Portugal: Governing Laws/Bylaw Requirements

The bylaw requirements differ based on the type of Portuguese company established.

For the PLC (“Sociedade Anónima” or “S.A.”)

As one of the two most common investment vehicles used in Portugal with the purpose of establishing business and commercial transactions, bylaws must include information on the limitation of shareholders liability to the amount of their investment in the company, including their participation in its share capital, and whether or not they are qualified these as negotiable securities.

The number of Directors of the board is foreseen in the bylaws. A S.A. can have one Director, as long as the share capital does not exceed €200,000. In practice, a minimum of three are normally appointed. An S.A. can have a corporate director who must act through a nominated individual. Directors may be designated in the bylaws or elected by the general meeting or first meeting, for a term of office established in the bylaws and which is no greater than four calendar years. The company becomes bound by the acts concluded by the majority of the board members or by a lower number, if so established in the bylaws.

As a general rule, a PLC must be incorporated by a minimum of five individual or corporate founding shareholders. Exception is made, being required only one founding shareholder, when all outstanding capital stock is subscribed and held by another corporation since the incorporation. Also, only two founding shareholders are required when the State, or a State holding company, owns more than 50 % of the capital stock.

Shares can either be nominative or bearer (depending on whether the issuer has the ability to be constantly informed of the identity of the respective holders) and may be represented by book entries or certificates (depending on whether they are represented by registrations in an account or by paper documents). Shares are mandatorily nominative if (i) they are not fully paid up, (ii) by-laws foresee restrictions on its transfer, or (iii) shareholders are required under the bylaws to deliver additional cash or material contributions to the company.

Except for legal or company bylaws prohibition, the issuer may decide on the conversion of securities as to their form of representation. Also, and except for legal, bylaws or provisions resulting from special conditions established for each issue, bearer shares may, at the holder’s initiative and expense, be converted into nominative and vice-versa.

There are two types of shares:

  1. Ordinary shares (“acções ordinárias”) which entitle holders to dividends and to a portion of the assets
  2. Preferred shares (“acções preferenciais”) which award special rights to their holders, usually broader rights than the ones attributed to ordinary shares. The bylaws may authorize the PLC to issue two types of preferred shares:
    • Non-voting preferred shares (“acções preferenciais sem voto”) which confer, if they have nominal or par value, preferential rights to their holders to receive an annual payment of not less than 5% of the shares’ par value, payable as a dividend out of distributable profits. If authorized by the bylaws, corporations may issue non-voting preferred shares up to a maximum of 50% of its registered share capital
    • Redeemable preferred shares (“acções preferenciais remíveis”) which are redeemable at a fixed time date or when established by shareholders’ general meeting. Redemption must be made at par value or according to shares issue value (in case of shares without par value), unless bylaws provide for the payment of a premium

Shares in a PLC are freely transferable, except where the respective bylaws set forth restrictions on its transferability. The bylaws may not prohibit the transfer of shares otherwise permitted by law, being that transfer may only be restricted within the terms of the relevant legal provisions.

Finally, share capital increases, as any other amendment to the company’s bylaws, shall be approved by shareholders’ meeting. Nevertheless, bylaws can authorize the board of directors to decide on share capital increases in cash within certain limits.

The shareholders’ meetings must be convened by a notice published in the official website of the Ministry of Justice or, in certain cases where all shares are nominative and the bylaws foresee such possibility, by registered mail or by e-mail to shareholders having expressed their prior written consent. The notice shall be published with at least 1 month or sent 21 days in advance as to the date of the general meeting, and shall mention, amongst other information, general meeting’s agenda.

Last reform of the Portuguese Companies Code (2006) introduced the possibility of holding general meetings through “virtual meetings”. The shareholders and the company can benefit from this new way of gathering provided that the respective bylaws do not prohibit such mechanism.

The LTD (“Sociedade por Quotas” or “Lda.”)

This has traditionally been the investment vehicle used in Portugal for small business, usually of family nature. This type of business entity does not allow participants to be represented by shares (since capital stock is divided into quotas) and thus may not be listed on the Lisbon Stock Exchange. Quota-holders may defer the payment of their contributions until the end of the first financial year or until another date to be set forth in the respective bylaws but no longer than 5 years after incorporation. As a general rule, a quota can only be transferred by private or public deed under the company’s express consent or under court order, unless the prospective transferee is another quota-holder, transferor’s spouse or the following person in line of succession. This legal regime can be differently regulated in the bylaws, which establish the operating rules for management, i.e. the number of signatures required to bind the company and the associated rules.

Certain issues and acts, in addition to others which may be foreseen by law or in the bylaws of the company, require resolutions by the quotaholders taken in quotaholder meetings including issues when revising the bylaws.

Portuguese companies are regulated by the Portuguese Companies Code, as enacted by Decree–Law 262/86 of 2 September 1986, and amended, and the Commercial Companies Act [2] republished by Decree-Law No. 76-A/2006, of 29 March and amended by Decree-Law No. 8/2007, of 17 January and Decree-Law No. 357-A/2007, of 31 October.


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