which has led to a growing number of lawsuits.

Toky, contacted by Valor, said its board “aims to generate value for shareholders and other stakeholders.”

Grupo Azzas responded that “its key shareholders, Alexandre Birman and Roberto Jatahy, maintain an ongoing dialogue to improve governance.” In a statement, the company said that “despite the ongoing conversations, no transaction has been finalized between them, and the separation or breakup of the business is not under discussion.” It reiterated that “it does not comment on market rumors and remains focused on executing its strategic guidelines, which have delivered excellent results, as shown in the company’s consolidated first-quarter 2025 earnings.”

Teka issued a statement, saying that “with an estimated debt of R$4 billion and a breach of the court-supervised reorganization plan, the company is facing a situation of deep insolvency.” It added, “The court-appointed administrator has acted impartially and responsibly to ensure the legality of the process, transparency in its handling, and the continuation of operations, with special attention to workers’ rights, in strict compliance with its legal duties.”