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The members must agree to amendments to the articles of association. In most cases, if the articles of association do not establish to the contrary, these amendments just require a resolution by the members approved by three-quarters of all votes representing the total capital.

If the amendment involves an increase in the capital contribution to which partners are bound by the articles of association, this increase shall be considered without effect for those members who did not give their consent.

In general, the resolution to amend the articles of association must be registered in the Company Registry Office within 60 days.

 

Examples of amendments to articles of association

  1. Increase of capital
  2. Transfer of ownership of quotas
  3. Amendment of business name, object and registered office
  4. Conversion of companies
  5. Winding up and liquidating companies
  6. Reduction on capital

 

Increase of capital

Increase of Share Capital is considered to be an amendment of the Articles of Association, which as a general rule is optional and approved by resolution of the shareholders.

The resolution to increase the share capital should state expressly:

  1. The formality used for the increase of share capital;
  2. The amount of the increase of share capital;
  3. The nominal value of new shares;
  4. The nature of payment of shares;
  5. The capital surplus, if any;
  6. The deadlines within which shares must be paid up, not withstanding the dispositions of Article 89 of the Companies Code (Código das Sociedades Comerciais);
  7. The parties subscribing the increase.

The resolution to increase the capital expires after one year if the capital contributions have not been paid in inside this term.

The capital increase must be registered in the Company Registry Office within 60 days.

 

Means of increasing the capital

Incorporation of reserves

In general, the increase in capital by incorporation of reserves shall increase the equity interest of each partner in an amount proportional to its par value or to its accounting value;

In case of shares with no nominal value, the capital increase may occur with no changes to the number of shares.

A company may increase its capital by incorporating reserves available for this purpose.

This capital increase requires the prior approval of the financial statements for the financial year prior to the resolution. However, if more than six months have passed since the financial statements were approved, the existence of reserves to be incorporated shall only be approved if a special balance statement is issued, structured and approved according to the same requirements as those which exist for the annual balance sheet.

When no indication is made, the number of shares remains unchanged.

The company´s capital may not be increased by incorporating reserves while all the instalments for initial capital input or for prior capital increases have not yet become due.

The resolution should expressly state the reserves to be incorporated in the capital.

In general, the increase in capital by incorporation of reserves shall increase the equity interest of each partner in an amount proportional to its par value.

The resolution to increase the share capital will indicate if additional shares or stock are to be generated or if there will be an increase of the nominal value of existing shares or stock. When no indication is made, the nominal value of shares and stock will be raised.

The company´s own quotas or shares participate in this type of capital increase, unless otherwise determined by the members.

The management body and auditing body, if any, shall declare, in writing, to have no knowledge of the occurrence of a reduction of assets having taken place between the date of the balance sheet which served as the basis for the resolution to increase the share capital, and the date of the resolution, as this would serve as an obstacle to the increase.

 

New capital contributions in cash

An increase of share capital through new cash contributions cannot be approved until a prior increase is registered on a definitive basis and all obligations to pay up the share capital (original or increased) have accrued. Capital contributions in cash can be deferred.

If the resolution fails to mention the requirement for initial capital contributions in cash, which legislation establishes may be deferred, the contributions fall due as soon as the capital increase is definitively registered.

 

New capital contributions in kind

Similarly, an increase of capital through new in kind contributions cannot be approved until a prior increase is registered on a definitive basis and all obligations to pay up the share capital (original or increased) have accrued. Capital contributions must be totally paid in by the increase-in-capital resolution date. They must be assessed by a statutory auditor and a report issued.

 

Transfer of ownership of quotas

The transfer of ownership of quotas is the procedure concerning the transfer of quotas between living persons, which is achieved by two means: free of charge or with attached charges.

Generally, untied transfer takes place, as long as the company consents and the resolution by members is taken by a simple majority.

Consent from the company is not required if the transfer is made to a spouse, ascendants, descendants, or other members. However, the Memorandum of Association may exempt transfer of ownership from consent, both in general and specific situations.

The transfer of ownership of quotas must be recorded in writing and registered in the Company Registry Office within 60 days.

IMT tax may become due on the transfer of ownership of quotas if the company holds real estate in Portugal and if, as a result of the transfer of ownership of quotas, one of the member´s holdings accounts for at least 75% of the capital, or if the number of members is reduced to husband and wife, married with general community of estate or community of estate subsequent to marriage.

 

Company Consent

  1. Expressly
    This is provided by means of members´ resolution to this end, within 60 days of the request being received by the company. If there is no response 60 days after the request was received by the company, then the transfer of ownership no longer requires consent for implementation.
     
  2. Tacitly
    If the transferee participates in a members’ resolution and no other member challenges the resolution, consent is deemed to have been granted.

 

Refusal to provide consent

If refused, the note providing the decision must compulsorily contain a proposal for the amortisation or purchase of the quota, at the risk of the transfer of ownership becoming open to all.

The transferor has 15 days to state his position on the proposal. Rejection of the proposal will render the transfer ineffective, and the refusal of consent will stand.

 

Contratual Provisions

The articles of association can govern the transfer of ownership of quotas as follows:

  1. Just simply prohibiting it;
  2. Declaring it to be totally untied;
  3. Making it dependent on the company´s consent;
  4. Limiting the company´s consent via specific requirements.

When the company approves changes to the memorandum of association that aim to prohibit or create obstacles to the transfer of ownership of quotas, all members affected by this decision must consent to the same.

 

Amendment of business name, object and registered office

The amendment of the business name, object and municipality of the registered office require prior authorisation of the National Legal Person Registry, through the issue of the respective Certificate of Admissibility.

 

Conversion of companies

The conversion of a company consists of modifying the legal type of company previously registered, without altering the company´s identity or implying the winding up of the company.

Unless otherwise agreed by all interested members, the par value of the equity interest of each member in the capital and the proportion held by each equity interest relative to the capital cannot be altered in the conversion.

If legislation or the memorandum of association provides any member that voted against the conversion with the right to resign, the resigning member may demand, within one month of the date on which the resolution was adopted, that the company purchase its equity in the company or arrange to have it purchased.

The conversion shall not affect the member's liability for company debts prior to the conversion.

The transformation should be registered in the Registry of Companies within 60 days.

 

Impediments to conversion

A company may not be converted if:

  1. The capital has not been fully paid in or if not all of the initial capital contributions established in the memorandum of association have been paid in;
  2. The balance sheet shows that the company´s equity is less than the sum of its capital and statutory reserves;
  3. Members owning special rights that cannot be maintained following conversion, oppose the transaction;
  4. In the case of a public limited company, bonds convertible into shares have been issued and these have not been fully redeemed or converted;

Requirements for converting a private limited company into a public limited company:

  1. The management of the company drafts a report justifying the conversion, which includes the company balance sheet and draft of the new articles of association;
  2. The Auditing body or Certified Official Auditor, which ever the case may be, will be responsible for drawing up an opinion in respect of the these documents;
  3. The general meeting is convened to ratify the conversion;
  4. These documents are available to the members and company creditors for consultation;
  5. The General Meeting is held, to: approve the balance sheet, the conversion and approve the new memorandum and articles of association
  6. Requirement of special quorum: majority of ¾ of the votes corresponding to the capital

 

Winding up and liquidating companies

A sequence of legal facts and procedures must be followed to close a company:

 

Winding up

Winding up is the procedure through which the company decides or recognises that it should close down.

 

Causes of winding up

The causes of winding up can be:

Causes of immediate winding up

Winding up is immediate on the occurrence of one of the following facts:

  1. a) Deadline established in the articles of association.A company has unlimited duration by default, though the members can define the duration in the articles of association. In any case, once the term has ended the members can agree to extend or eliminate the limited duration before it expires, or even decide to bring a company in the process of winding up back into business.
  2. b) Resolution of the members. In private limited companies, the resolution to wind up the company must be passed by three-quarters of the votes of the total capital, unless the articles of association establish a higher majority or other requirements.
  3. c) Complete fulfilment of the corporate object. If the company´s object is completely fulfilled, then the company has no further reason to exist.
  4. d) Supervening illegality of the company´s object. The illegality must encompass the entire object.
  5. The company is declared insolvent. Insolvency is decided by a law court and as such the company must wind up its activities and go into liquidation, in order to pay off its creditors to the extent possible.
  6. e) Other facts established in the articles of association. The articles of association can define other occurrences that cause immediate winding up.

In the event of immediate winding up as described in a), c) and d) of the previous paragraph, the members may resolve to consent to winding up by a simple majority, and any member, successor of a member, or company creditor may file for notarial justification or for simplified justification proceedings relative to winding up.

 

Causes of administrative winding up

A request for the administrative winding up of a company may be submitted in the cases defined in law or in the articles of association, and whenever:

  1. The number of members is smaller than the minimum legal requirement for a period of no less than one year, except if one of the members is a public legal person or an entity that is legally comparable thereto. The members can request that a reasonable term be provided them to remedy the situation, suspending the winding up of the company.
  2. When the corporate object becomes impossible to fulfil.
  3. When the company has not performed any business activity for two consecutive years.
  4. When the company´s business is substantially different from that stated in the articles of association.
  5. The winding up procedure will not be ordered if the infringement is corrected while the procedure is pending.
  6. When a natural person is the member of more than one single member limited company.
  7. When a single member limited company has another single member limited company as its sole member.
  8. Other circumstances established in the articles of association.

In any of these cases, the members may wind up the company based on a past fact by absolute majority of the votes cast at a general meeting.

The company can apply for administrative winding up through its members, respective successors and creditors, by means of an application to that end in the competent Company Registry Office.

 

Causes of enforced winding up

If the interested parties do not initiate administrative winding up proceedings then the appropriate registration service should enforce such proceedings whenever:

  1. The company has not filed its financial statements for a period of two consecutive years, and the tax authorities inform the registry service that the company has not filed its income tax return for an equal period
  2. The tax authorities inform the appropriate registry service of a lack of company activity, as defined by the provisions of the applicable tax legislation
  3. The tax authorities inform the appropriate registry service that the company has filed a declaration of cessation of business, under the terms of applicable tax legislation

 

Form of Winding up

Generally, company winding up resulting from a resolution adopted at the general meeting is not subject to any special form.

The management or the receivers must petition that the winding up be registered by the appropriate service. Any member may file this request at the cost of the company.

 

Liquidating companies

At the end of the winding up procedure the company is immediately placed in liquidation. This aims to finalise pending business, pay off debts, collect from debtors and share out the surplus resulting from liquidation amongst the members.

As a general rule, a company in dissolution will maintain its legal personality, except when otherwise stated by law or when the formality of liquidation requires otherwise, and will remain subject to the provisions, including any necessary adaptations that govern operational companies.

A dissolved company must add "company in liquidation" or "in liquidation" to its business name and appoint the receivers.

Liquidation can be performed in one of the following ways:

  1. Immediate distribution
    If upon the date of winding up there are no outstanding debts, or if the outstanding debts are only of a fiscal nature (and are not made payable on the date of dissolution) members may proceed immediately to the distribution of assets.
    Tax debts that have not yet come due on the date of winding up do not impede immediate distribution. However, in such an event, all of the members remain jointly and severally liable to an unlimited extent for these debts.
    Legislation establishes a special procedure of immediate cessation of a company´s existence that involves the winding up and liquidation of a company with no assets or liabilities to liquidate, and which has been unanimously approved.
     
  2. Global assignment
    All of the assets and liabilities resulting from the liquidation of the company may be assigned to one or more of members, when the remaining members are compensated monetarily, so long as written consent is provided by all of the company´s creditors; if provided for in the articles of association, being the others paid with cash. Tax debts that have not yet come due on the date of winding up do not impede global assignment. However, in such an event, all of the members remain jointly and severally liable, to an unlimited extent, for these debts.
     
  3. Extrajudicial liquidation
    This is a liquidation procedure that must comply with the regulations established in Article 149 of the Portuguese Companies Act, as well as the rules set out in the articles of association.
     
  4. Administrative liquidation
    The administrative liquidation procedure commences automatically at the end of the administrative winding up process or via submittal of application from the company, its members, respective successors or creditors, whenever legislation establishes that it must be performed administratively.

    The administrative liquidation procedure may be instigated by the registrar on its own initiative, by means of a document specifying the circumstances that justify and have led to the instigation of the procedure, and appointing one or more receivers; or when:

    - Winding up was performed via a compulsory procedure;

    - It is noted that the terms defined for the duration of liquidation have terminated without the respective registration of closure having been applied for.

  5. Judicial liquidation
    Must also comply with the special procedure provisions of Article. 1122 and following of the Civil Procedure Act.

 

Operations preceding liquidation

The management has 60 days to organise and approve the company´s financial statements up to the winding up date. If it fails to do so, the responsibility falls on the receivers.

 

Duration

Liquidation must have terminated and the distribution of assets been approved within two years of the company´s winding up date. This period may be extended for a maximum of one year, always by means of company resolution.

A shorter time period may be defined in the articles of association or by resolution of the members.

If the time periods are not complied with, the registry office must compulsorily initiate administrative liquidation procedures.

In the event of administrative liquidation, the time limit set by the registrar must not be greater than one year.

 

Receivers

There follow some details of receivers, which are responsible for effectively liquidating the company by non-judicial means:

  • Appointment
    Unless otherwise stipulated by the articles of association or a resolution adopted by the members, the company´s management become receivers at the time the company is considered wound up.The members may appoint new receivers, in addition to or replacing those already appointed.
    If no receiver has been appointed, the company´s supervisory board or any of its members or creditors may request that the appropriate Registry Office administratively appoint a receiver. A legal person may not be appointed receiver, except if they are law firms or statutory auditing firms.
    Appointment is subject to registration in the Company Registry Office.
     
  • Removal from office
    The members may resolve to remove the receivers at any time without just cause.
    The company’s supervisory board or any of its members or creditors may petition that the receiver be administratively removed from office based on just cause.
    The dismissal from office is effective on its registration.
     
  • Remuneração dos liquidatários
    The members may resolve to remove the receivers at any time without just cause.
    The company’s supervisory board or any of its members or creditors may petition that the receiver be administratively removed from office based on just cause.
    The dismissal from office is effective on its registration.
     
  • Remuneration of receivers
    Receivers must:
    - Finalise any outstanding business
    - Fulfil the company´s obligations
    - Collect from debtors to the company
    - Pay all company debts permissible by the value of the assets
    - Convert any residual assets to cash
    - Propose the distribution of the company’s assets
    - Submit liquidation accounts and a report during the first three months of each calendar year
    - Approximately calculate the liquidation costs, in order to exclude this value from the distribution of assets
    - Hand over the goods according to the approved distribution of assets
    - Apply for the registration of liquidation closure

    The members may authorise the receivers to, via resolution:

    - Temporarily continue the company´s previous business activities
    - Contract any loans necessary to effectively liquidate the company
    - Proceed with the global sale of the company´s assets
    - Proceed with the conveyance of the company´s premises

     

    Notwithstanding any clauses in the articles of association or resolutions to the contrary, if there is more than one receiver, each one shall have equal and independent powers for liquidation activities, except for the powers regarding the disposal of company assets, which require the participation of at least two receivers.

    The receivers´ duties generally end when the company is wound up.

  • Liability of receivers
    Receivers who maliciously or falsely state on the documents to be presented at the general meeting that all of the rights of the company´s creditors have been settled, shall be personally liable to those creditors whose rights were not duly provided for. Except for cases of wilful misconduct, receivers have the right to regress against former partners.
     

 

Distribution of remaining assets

The remaining assets, after settling or making appropriate provision for the rights of creditors of the company, can be distributed in kind, if such is established in the memorandum or if the members unanimously so resolve.

The remaining assets are first assigned to reimburse the members for the amount effectively invested in the company. This amount is the fraction held by each member of the capital, notwithstanding that established in the articles of association in regard to the assets used as the initial capital contribution being of a higher value than the par value of said fraction.

If full reimbursement is not possible, the remaining assets are partitioned amongst the members so that the losses are distributed across the members in proportion to the share each one has in the company.

If, following full reimbursement to the members, the asset balance is still positive, then these assets should be distributed in the same proportion as those used for profit sharing.

 

Final accounts, report and resolutions by members

The final accounts of receivers must include a plan as to how the remaining assets shall be distributed, and a report containing specific mention that suitable provisions have been made for all creditor rights and that the receipts and relevant supporting documents are available for examination by the members.

Lastly, the above-described is placed before the members for approval.

 

Delivery of distributed assets

Pursuant to resolution by the members and in accordance with the same, the receivers deliver the assets assigned to each member. The receivers are responsible for any formalities required to assign the assets to the members.

 

Closure of liquidation proceedings

The receivers must apply for the registration of the closure of the liquidation proceedings.

The company is considered to be wound up, even among the members, on registration of the closure of liquidation proceedings.

Following liquidation and winding up of the company, the former partners are liable for any company liabilities which are outstanding or for which provision has not been made, up to the amount they received in the distribution of assets.

Following liquidation and winding up of the company, if non-distributed assets are discovered the receivers shall propose the distribution of these assets among the former partners, converting them into monetary amounts if no agreement regarding distribution in kind is reached.

 

Reduction of Capital

The articles of association may further establish that this alteration is reliant on the consent of a specific shareholder that as long as the mentioned shareholder remains in the company.

The notice of meeting must indicate the purpose and how the reduction of capital will be performed. A qualified majority of three-quarters of the votes of the total capital is necessary, though the articles of association may establish a higher margin.

The articles of association may further establish that this alteration is reliant on the consent of a specific shareholder that as long as the mentioned shareholder remains in the company.

The capital can be reduced to a value below the minimum required by law as long as the resolution is dependent on an increase in capital of equal or greater value within 60 days of the reduction, or if the resolution involves the transformation of the company into one with a different legal nature, that can possess a lower share capital.

The reduction of capital can only de approved if the company´s net worth after the capital reduction exceeds the new share capital by a minimum of 20%.

The share capital can be reduced for the following purposes:

  1. To cover losses
  2. To free up capital
  3. For a special purpose

The steps to be taken to reduce share capital are:

  1. Special notice of meeting in the event that the meeting is not called under the provisions of Article 54 of the Portuguese Companies´ Act
  2. Minutes of the general meeting
  3. Registration and publication of the resolution to reduce share capital
  4. Publication of the registration

Any company creditor can, within one month of the publication of the registration of the share capital reduction, file a suit to prohibit or limit the distribution of available reserves or profits for a financial year for a defined period of time, unless the applicant’s credit is paid off, if it has become due, or it is suitably secured in all other cases.

This facility can only be exercised if said creditor(s) have requested that the company settle its debt or provide appropriate guarantee for the same, at least 15 days previous, without the request being complied with by the company.

The company may not perform monetary distributions before the termination of the period of time provided to company creditors under the previous paragraphs. This prohibition comes into effect as soon as the company becomes aware of any such demand by any creditor.

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