Part 4 of Chapter 3 Flashcards
Legal framework for quota companies or private limited companies
Title 1 1-174, Title 3 197-270
Minimum number of partners? for quota companies.
2 although the company can be incorporated with only 1 partner in the case of Single Partner Quota companies.
Law in regard to company name for quota companies.
Article 200
Shall include name or business name or one, some or all partners, or specific denomination, or both, with or without abbreviations and shall end with “Limitada” limited, “Lda”
Law in regard to capital and initial contributions for quota companies.
- No minimum capital, freely established by partners in articles of association (Article 201)
- Initial contributing consisting of services are not permitted (article 202 (1))
- Partners shall only be obligated to pay additional capital contributions if such obligation results from article of association or law.
- Capital is divided in quotas. Par value of quotas may be different, however none may be less than 1$ (article 219 (3))
- Quotas are nominative
- Partners are jointly liable for putting up all of the capital agreed in the articles of association (article 197)
Law in regard to deferral of initial capital contribution for quota companies.
Article 203
Initial capital contribution:
a) Deferred until specific dates
b) Or be made contingent upon specific facts
When will the initial capital contribution be required for quota companies.
- 5 years after signature of the articles of association
- 5 years after the decision to increase the capital
- Once half of the duration of the company elapses, whichever comes first.
Law in regard to assignment of quotas among living persons and transfer of quotas for quota companies.
Articles 228 to 231
- Assignment of quotas inter vivos has to be executed in writing.
- Takes effect against the company once it is communicated to said company, in writing, or when the company gives its express or tacit recognition(article 228(3) and a request for registration is submitted (article 242-A)
When will transfer of quotas take effect for quota companies.
- Shall not take effect against the company until the company gives its consent, except for transfers between spouses, ascendants descendants or partners (article 228 (2).
- Articles of association may waive the need for consent, in general or for certain situations only (article 229/2)
- The request for consent must be submitted in writing, indicating the transferor and all the terms of the transfer (article 230)
- If the company refuses, the refusal addressed to the partner shall include a proposal for the amortization or acquisition of the quota (article 231)
Can the articles of association prohibit the transfer of quotas? for quota companies.
Yes, however, partners shall be entitles to a waiver of such a cause 10 years after becoming a partner (article 229(1) and (2))
Can the articles of association establish preference? In the transfer of quotas? for quota companies.
Very common for articles of association or shareholder’s agreements to establish preference rights in favor or one or all the other partners
Restriction to the transfer of quotas is regulated in articles 485 and 487.
Are the transfer of quotas a sub-species of the assignment of quotas inter vivos? for quota companies.
Yes, its distinctive feature resides in the voluntariness of the fact that is on the basis of the transfer
There is no transfer of quotas in the absence of a voluntary act of its owner (as is the case with an execution in the context of legal proceedings).
Law in regard to the liability of partners for quota companies.
- Limited to the share capital
- Each partners is responsible for the full subscription of his quota
- Partners, are also responsible for the other partners unsubscribed capital (joint responsibility)
- Partners are not liable for the debts of the company.
Other obligations of partners, obligation to make additional contributions for quota companies.
Article 209
1. Articles of association can impose upon partners the obligation to make additional contributions (only exists if provided for in the articles of association)
2. Articles of association must establish the essential aspects of this obligation and specify whether these contributions are free of charge or not.
3. These additional contributions can be a provision of services, construction work, a loan, etc.
Obligation to make supplementary contributions in the case of quota companies (1/3)
Article 210
1. Specific for quota companies (not share companies)
2. Partners may be under the obligation to pay supplementary capital contributions, provided this obligation is included in the articles of association and a partners’ resolution to that effect is adopted.
3. These contributions shall always be in cash (although they will not become part of the company’s capital
Obligation to make supplementary contributions in the case of quota companies (2/3)
- When the articles of association allow supplementary contributions, they must also clearly provide the following:
a) Total amount of the supplementary contributions
b) Partners who are obligated to make these contributions
c) Criteria to allocate these supplementary contributions among the partners obligated to make them. - Interest shall not apply to supplementary capital contributions (210(5))
Obligation to make supplementary contributions in the case of quota companies (3/3)
- The demand for supplementary capital contributions always depends on a decision by the partners, establishing the amount and the deadline for the payment, which can not be less than 30 days following its notice to the partners (article 211 (1)).
Can partners recover from supplementary contributions? for quota companies.
Article 213
Recovery by partners of supplementary capital contributions may only occur if, in doing so, the company’s liquidity does not fall below the sum of the capital and of the statutory reserves, and if the partner has already paid-up his quota.
Partners loan agreements for quota companies.
Loan agreements:
1. Contract where partner lends money or fungible thing to the company, being the company obligated to repay in the same quality and type
2. When partner agrees to grant deferral of maturity of his loans (provided loan has a permanent nature)
Contracts are not dependent upon any special legal form (article 243 (6))
Indicators as to what makes a loan permanent in nature for quota companies.
(articles 243 (2) and (3))
1. Stipulation of a reimbursement period of more than one year (weather this stipulation occurs simultaneous with the loa or later on)
2. Non-use of the faculty of requesting the reimbursement for a period of one year from the date on which the loan is established.
Law in regard to partner’s right to information for quota companies.
Article 214
1. Managers are obligated to provide at the partner’s request (in writing if they request), truthful, complete and elucidating information on the management of the company, make respective accounts, books and documents available for consultation at the company’s headquarters.
2. Provision of information and access to documents or inspection of company’s assets may be refused if managers have reasons to fear that the partner is using the information for purposes other than those of the company and to the detriment of the company. Or when provision of information results in violation of confidentiality imposed by law in the interest of third parties (article 215)
Law in regard to statutory reserves for quota companies.
(article 218, 295 and 296)
Percentage no less than 1/20 of profits of the company must be used for the constitution of a mandatory statutory reserve and as the case may be, to its reinstatement, until the reserve represented 1/5 of the company’s capital, which can’t be lower than 2500$
Law in regard to the uses of statutory reserves for quota companies.
a) Cover loss recorded in the balance sheet for the financial year which cannot be covered by the use of other reserves
b) Cover the part of the losses brought forward from the previous financial year which cannot be covered by the profit of the financial year nor by the use of other reserves
c) Incorporation into the company’s capital.
Law in regard to the right to share in the profits of the financial year for quota companies.
Article 217
Must distribute at least 50% of the annual distributable profits.
Unless:
1. Otherwise provided for in the articles of association
2. There is a resolution not to distribute approved by a majority representing 3/4 of the capital, at a partner’s general meeting convened for this specific purpose.
Profits must be paid, within 30 days from the resolution that approves distribution, except when a deferral of payment is consented by the partners. Deadline can be extended for a period of up to 60 days, based on exceptional situation of the company.
Law in regard to Management and supervision for quota companies.
Quota companies shall be managed and represented by one or more managers chosen among partners or other persons who are not part of the company. Managers must be individuals with full legal capacity.
