PART 4 (CHAPTER 1) Flashcards
Types of commercial companies
general partnership
private limited company (limited liability)
public limited company
limited partnership
partnership with shares
Commercial companies and legal personality
companies have legal personality and exist as such from the date of the final registration of the articles of association
Title 1 general provisions
a group of legal provisions that apply to all commercial companies
Consequences of the legal personality of commercial companies:
The initial contributions are transfers in ownership (from the partners to the company);
The distribution of assets after a liquidation constitutes a transfer in ownership (from the company to the partners);
What is a Memorandum of association (articles of association) and what are its major components?
A contract between the partners (shareholders), discussing the distribution of shares that each partner will hold, as well as key company details (percentage of share capital, address, tax information, members of the board, quota held by each partner, type of initial capital contribution…)
Two types of provision in the commercial code
Imperative and Subsidiary (supplementary) provisions
Imperative provisions
Main provisions that have to be complied with no matter what
Subsidiary (supplementary) provisions
must be complied with but companies can regulate with a degree of freedom how it will be followed
Corporate structure of a company
General meetings
Board of directors
Supervisory board
Supervisory boards are not mandatory to have in what type of companies
small quota companies
Which types of companies are mostly focused in the course for commercial companies?
public limited companies and private limited companies
Why do people not have a general partnership
They have an unlimited liability, your personal assets can be seized to pay for the debts incurred by the company
how can you incorporate a company?
adding money or capital
What is the minimum share capital to incorporate a company?
There is no minimum, however, the minimum for a quota company is 1 euro for a single person.
Whats the minimum for incorporating a shared company for a decent sized company?
50 000 euros
What happens if you create a shared limited company with someone, and incurred debts, but you haven’t deposited the full amount of the initial contribution?
Generally, you will be held liable to for the initial contribution
A company’s 100% shared capital is bought by someone else, is the company the same?
Yes, only the partners have changed
Single member companies with 1 member are different from each other in what way (legal personality)
entity from each other, as the company itself has legal personality separate from the member.
Companies only acquire their legal personality after…
being registered
The legal capacity of companies are…
all rights and obligations necessary to pursue corporate purposes, with the exception of those prohibited by law
Donations (if they’re small enough) are considered to be
gratuities
The provision of in rem or personal guarantees for any debts of entities is considered to be…
contrary to the purpose of the company
what are the exceptions that the provision of in rem or personal guarantees for any debts of entities is considered to be contrary to the purpose of the company?
in cases where the guaranteed company has it’s own justified interests or is in a group or a controlling relationship.
The contract clauses and company resolutions that establish their purpose or prohibit certain acts shall not…
limit the capacity of the company.
Corporate bodies are bound by the duty to not…
exceed the limits of this corporate purpose and to refrain from carrying out such prohibited acts.
If board directors give 100% of their company’s profit to a charity…
they have a legal problem
ultimate purpose of a commercial company
generate profit
corporate purpose of a commercial company
those written and established specifically in the company’s memorandum of association (articles of association) as the object of the company.
Acts contrary to the ultimate purpose of a commercial company are…
null and void, with the exception of gratuities (donations) that are deemed usual according to circumstances and conditions
Acts contrary to the corporate purpose of a commercial company are…
valid and effective, however, members of corporate bodies that carry out those acts are liable for damages caused to the company.
Difference between the memorandum of association and articles of association
memorandum is the contract between the partners, and articles of association is embedded in the memorandum
What can you contribute to the shared capital of a company?
Money
Assets
If you contribute to the shared capital of a company with assets that need to be transfered to the company (via public deed)
Then the memorandum of association also has to be verified in a public deed as well
What is the minimum number of partners to create a company, and are there exceptions to this?
Two, except when the law requires a higher number (share companies) or it’s a single member quota company.
Equity held by spouses in companies
- The incorporation of companies between spouses is permitted.
- Spouses are permitted to have equity interests in companies, provided that only one spouse has unlimited liability.
Fundamental Elements of the Articles of Association
Articles of association must contain:
- names or business of all founding partners and other data that identifies them
- the type of company
- the business name
- the purpose of the company
- the headquarters of the company
- the capital
- the quota held by each partner and the type of initial capital contribution, as well as any payments made in relation to the quota
- in the event of initial capital contribution comprising assets other than money, a description of these assets and specific information in relation to thier value
Specific rules for each company: General Partnership Companies
includes the names or company names of at least one or all of the partners and the expression “& Companhia”
Specific rules for each company: Private Limited Companies or quota Companies
includes name or company name of all or some of the partners or a particular denomination, or by both, ending with the expression “Limitada” or the abbreviation “Lda”
Specific rules for each company: Single partner private limited companies or single partner quota companies
include the name of all or some of the partners, followed by the expression “Unipessoal” or the abbreviation “Lda”
Specific rules for each company: Public limited companies or share companies
include the name of all or some of the partners ending with the expression “Sociedade Anónima” (Share company) or the abbreviation “S.A”
Specific rules for each company: Simple limited partnership and limited partnership with shares
include names of at least one or all partners and the expression “Em Comandita” or “Em Comandita por Acções”
Registered Offices
- The company’s registered offices must be established at a specific location
- Except where there are provisions to the contrary in the articles of association, management may relocate the company’s registered offices within the national territory
Duration
- Indefinite duration: if the articles of assocation of a company don’t establish how long it will exist, by default it is considered to have no specific end date
- Specified duration: if the articles of association do specify how long the company will exist, that is the duration unless the owners (shareholders) decide to extend it (they must make this decision before the specified period ends)
Shareholder Agreements
contract between shareholders of a company, in which they agree to exercise certain rights and fulfill certain obligations in a specific way (agreements are separate from the company’s articles of association)
Shareholder agreements are legally binding…
if shareholders enter into a shareholder agreement, it legally binds them to its terms
Scope of agreements (shareholder agreements)
shareholder agreements can cover various aspects, including how voting rights are exercised, however they cannot dictate how other parties involved should behave
Invalid provisions (shareholder agreements)
certain provisions in a shareholder agreement are considered null and void, for example:
- if a shareholder is required to follow the company’s instructions or always approve its proposals
- if a shareholder is compelled to vote in a specific way or abstain from voting in exchange for special benefits
Obligtions of the partners
to invest: partners must invest in the company with either
- assets that can be used as collateral
- their skills or work if the type of company allows it
to share in any losses:
- all partners are responsible for sharing any losses that the company may face
- however, if a partner only invests their skills and work (and not assets), they might be exempt from sharing in losses
Rights of the partners
- To share in any profits
- To participate in making decisions that affect the company
- To access information about the company’s activities
- To be appointed to important roles within the company, such as corporate or supervisory positions
Prohibition of Fixed Payments
any agreement where a partner receives fixed payments, such as interest, is not allowed. This means that the partner cannot be guaranteed fixed amounts in exchange for their contributions to the company
Conservation of capital
it is about maintaining the financial health of the company
Loss of Half of the Company’s Capital
when a company’s capital (money it has) is equal to or less than half of its share capital (money its supposed to have), a meeting must be held in order to inform the partners about this situation and decide what to do
Loss of Half of the Company’s Capital: MEETING
The meeting must discuss:
- Dissolving the company
- Decreasing the share capital to at least match its own capital, if allowed by law
- Having partners put in more money to boost the company’s own capital
Partners aren’t required to take any of these actions, and this information must be publicly disclosed
How partners make decisions
Partners can only make decisions in ways allowed by the law for their type of company, such methods include:
- Partners’ general meetings, where all partners gather to discuss and vote on matters
- Unanimous resolutions and Universal Meetings*
Unanimous resolutions and Universal Meetings
Partners in any type of company can make unanimous decisions without a formal meeting:
- if all partners agree to discuss a certain matter, they skip the usual meeting formalities, however they still need to follow all legal and contractual rules
- only topics that all partners agree on can be discussed
Minutes
record of what happens in meetings or when decisions are made, they need to include specific information to ensure transparency and accuracy
Importance of minutes
- Partners decisions must be recorded in minutes of meetings
- if decisions are made unanimously without a meeting, the documents related to those decisions also count
What Minutes Should Include:
- Company details and where and when the meeting took place.
- The names of the chairman and secretaries.
- Names of partners present or represented, along with their ownership interests.
- The agenda of the meeting.
- References to any documents or reports discussed.
- Details of decisions made.
- Results of votes.
- How each partner voted, if they ask for it.
Fundamental Duties of Management and Supervision
Managers or board members of the company have two main responsibilities:
1. Duty of Care
2. Duty of Loyalty
Duty of care
- they must act with care and attention, showing a good understanding of the company’s operations suitable for their position
- they should carry out their responsibilities dilligently
Duty of loyalty
- they must prioritize the company’s interest above everything else
- they should also consider the interests of other relevant parties such as employees, clients, ensuring the company’s sustainability
Duty to Prepare the Annual Report and Accounts
- managers and members of the board have the duty to prepare and submit the annual report, the statutory accounts and other financial statements provided for in the law
- the annual reports must be prepared and signed by all current managers/directors and must be submitted within 3 months at the end of each financial year (companies that consolidate their accounts/use the equity method of accounting have 5 months to submit)
Content of the Annual report
- must have a clear picture of the company’s position, performance, and any risks it faces
- must provide a balanced view of the company’s activities
- must cover financial aspects and non-financial aspects like environmental and labor issues
- must explain the amounts recorded in the accounts for the financial year
Specific information required for annual report
- how management handled different aspects like market conditions, investment costs, income, and R&D
- significant events
- predictions
- details about company’s shares and quotas
- business transactions between company and its managers/board members
- proposal for how to use the company’s profits
- policies for managing financial risks
Consequences of a late submission of an annual report
any partner can take legal action, asking for an inquiry into the company’s affairs
Responsibility of Managers and Board Members towards the Company
- they are responsible for any harm caused by their action or lack of action, if they fail to fulfill their legal or contractual duties
- they can avoid liability if they can prove that they didn’t act wilfully or maliciously
Conditions for Waiving Liability
- liability can be waived if the manager or board member acted with full awareness, without personal interest, and with corporate rationality
- managers/board-members who did not partake in the decision or whose votes were ignored won’t share equal liability
- a manager who does not exercise their right of opposition shall be jointly liable
Liability towards the creditors of the company
- managers/board members can be held responsible to the company’s creditors if, by ignoring legal or contractual rules meant to protect the company’s assets, those assets become insufficient to cover the company’s debts
Continuation of Liability
- even if a manager resigns or the company is sold, their responsibility towards the company’s creditors does not end
Bankruptcy Proceedings
If the company goes bankrupt, the rights of creditors are protected by the trustee managing the bankrupt estate during the bankruptcy process
Liability for Damage Caused to Shareholders and Third Parties
managers/board members are generally responsible to both the company’s shareholders (partners) and third parties for any harm directly caused by how they carry out their duties
