The Essential Corporate Law in Portugal (2)

This is the second part of “The Essential Corporate Law in Portugal”. If you want to read the first part, click here.

These are the highlights if you want to know the essential of Corporate Law in Portugal. This entry was drafted by “Sousa Machado, Ferreira da Costa e Associados” for “E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want or need legal advice, ask for a lawyer or a law firm. In that case ” Sousa Machado, Ferreira da Costa e Associados ” is an excellent option in Portugal

Corporate Governance

SAs management and supervision bodies’ composition depends on the organization system adopted, which may be organized either on (i) a traditional 2-tier structure consisting of a Board of Directors (or a sole Director, should the share capital not exceed € 200,000.00) and an Audit Board or a Single Auditor; or (ii) under a 1-tier structure consisting of a Board of Directors, which shall comprise an Audit Commission and a Chartered Accountant; and (iii) under a 3-tier structure consisting of an Executive Board of Directors, a General and Supervisory Council and a Chartered Accountant. SAs with a capital not exceeding € 200.000,00 may have only one Director instead of a Board of Directors.

The corporate bodies of a Lda. are the General Meeting of Shareholders and the Management (which may be composed of one or more directors). Although a Supervisory Board is not mandatory, in some situations Lda.s are required to appoint a statutory auditor.

General Meeting Of Shareholders

Although most powers to run the company are vested in the directors, the following resolutions are reserved to the Shareholders:

 Approval of financial statements and distribution of profits.
 Appointing and removal of the Directors and members of the Audit Board.
 Amendments to the Bylaws.
 Merger, spin-off, transformation or dissolution of the company.
 Transfer and encumbrance of real estate properties (only applicable to Lda.s).
 Issuance of Preferred Shares.
 Issuance of Bonds.
 The division and consent for the transfer of quotas to third parties (only applicable to Lda.s).

Directors

SAs are required to have a board of directors (or an Executive Board of Directors and a General and Supervisory Council, depending on the organization structure adopted).

Lda.s are managed by one or more directors (“gerente/gerência plural”), although there is not a formal management board.

Managing corporate bodies of SAs and Lda.s have very broad authority to bind the company. Although restrictions may be contained in the by-laws, these are not enforceable against third parties provided the actions of the directors are within the limits of the corporate purpose.

In a SA, the shareholders appoint the board of directors, generally for a four-year term (but the by-laws can provide for a shorter term). There are no requirements for independent directors (except for listed companies). In a Lda., the directors may be appointed for terms of office or without a definite term, in this case remaining appointed until dismissal or resignation.

The directors may be remunerated or not.

Annual Accounts

Portuguese law foresees that all companies must approve, at the annual general meeting, the respective year-end accounts within a 3-months period (as from the end of the financial year) and, in special cases, within a 5 months period (in case of companies with consolidated accounts).

The documents to be approved are: (i) the year-end financial statements (comprising a detailed balance sheet), (ii) the management report, (iii) a report issued by the audit body, and (iv) in case of SAs, a legal certification of the accounts must be issued by a Chartered Accountant.

Once approved by the general meeting, the accounting documents must be submitted, by Internet, under a new system called “Informação Empresarial Simplificada” (IES), under which the annual financial and accounting information is sent simultaneously to all the relevant public services (tax authorities, commercial registrar, etc.).

In case of permanent representations of foreign companies in Portugal (Branches), the process is even easier, as it is only required a declaration confirming that the head-office received the supporting documents of the branch’s accounts.

Incorporation of a company

The incorporation of a company (except when depending on special approvals or when the start-up capital is to be made through contributions in kind) may be fully performed in one day, if the shareholders choose to create a company under the special regime that allows a company to be incorporated “in one hour” (on the spot company – “empresa na hora”), with or without acquiring or possessing a trade mark. This process is carried out before a Commercial Registry Office or a Company Formalities Centre (CFE).

On the other hand, it is now possible to launch and set up a company throughout digital means – the so-called “online company registration”.

Regarding the special regime of incorporation “on the spot company” above mentioned, in April 2008, it was also created a special regime that allows a branch from a foreign company to be dully incorporated “in one hour” (on the spot branch – “Sucursal na hora”). With this procedure it can be created, immediately and in one place, permanent representations of foreign companies in Portugal, with the simultaneous appointment of their representatives.

In 2008, some measures were approved to simplify the companies’ incorporation process as well as other companies’ day-to-day procedures, namely:

1. Company’s Card (“Cartão da Empresa”): as from now on, Companies shall have a sole Identification Card that evidences the three essential numbers: the Company’s Tax Identification Number, the Company’s number of registration at the Commercial Registry Office and the Company’s Social Security number. The Company’s Card may be requested online (empresaonline.pt) or at the Commercial Registry Office, remaining the respective issuance dependent on the enrolment of Company with the Tax Authorities and with the Social Security.
2. SICAE (Portuguese Information and Classification System of Economic Activities): this system consists on a permanent and actualized database concerning the companies “economical activity code” (“CAE”), allowing a simplified process of modification regarding this matter.

Listed companies

Listed companies have to comply both with the Portuguese Companies Code and with the Portuguese Securities Code. This act establishes cooperation, communication and publicity duties for corporations, as well as the regulation and supervision of the respective activities by the Portuguese Securities Market Commission.