Member Article

Basic Legal Aspects

Portugal is a member of the European Union since 1986, being integrated in the Euro-Zone since its  implementation. Hence, its national law, notably its business law, is in line with the European applicable common norms, namely those deriving of the freedom of  establishment  of  undertakings.  rights. Therefore,  in  general, according to Portuguese law, there are no restrictions on foreign investment and businesses.

Conducting Business . Legal Forms

1. Commercial Companies

Doing business in Portugal is mainly carried out by means of  two different legal types of commercial entities, which are the (i) private limited liability company . Sociedade por Quotas - , and the (ii) public limited liability company/joint stock company – Sociedade Anónima. Portuguese Commercial Companies are governed by the Commercial Companies Code (Código das Sociedades Comerciais), hereinafter CSC.

Subsequent to the CSC, there are five types of commercial companies:

· Limited Liability Company/ Quota Company;

· Public limited liability company;

· General Partnership ;

· Limited Partnership;

· Limited Partnership with Share Capital/ Partnership Limited by Shares

 

These types of companies differ in their economic significance for Portuguese business life. General Partnerships and both types of Limited Partnerships are not usual in the Portuguese business life, whereas limited liability companies and joint-stock companies are by far the two most common commercial companies in Portugal. The articles of association of all companies have to be drawn up in written form and the signatures of the partners require to be certified. The incorporation of a company is not mandatory performed before a public notary. All companies are subject to commercial registration (registo commercial) at the commercial registry (Conservatória do Registo Comercial), the moment of final registration being the moment of the incorporation of the company as a legal entity (Article 5 CSC).

a) Limited Liability Company / Quota Company (sociedade por quotas)

This is the type adopted by the majority of small and medium sized Portuguese companies. The minimum share capital required is € 5,000,00, being divided into so-called .quotas. and contributions being made in cash or in kind. The minimum par value of one share (quota) is € 100, 00. The liability of the shareholders for company’s debts is limited. Portuguese private limited liability companies are, as  a  rule,  incorporated  by  two  or  more   shareholders. The corporate structure of a private limited liability company is quite simplified, and besides the general assembly, the majority of these type of companies has, as further mandatory body, one or more directors, who have the power to manage and represent the company. A supervisory board (conselho fiscal) may be appointed if provided for in the company´s articles of association and is mandatory if the company meets two of the following goals: · Total amount of balance of €1.500.000,00; · Total amount of net sales and other profits of €3.000.000,00; . An annual average of 50 employees. Portuguese law also enables the existence of single shareholder limited liability companies. The name of a limited liability company needs to contain the word Limitada. or the abbreviation .Lda. and the words .sociedade unipessoal. - or the word .unipessoal. in front of the word .Limitada. or the abbreviation .Lda. - , in case of single-shareholder limited liability companies.

b)  Public  limited  liability  Company  (Sociedade  Anónima)

Public limited liability.s capital is divided in shares. As in private limited liability companies (and except which concerns the special regime applicable to sole-shareholder public limited companies), the shareholders. liability is limited . Shareholders. private assets are not liable towards company.s debts. The minimum number of shareholders for incorporation  is  five. However, as stated, under some circumstances, a joint-stock company may be incorporated with a sole shareholder as long as this shareholder is a company. The minimum capital required is € 50,000 and the minimum nominal value of one share is 0,01 €. Contributions may be made either in cash or in kind. Unlike private limited liability companies, the corporate structure of public limited liability companies foresees a mandatory audit board, besides the board of directors and general assembly. There are three models  of  management  and  supervision  foreseen  by  the  law:  General assembly, board of directors and board of auditors (conselho fiscal);

· General assembly and board of directors encompassing an auditing committee and a chartered accountant;

· General assembly, executive board of directors, supervisory board (conselho  geral  e  de  supervisão)  and  a  chartered  accountant.

Instead of a board of directors, a single director might be appointed in companies which capital that does not exceed € 200.000,00. Subsequent to Council Regulation on the Statute for a European Company (Council Regulation (EC) n°2157/2001) and Decree-Law nº 2/2005, of 4th January, there is the possibility to incorporate in

Portugal as a European Public Company (SE).

c)  Partnership (sociedade em nome colectivo)

Like all other types of Commercial Companies in Portugal, the General Partnership is a legal entity and can therefore act in its own name, acquiring rights and incurring liabilities on its own behalf. However, besides  the  company.s  assets,  the  partner.s  assets  too  may  be challenged to respond subsidiary before creditors to pay for the company.s debts.

Contributions to this type of commercial company may be made either  in  cash  or  in  kind  (e.g.  labour). The name of a General Partnership must include the name of all, some or one of the partners. In the second and third case, the General Partnership´s name must end with a reference that points to the existence of other members

(e Companhia or & C.ia).

d)  Limited  Partnership  (Sociedade  em  Comandita  Simples)

The Limited Partnership is a legal entity in which at least one member is  subject  to  unlimited  personal  liability  for  the  partnership´s obligations (general partner/ sócio comanditado), unlike the other partners (limited partners/ sócios comanditários), whose liability is limited  to  the  amount  of  capital  subscribed  by  each  of  them. The managing function is exercised by the general partners. There is no minimum capital requirement. The  partnership´s name must

include at least the name of one general partner and the words em Comandita or & Comandita.

e) Limited Partnership with Share Capital/ Partnership Limited by Shares (Sociedade em Comandita por Acções)

In the second type of limited partnership there is also a distinction between one or more general partners - with unlimited personal liability and exclusive managing powers - and limited partners, with one important specific characteristic: the capital contributed by the limited partners must be divided in shares, i.e., the limited partners

shall be shareholders. The minimum share capital is € 50,000 and Partnership´s name shall include at least the name of one general partner and the words em Comandita por acções or & Comandita por acções.

2. Alternative investment vehicles

a) Branch office/ Representative office

Foreign companies that intend to conduct business in the Portuguese market and do not intend to incorporate a fixed corporate structure may do so by  means  of  establishing  a  branch  (sucursal). Since branches have no autonomous legal entity, as they are considered an extension of the Foreign Company, this one remains liable for

the obligations arising from the agreements executed by its branch office.

The branch requires to be registered at the Commercial Register (registo comercial) and its name has to be  registered at the National Registry for Legal Entities (Registo Nacional de Pessoas Colectivas (RNPC).

 

b) A.C.E. (Agrupamento Complementar de Empresas) Enterprise Group

 The A.C.E. Enterprise Group (Law nº 4/73, of 4th  de  Junho, as amended by Decree-Law no. 36/2000, of 14th March) is a legal entity,  which  creation  was  influenced  by  the  business  type .groupement d. interêt économique., foreseen and governed by French law. The A.C.E. Enterprise Group is an entity established by way of a contract entered into between natural persons or pre-existing legal entities, which collaborate – without prejudice to its legal personality

. in order to improve their activity and/or their results or achieve a common goal.

As an alternative, business can be carried out in the form of a European Economic Interest Grouping (EEIG). This business form is regulated by Council Regulation CEE no. 2137/85, of 25th July, Decree-Law no. 148/90, of 9th May and, subsidiary, by the A.C.E. Enterprise Group legal regime (Law no. 4/73, of 4th of June). /

3. Non commercial juridical structures

a) Civil Company (sociedade civil)

A civil partnership, by the adoption of a Civil Company, may be established under the regulations of the Civil Code by at least two members for the development of an economic activity without a commercial purpose3. The civil company is governed by Articles 980-996 of the Portuguese Civil Code. Even though civil companies cannot have a commercial purpose, Portuguese law enables them to adopt a commercial form (Article 1 no. 4 CSC). In this  case, the rules governing  commercial  companies  are  also  applicable  to  such companies.  For instance, civil companies that adopt a commercial form shall file for commercial registration (registo comercial) at the local  trade  registry  (Conservatória  do  Registo  Comercial).

b)  Professional Partnership

There are professional partnerships in Portugal that are subject to specific regimes, notably law firms (sociedades de advogados; Decree- Law nº 224/04 of 10th December), and companies of chartered accountants  - sociedades de revisores oficiais de contas, regulated by Articles 94-122 of Decree-Law nº 487/99 of 16th November 1999 - which are both special types of civil companies.

c) Associations

Foreign entities are finally also freely entitled to participate and become members of Portuguese associations,  being these civil law and non-profit envisaged entities ruled at Portuguese Civil Code, which are destined to uphold the best interests of its partner.s best interests.