The usufruct of companies’ shares is a form of succession and corporate planning often forgotten by people. It has great advantages for specific cases and offers high legal certainty.
The usufruct can be a way of investing in a company, as agreed between the parties and if the quotaholders’ agreement or shareholders’ agreement allows. The usufructuary can benefit from equity on interest and dividends (“fructus” or profits) distributed for a period of time, while the owner can remain with his power of administration, right of veto and voting rights, for example
It is legally possible because the “ownership” over goods and assets has multiple interests within it. The usufruct is a way of, in practice, share the rights related to the ownership (to alienate, to use and enjoy, to derive profit) between the owner and the usufructuary, to whom is contractually granted the right to use, to possess and to derive profit from it.
The Brazilian IRS has already settled that (i) it is possible to institute usufruct of quotas of limited companies, e not only joint-stock companies; (ii) the usufructuary can be the one entitled to interest on equity; and (iii) the companies can deduct interest on equity distributed to usufructuaries of their taxable income, even though they are not the actual shareholders, of corporate tax. That means there is no disadvantage for companies because of usufruct rights agreements.
Similarly, comparatively between the shareholder/quotaholder and the usufructuary, there is no tax disadvantage: income tax over equity on interest remains the same (15%).
Therefore, the agreement for right of usufruct related to shares, quotas and equity is a great option of investment that can be explored. It can cover different aspects, from deriving profits to voting rights, right of veto, etc.