Part 4 Commercial Companies 1

Question 1

Where is the legal framework applicable to Portuguese companies is provided where?

Answer 1

The Commercial Companies Act

Question 2

What are the 8 parts of the index for in the Commercial Companies code

Answer 2

Title 1 - General Provisions
Title 2 - General Partnerships
Title 3 - Quota Companies
Title 4 - Share Companies
Title 5 - Limited Partnerships
Title 6 - Affiliated Companies
Title 7 - Criminal Provisions
Title 8 - Final and transitional provisions

Question 3

How do you find the specific law using the index?

Answer 3

You first go to (Title 1) General Provisions and then go to the section which goes into more specificity

Question 4

What are the equivalent legal forms of the commercial companies to the sections of the Title index?

Answer 4

Title 2 - General Partnership = General Partnership
Title 3 - Quota Companies = Private Limited Company
Title 4 - Share Companies = Public limited company
Title 5 - Limited Partnerships = Limited Partnerships or Limited partnerships with shares

Question 5

What does Title I contain?

Answer 5

General provisions applicable to all types of commercial companies

Question 6

Definition of Commercial Companies?

Answer 6

Companies whose purpose is to carry out commercial activities, and they take a legal form

Question 7

What are the four types of legal forms that commercial companies can take?

Answer 7

1. General Partnership
2. Private Limited company
3. Public limited company
4. Limited partnership

Question 8

Do companies have legal personalities

Answer 8

Yes

Question 9

From when do companies attain their legal personality

Answer 9

From the date of the final registration of the articles of association.

Question 10

Is the legal personality of a company different from the legal personality of its partners? Explain why

Answer 10

Yes it is different from the legal personality of its partners, the commercial company is the trader, not the partners.

Question 11

What are the consequences of the legal personality of commercial companies?

Answer 11

Article 5
1. The initial contributions are transfers in ownership (from the partners to the company)
2. The distribution of assets after a liquidation constitutes a transfer in ownership (from the company to the partners)
3. Partner’s do not own the assets of the company
4. The company is the same regardless of any changes in relation to its partners, articles of association, etc.
5. The company establishes internal relationships *between the company and the members of corporate bodies) and external relationships (between the company and third parties).
6. In certain cases, a company can have a single partner.

Question 12

Discuss the capacity of a company (1/4)

Answer 12

The capacity of a company shall include the rights and obligations necessary or appropriate to the pursuit of its corporate purpose, with the exception of those which are prohibited by law or inseparable from the individual personality.

Question 13

Capacity (2/4)

Answer 13

The gratuities which can be deemed usual according to the circumstances of the time and the conditions of the company shall not be considered to be contrary to the company’s purpose.

Question 14

Capacity (3/4)

Answer 14

The provision of in rem or personal guarantees for any debts of other entities shall be considered contrary to the purpose of the company, except in cases where the guaranteed company has its own justified interests, or it is in a group or in a controlling relationship.

Question 15

Capacity (4/4)

Answer 15

The contractual clauses and company’s resolutions which establish its specific purpose or prohibit the carrying out of certain acts shall not limit the capacity of the company; however, the corporate bodies shall be bound by the duty to not exceed the limits of this corporate purpose and to refrain from carrying out such prohibited acts.

Question 16

What are acts contrary to the purpose of the company (1/2)

Answer 16

Acts contrary to the ultimate purpose of a commercial company - which is the pursuit of profit - are null and void (with the exception of gratuities which can be deemed usual according to the circumstances of the time and the conditions of the company.

Question 17

Acts contrary to the purpose of the company (2/2)

Answer 17

Acts contrary to the corporate purpose of a commercial company are valid and effective. However, the members of the corporate bodies that carry out those acts are liable for damages caused to the company (as the corporate bodies shall be bound by the duty to not exceed the limits of this corporate purpose and to refrain from carrying out such prohibited acts).

Question 18

What are the formalities related to creation and verification of the Memorandum and Articles of association

Answer 18

The memorandum of association and the articles of association must be in writing and the signatures of the parties thereto must be verified and witnessed by a notary or a lawyer present at the signing. However, when a more solemn form is required of the transfer of the assets with which the partners join the company/make their initial contributions, the articles of association must follow such format.

Ex. If the initial contribution consists of immovable property, the execution of a public a deed is required.

Question 19

What is the minimum number of partners

Answer 19

Two, except when the law requires a higher number (ex. share companies) or allows companies to be established by only one person (ex. single partner quota companies).

Share companies where state holds majority of the share capital, the minimum number of partners is 2 (article 273)
Share companies incorporated with only one shareholder (initial total domain situations) article 488.

Question 20

Discuss what occurs when equity is held by spouses in companies

Answer 20

1. The incorporation of companies between spouses is permitted
2. Spouses are permitted to have equity interests in companies, provided that only one spouse has unlimited liability.

Question 21

Fundamental elements of the articles of association

Answer 21

1. Names or business names of all the founding partners and other data that identifies them
2. Type of company
3. Business name
4. Purpose of the company
5. Headquarters of company
6. Capital (except in partnerships where all partners only contribute services)
7. Quota held by each partner and the type of initial capital contribution, as well as nay payments made in relation to the quota.
8. In the event of an initial capital contribution comprising assets other than money, a description of these assets and specific information in relation to their value.

Question 22

Specifications in regard to company name (1/3)

Answer 22

1. Characteristic elements of business names must not be suggestive of an activity other than that which constitutes the company’s corporate purpose.
2. When the business name of a company consists solely of the names or the business names of all, any or some of the partners, it must be completely different to any business names which have already been registered.

Question 23

Specifications in regard to company name (2/3)

Answer 23

3. The business name of a partnership establishes under the name of an individual or under the title and name or business of a partner shall not be identical the registered business name of another company, or similar to such an extent that is could lead to errors.

Question 24

Specifications in regard to company name (3/3)

Answer 24

4. Name consisting solely of terms in current usage, which identify o are related to an activity, technique or product, as well as place names and any indication of geographical provenance shall not be permitted.
5. The following shall not form particle of the names of companies:
   a) Expressions which could be misleading as regards to the legal characteristics of the company; in particular expressions currently used in the name of public or non-profit organisations.
   b) Expressions which are prohibited by law or offensive to morals or morality.

Question 25

Specific Rules in regard to company names of each type of company. (General Partnerships, 1/5)

Answer 25

Shall include the names of company names of at least one or all of the partners and the expression “& Companhia” (& Company) article 177

Question 26

Specific rules in regard to company names of each type (Private limited companies, quota companies, 2/5)

Answer 26

With or without abbreviations, it shall include the name or company name of all or some of the partners or a particular denomination, or by both, ending with the expression “Limitada” (Limited) or the abbreviation “Lda” Article 200.

Question 27

Specific rules in regard to the company names of each type (Single partners private limited companies or single partner quota companies, 3/5)

Answer 27

With or without abbreviations, it shall include the anme or company name of all or some of the partners or a particular denomination, or by both, followed by the expression “Unipessoal” (Single Partner) before “Limitada” or the abbreviation “Lda”. Article 270 B

Question 28

Specific rules in regard to each type of company (Public limited companies or share companies, 4/5)

Answer 28

With or without abbreviations, it shall include the name or company name of all or some of the partners or a particular denomination, or by both, ending with the expression “Sociedade Anonima” (Share company) or the abbreviation “S.A” Article 275/1

Question 29

Specific rules in regard to each type of company (Simple limited partnership and limited partnership with shares, 5/5)

Answer 29

Their names shall include the names or company names of at least one or all of the partners and the expression “Em Comandita” or “& Comandita”/”Ëm Comandita por accoes” or “& Comandita por accoes” Article 467

Question 30

Discussion in regard to Registered offices.

Answer 30

1. The company’s registered offices must be establishes at a specific location
2. Except where there are provisions to the contrary in the articles, management may relocate the company’s registered offices within the national territory.

Question 31

Law in regard to the Duration of a company

Answer 31

1. The company shall have an indefinite duration whenever its duration is not established in the articles of association
2. The duration of a company, when established in the articles of association, shall only be increased if such a resolution is adopted prior to the end of said period.
   Article 15

Question 32

Law in regard to shareholders agreements (1/2)

Answer 32

Is an arrangement between the shareholders of a company under which they assume the obligation to exercise certain shareholders’ rights and obligations in a certain way. They are not particle of the articles of association, whether executed a the date of the incorporation or latter on.
1. Any shareholders agreements entered into by all or some partners, by which means and in which capacity they are oblibed to conduct themselves in a manner which is not prohibited by law, shall legally bind the parties to each other, and acts carried out by the company or by the partners towards the company on the basis of such agreements cannot be contested.

Question 33

Law in regards to shareholders agreements (2/2)

Answer 33

2. The agreements may relate to the exercise of voting rights, but not to the conduct of parties to the agreement or other persons involved in the exercise of management or supervisor functions.
3. Agreements through which a partner is obligated to vote as follows shall be null and void:
   a) Always following the instructions of the company or one of its bodies
   b) Always approving the proposals of the company or its bodies
   c) Exercising the voting right or abstaining from exercising it in return for special benefits.
   Do not constitute legal grounds for challenging any actions of the company or of the partners in relation to the company.

Question 34

Obligations of the partners

Answer 34

Article 20
a) To invest in the company with assets which are suitable for pledging, or with their services, when the type of company permits this
b) T share in any losses, except in the case of provisions for partners investing only their services.

Question 35

Obligation to invest (1/3)

Answer 35

Initial capital contributions by partners shall be made prior to the signing of the articles of association, notwithstanding any stipulation set forth therein, whereby initial capital contributions in cash are deferred, in the cases and under the terms permitted by law (article 26(1)).

Question 36

Obligation to invest (2/3)

Answer 36

Acts performed by the management or resolutions adopted by the partners, which partially of fully exempt the partners from the duty to make the stipulated contributions, shall be rendered null, except in cases of reductions of capital (Article 27 (1)).

Question 37

Obligation to invest (3/3)

Answer 37

Article 28 (Verification of initial capital contributions in kind)
1. Initial capital contributions in assets other than cash must be subject of a report prepared by means of a resolution adopted by the partners, in which partners to whom the initial capital contributions correspond shall be prohibited from voting.

Question 38

Law in regard to partner’s obligations to share in any losses, without prejudice to the provisions regarding partners investing only their services.

Answer 38

In the absence of a special provision or agreement to the contrary, the partners shall share in the profits and losses of the company, in the proportion of the par value of their share in the capital (article 22 (1)).
Any provision which excludes a partner from sharing in profits or which exempts them from sharing in any losses incurred by the company shall be null and void, without prejudice to the provisions applicable to non-equity partners. (article 22(3)).

Question 39

Law in regard to the Rights of Partners

Answer 39

Article 21
1- All partners shall have the following rights:
a) To share in any profits
b) To participate in resolutions adopted by the partners, notwithstanding any restrictions set forth by law
c) To obtain information on the life of the company, under the terms of the law and the articles of association
d) To be appointed to the corporate and supervisory bodies of the company, under the terms set forth by law and in the articles of association.
2. Any stipulation by means of which a partner receives interest or other fixed amounts, in return for their capital or their services, is prohibited.

Question 40

Law in regard to share in the company’s profits.

Answer 40

In the absence of a special provision or agreement to the contrary, the partners shall share in the profits and losses of the company, in the proportion of the par value of their share in the capital (article 22(1)
Any provision which excludes a partner from sharing in profits or which exempts them from sharing in any losses incurred by the company shall be null and void, unless provision is made for partners to invest their services alone. (article 22(3)

Question 41

Law in regard to Non-distributable profits and reserves.

Answer 41

Article 33
1. Profits from the financial year, which are required to cover any losses brought forward or to form or reconstitute reserves required by law or by the articles of association, shall not be distributed among the partners
2. Profits from the financial year shall of be distributed among the partners whenever incorporation costs or research and development costs are not fully redeemed, except in cases where the total value of free reserves and results brought forward are at least equal to the said unredeemed costs.

Question 42

Law in regard to the right to participate in resolutions adopted by the partners

Answer 42

The law establishes a right to participate in resolutions adopted by the partners. However, notably in share companies, restrictions to this right may apply.

Question 43

Law in regard to the partner’s right to information

Answer 43

Law establishes different degrees in relation to the right to information on the life of the company for the different types of commercial companies.

Question 44

Law in regard tot he tight to be appointed to the corporate and supervisory bodies of the company

Answer 44

Different rules apply to the different types of commercial companies. General Partnerships: Unless otherwise provided by the law, management is carried out by all partners.

Question 45

Law in regard to special rights

Answer 45

Article 24
These special rights can only be created by means of stipulation in the articles of association.
These privileges may include, inter alia, the right to vote on a resolution regarding the appointment or managers or members of the board, the right to purchase new shares issued by the company, and the right to obtain a special share in the distribution of the profits or the liquidation proceeds of the company.
Special rights may not be excluded or restricted without the consent of the respective partner, unless otherwise provided for by the law of by a specific provision in the articles of associaiton.

Question 46

Law in regard to the conservation of capital (In case of loss of half of a company’s capital)

Answer 46

Article 35
Whenever the equity capital of the company is equal to or less than half of the share capital of the company, a general meeting must be convened, in order to inform the partners of the situation and taking the appropriate steps.

Question 47

What are the three things that can occur when a company’s equity capital is equal to or less than half of its share capital?

Answer 47

Three things can happen:
1. Dissolution
2. Reduction of the company’s capital to a figure lower than its equity capital, without prejudice to article 96(1), where applicable
3. Capital contributions by the partners to reinforce the company’s equity capital.
However, the partners are not obligated to do anything, the consequence of that is that they must inform third parties. Thus, quota companies, share companies and limited partnerships are obligated to indicate, in alle external activities, correspondence, contracts, publicity, websites, etc, the amount of equity capital as per the most recent approved balance sheet. (Whenever it is less than or equal to half the share capital) (Article 171/2)

Question 48

Law in regard to Partner’s Resolutions

Answer 48

Resolutions shall only be adopted by partners through one of the means permitted by the law for each type of company. Through the meetings of partners

Question 49

Law in regard to the Unanimous Resolutions an Universal Meetings

Answer 49

Article 54
1. Partners in any type of company are permitted to adopt unanimous resolutions in writing and also to convene a general meeting, without observing any prior formalities, provided that all partners are present and all partners demonstrate that they agree with the convening of the meeting in order to discuss a given matter
2. Once all partners have demonstrated their willingness to discuss the matter in question, all of the legal and contractual rules relating to how the general meeting functions shall apply, however, only issues enjoying the consent of all partners may be discussed.
3. Representative of a partner shall only be permitted to vote in resolutions adopted under the terms of paragraph 1 if expressly authorized to do so.

Question 50

Law in regard to the Minutes of a meeting

Answer 50

Article 63
Partner’s resolutions can only be proven through minutes of the meetings or, when unanimous resolutions are admitted, by the documents that are particle of sch resolutions.
The minutes shall contain, at least, the following:
1. Identification of the company, place and date and time of the meeting
2. The name of the chairman and the secretaries
3. Names of the partners present or represented and the par value of the ownerhip interest, quotas or shares held by each partner (except where the law stipulates that an attendance list be attached to the minutes)
4. Order of business, included in the notice of the meeting, except if it is attached to the minutes
5. Reference to the documents and reports submitted at the meeting
6. Content of the decisions adopted
7. Results of votes
8. How partners votes if they request so.

Question 51

Law in regard to the management and supervision (1/2)

Answer 51

Article 64
1. The company’s managers or member of the board must comply with:
a) Duty of care towards the org, displaying willingness, technical competence and an understanding of the company’s business that is appropriate to their role, and executing their duties with the diligence of a careful and organized manager
b) Duty to be loyal to the interests of the company, serving the long term interests of the partners and taking into account the interests of other relevant parties such as employees, clients, and creditors in ensuring the sustainability of the company.

Question 52

Law in regard to the management and supervision (2/2)

Answer 52

2. Members of the corporate bodies with supervisory powers must execute their duties in the interests of the company, executing proper care and employing high standards of professional diligence and loyalty.

Question 53

Law in regard to the duty to prepare the annual report and accounts

Answer 53

Article 65
Managers and members of the board have the duty to prepare and submit before the relevant corporate bodies, the annual report, the statutory accounts and other financial statements provided for in the law.
Annual report and financial statements for the period must be drafted and signed by all managers or directors in office at the time of submission. Both annual report and financial statements must be submitted to the relevant corporate bodies no later than 3 months after the end of the financial year, (Five for companies that consolidate accounts or that apply equity method of accounting)

Question 54

Law in regard to the annual report (1/4

Answer 54

Article 66
Annual report must contain, (at least) accurate and clear description of the evolution of the business and the performance and the position of the company, as well as a description of the main risks and uncertainties that it faces.
Must consist of a balanced and global analysis of the evolution of the businesses, the results and the position of the company, in accordance with the size and complexity of its activity.

Question 55

Law in regard to the annual report (2/4

Answer 55

To the extent necessary to understand the evolution of the business, the performance or the position of the company, the description must cover both financial aspects and, where appropriate, non-financial performance references relevant to the specific activities of the company, including information on environmental and labor issues.
The description should also include a reference to the amounts registered in the accounts for the financial year and additional explanation relating to these amounts.

Question 56

Law in regard to the annual report (3/4

Answer 56

The report must indicate, in particular:
a) Evolution of management in the different areas in which the company operates, notably in relation to market conditions, investments, costs, income and research and development activities
b) Relevant facts that occurred after the end of the year.
c) Foreseeable evolution of the company
d) Number and the par value or, in the absence of a par value, the book value of the quotas or own shares acquired or disposed of during the period, the fraction of he subscribed capital they represent, the reasons for these acts and the respective price, as well as the number and par value or book value of all own quotas ad shares held at the end of the period
e) Authorizations granted for businesses between the company and its managers or board members, pursuant to article 397.
f) Duly substantiated proposal for the application of results.
g) Existence of branches of the company
h) Objectives and policies of the company in terms of financial risk management, including its hedging policies of each of the main categories of transactions for which hedge accounting is used, and the company’s exposure to risks in connection with price, credit, liquidity and cash flows, when materially relevant for the evaluation of assets and liabilities, financial position and results, in relation to the use of financial instruments.

Question 57

Law in regards to the annual report 4/4

Answer 57

If annual report and financial statements are not submitted within the 2 months following the deadline of the submission of the accounts (as a general rule 3 months from the end of the company’s financial year), any partner may file legal proceedings, asking for an inquiry to the company (article 67)

Question 58

Other duties

Answer 58

Managers and directors have other duties:
1. Obligatoin to provide the partners with accurate information on the company (and can only refuse in the cases provided for by the law)
2. Comply with resolutions adopted by the partners
3. Non-competition: Cannot carry out, either on their own behalf or on the behalf of third parties, any activity that is considered to be in competition with the company for which they were appointed, or any functions in a competitor company, or be appointed on behalf of or in representation of a competitor company, unless authorized by the partners (article 253 for quota and 398(5) for share)

Question 59

Law in regard to the civil liability of managers and member of the board (1/2)

Answer 59

Article 72
Responsibility of the members of the board to the company
1. Managers or member of the board shall be responsible for damages cause by acts or omissions resulting from dereliction of their legal or contractual duties, unless the managers or members of the board can prove that they did not act willfully or maliciously.
2. Liability shall be waived if he or she acted in an informed manner, free of any personal interest an using the criteria of corporate rationality.
3. Managers and members of the board who did not participate in a collegiate resolution of the managers or members of the board, or whose votes were overridden shall not have equal liability. In this case Managers and members of the board shall have five days to cast their ballots, either in the book of minutes or in a notice submitted to the supervisory body, if such a body exists or before a notary or registrar

Question 60

Law in regard to the civil liability of managers and member of the board (2/2)

Answer 60

Article 72
4. Manager or director who does not exercise their right of opposition, as conferred by law, when able to do so, shall be jointly liable for the acts they could have objected to.
5. Managers or members of the board shall not be answerable towards the company if the act or omission is particle of a resolution adopted by the partners, even if this resolution is voidable
6. Companies that have a supervisory body, the favorable opinion or consent of this body shall not release the members of the board from liability.
Managers and members of the board are jointly and severally liable (article 73)

Question 61

Law in regard to liability towards the creditors of the company

Answer 61

article 78
1. Managers or member of the board shall be answerable to the company’s creditors if, because they willfully ignore the provisions set forth by law or in the articles of association, designed to protect the company’s assets, these become insufficient to pay for the company’s debt
2. From the point of view of the creditors, the obligation to indemnify does not cease by resignation or if the company is negotiated, nor does it cease merely because an act or omission was discussed by the general meeting.
3. In the event that the company goes bankrupt, creditor rights may be exercised by the trustee of the bankrupt estate while the bankruptcy proceedings are underway.

Question 62

Law in regard to liability for damage caused to shareholders and third parties

Answer 62

Article 79
Managers or member of the board are also generally answerable to the partners and third parties for damages resulting directly from the exercise of their duties.