Portugal
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Portuguese law provides several legal forms through which foreign investors may conduct business in Portugal. The most common are the private limited liability company (sociedade por quotas or Lda.), the single-member private limited liability company (sociedade unipessoal por quotas) and the public limited liability company (sociedade anónima or S.A.).
In practice, most domestic and foreign investors choose limited liability vehicles. The appropriate structure will depend largely on the size of the investment, the intended governance model and the level of flexibility required.
A private limited liability company is generally the preferred vehicle for small and medium-sized investments due to its simpler governance structure and lower administrative burden. Public limited liability companies are more commonly used for larger investments, projects requiring a more sophisticated governance framework or transactions involving multiple investors.
Branches of Foreign Companies
As an alternative to incorporating a Portuguese company, a foreign investor may establish a branch of a foreign company (sucursal).
A branch does not constitute a separate legal entity and operates as an extension of its parent company. Consequently, the parent company remains directly liable for all obligations and liabilities arising from the branch’s activities. While a branch may be allocated operating funds, it is not required to have its own share capital.
Simplified Incorporation Procedures
Portugal offers simplified incorporation procedures that significantly reduce the time and cost required to establish a company.
On-the-Spot Company Incorporation (“Empresa na Hora”)
This procedure allows a company to be incorporated in a single appointment using pre-approved company names and standard-form articles of association. According to official information, incorporation can be completed on the same day for a fee of €360.
Online Company Incorporation (“Empresa Online”)
Companies may also be incorporated electronically through an online platform, although submitting an application online does not mean that registration is completed immediately. As a rule, where no irregularities are identified, registration is completed in up to five days for pre-approved articles of association or ten days for articles prepared by the applicants.
The current fees are:
- €220 when pre-approved articles of association are used; and
- €360 when customized articles of association are submitted.
Both procedures remain subject to the applicable legal requirements and restrictions.
Traditional Incorporation Procedure
Investors may wish to use a company name of their choice, to reflect the company’s integration into a group or operations under the same brand, and tailor-made articles of association. These preferences do not, in themselves, exclude online incorporation: the Empresa Online procedure permits articles of association prepared by the applicants and a company name approved through a certificate of admissibility. Where the requirements for a simplified procedure are not met, the traditional incorporation procedure may be used. It generally involves:
- Obtaining clearance for the proposed company name;
- Executing the incorporation documents;
- Depositing the share capital with a credit institution (where required);
- Registering the company with the Commercial Registry Office;
- Registering the company with the Tax Authority and Social Security; and
- Filing the beneficial ownership declaration.
Digital Corporate Records
Portugal has developed a highly digitalized corporate environment. Commercial registration procedures and a significant number of corporate and regulatory filings may be completed electronically.
Portuguese law allows commercial correspondence, accounting records and related documentation to be archived electronically, provided that the applicable legal requirements are satisfied.
Electronic archiving is also permitted for invoices and certain tax-relevant documents. However, the existence of electronic filing and archiving systems should not be interpreted as allowing all corporate records and corporate books to be maintained exclusively in digital format. Specific rules continue to apply depending on the nature of the document concerned.
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There is a distinction between the minimum number of participants required for each type of company.
Generally:
- A public limited liability company (S.A.) must have a minimum of five shareholders[1]; and
- A private limited liability company (Lda) must have a minimum of two quotaholders.
Portuguese law also allows companies to be incorporated by a single shareholder in certain circumstances.
A single-member private limited liability company may be incorporated by a sole shareholder, whether an individual or a legal entity, holding the entirety of the share capital.
Accordingly, a single foreign investor may wholly own a Portuguese company incorporated as a single-member private limited liability company, as Portugal generally adopts a non-discriminatory approach towards foreign investment.
Certain restrictions apply to these structures. In particular:
- An individual may only be the sole shareholder of one single-member private limited liability company; and
- A single-member private limited liability company may not itself be the sole shareholder of another single-member private limited liability company.
These restrictions are specific to single-member companies and do not apply to ordinary private limited liability companies with more than one holder.
Minimum share capital requirements
One of the main advantages of an Lda. is the flexibility of its capital structure.
The share capital is freely determined by the holders and divided into quotas corresponding to each investor’s participation in the company. Each quota must have a minimum nominal value of €1.
As a result, a single-member Lda. may be incorporated with a share capital of only €1 and there is no statutory minimum share capital requirement applicable to this type of company.
The position is different for an S.A. A public limited liability company is subject to a minimum share capital requirement of €50,000. Its share capital is divided into shares, each having a minimum nominal value of €0.01.
Deferred payment of capital contributions
Portuguese law allows cash contributions to be deferred under certain circumstances.
Shareholders may declare that the relevant contributions will be made by the end of the company’s first financial year, subject to compliance with the applicable legal requirements and any provisions contained in the articles of association.
The possibility of deferral should not be confused with an exemption from capital subscription. The shareholder remains under an obligation to subscribe the share capital and to make the corresponding contribution within the legally prescribed period.
[1] Under certain circumstances a company may incorporate a wholly owned S.A.
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Portuguese law generally allows both individuals and legal entities, whether domestic or foreign, to incorporate Portuguese companies and to hold equity interests in them.
A single-member private limited liability company may be incorporated by a sole shareholder, whether an individual or a legal entity. Likewise, there is no general requirement for shareholders or quotaholders of Portuguese companies to be Portuguese nationals.
As a general principle, foreign investors are subject to the same legal framework as Portuguese investors and may freely acquire and hold interests in Portuguese companies, subject to applicable restrictions. The principle of equal treatment does not remove the need to comply with identification and documentary requirements. In the online incorporation procedure, foreign individual investors must hold a Portuguese Tax Identification Number (NIF), and foreign corporate investors must hold a Portuguese corporate identification number (NIPC) and provide the required evidence of their legal status and authority to participate in the company.
Special Regulatory Regimes
Notwithstanding the foregoing, certain business activities are subject to specific licensing, authorization or regulatory supervision requirements, including activities in the following sectors:
- Banking;
- Telecommunications;
- Energy; and
A separate safeguard regime applies to acquisitions of control over strategic infrastructure or assets by individuals or legal entities from countries outside the European Union and the European Economic Area. As a matter of fact, the Government may oppose such transactions in exceptional circumstances where they threaten national defense and security or the security of supply of essential services, notably in the energy, transport and communications sectors.
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Directors and Managers of Private Limited Liability Companies
A Lda. is managed and represented by one or more managing directors (gerentes), who must be individuals with full legal capacity.
Managing directors may be either quotaholders of the company or third parties with no ownership interest in the business.
Portuguese law does not generally impose nationality or residency requirements for the appointment of managing directors. Foreign nationals may therefore hold management positions in Portuguese companies, and there are no general nationality quotas applicable to management or board positions.
Identification, Registration and Tax Representation Requirements
Notwithstanding the absence of nationality or residency requirements, the appointment of managing directors remains subject to the applicable identification and registration formalities, including the submission of the documents required for registration with the Commercial Registry Office.
The identification and registration requirements applicable to members of corporate bodies must likewise be complied with.
Any tax obligations applicable to directors, managers or legal representatives must be assessed separately in light of the circumstances of the individual concerned and the applicable tax legislation.
Accordingly, tax matters must be analyzed on a case-by-case basis, including whether the appointment of a Portuguese tax representative may be required.
Branches of Foreign Companies
In the case of a branch (sucursal) of a foreign company, the designated legal representative must hold a Portuguese Tax Identification Number (Número de Identificação Fiscal – NIF), which must be obtained before the branch is registered.
Accordingly, there is no general requirement that the directors, managers or legal representatives of a Portuguese company be Portuguese nationals, residents of Portugal, or tax residents in Portugal. However, the applicable identification, registration and, where relevant, tax representation requirements must be complied with in each specific case.
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Ms. Sofia Belard (sbelard@afma.pt), Mr. Pedro Porto Dordio (ppdordio@afma.pt), Mr. Fernando Magiolo Magarreiro (fmm@afma.pt), Ms. Rita Nina (ritanina@afma.pt), Mr. Guilherme Frutuoso de Melo (gfmelo@afma.pt), Ms. Raquel Elias da Costa (rec@afma.pt).
