The right of veto is one of the most widely used corporate mechanisms to protect strategic interests in Brazil.
It guaranteesing to certain shareholders the power to block relevant decisions, especially in investment contexts, joint ventures, or companies with minority control. However, its full implementation as a protection tool can create decisional obstacles and affect the company’s dynamics.
That is why the limits of the right of veto must be evaluated very objectively, generating value for minority investors by allowing effective control of the strategic management of the business.
We highlight 3 points of attention for Brazilian business:
1. Defining the Necessity: The right of veto is most efficient when directed at truly strategic decisions, such as changes to the corporate purpose, dilution and entry of new shareholders, relevant operations, or changes in governance. In these cases, the veto acts as a legitimate mechanism for protecting investments and preserving alignment between the parties, preventing majority shareholders from deliberately making decisions that harm minority shareholders, even affecting the company’s results.
2. Strategic Application: Even though there is room for negotiation, excessively expanding the range of matters subject to veto, extending it to operational or routine agendas, can hinder management and compromise the company’s agility. In practice, this can lead to delays, conflicts, and even the loss of business opportunities. This is where the need to reflect on when it is actually positive to use it lies; after all, we cannot forget that the objective is for it to add value, not to harm the business.
3. Ensuring the Company’s Operation: The veto cannot paralyze operations; it is mandatory to have provisions for how to manage deadlock situations. Instruments such as mediation, arbitration, tie-breaking clauses, or even exit mechanisms can prevent the veto from paralyzing the company. The absence of these provisions is one of the main sources of corporate conflict, as it can directly affect the health of the business.
The right of veto is a valuable tool in building balanced corporate relationships. However, its use in Brazil requires discretion and planning. More than protecting individual positions, it should contribute to the stability of the company and to the ability to make decisions in an increasingly dynamic environment. Its indiscriminate use can end up affecting the development of the business, resulting in significant losses.
