Amendments to the Articles of Association in Portugal

The members must agree to amendments to the articles of association. In most cases, if the articles of association do not establish to the contrary, these amendments just require a resolution by the members approved by three-quarters of all votes representing the total capital.

If the amendment involves an increase in the capital contribution to which partners are bound by the articles of association, this increase shall be considered without effect for those members who did not give their consent.

In general, the resolution to amend the articles of association must be registered in the Company Registry Office within 60 days.

Examples of amendments to articles of association:

1. Increase of capital;
2. Transfer of ownership of quotas;
3. Amendment of business name, object and registered office;
4. Conversion of companies;
5. Reduction of capital.

Increase of capital

Increase of Share Capital is considered to be an amendment of the Articles of Association, which as a general rule is optional and approved by resolution of the shareholders. The resolution to increase the share capital should state expressly:

• The formality used for the increase of share capital;
• The amount of the increase of share capital;
• The nominal value of new shares;
• The nature of payment of shares;
• The capital surplus, if any;
• The deadlines within which shares must be paid up, not withstanding the dispositions of Article 89 of the Companies Code (Código das Sociedades Comerciais);
• The parties subscribing the increase.

The resolution to increase the capital expires after one year if the capital contributions have not been paid in inside this term. The capital increase must be registered in the Company Registry Office within 60 days.

Means of increasing the capital

Incorporation of reserves

In general, the increase in capital by incorporation of reserves shall increase the equity interest of each partner in an amount proportional to its par value or to its accounting value.

In case of shares with no nominal value, the capital increase may occur with no changes to the number of shares.

A company may increase its capital by incorporating reserves available for this purpose.

This capital increase requires the prior approval of the financial statements for the financial year prior to the resolution. However, if more than six months have passed since the financial statements were approved, the existence of reserves to be incorporated shall only be approved if a special balance statement is issued, structured and approved according to the same requirements as those which exist for the annual balance sheet.

When no indication is made, the number of shares remains unchanged.

The company´s capital may not be increased by incorporating reserves while all the instalments for initial capital input or for prior capital increases have not yet become due.

The resolution should expressly state the reserves to be incorporated in the capital.

In general, the increase in capital by incorporation of reserves shall increase the equity interest of each partner in an amount proportional to its par value.

The resolution to increase the share capital will indicate if additional shares or stock are to be generated or if there will be an increase of the nominal value of existing shares or stock. When no indication is made, the nominal value of shares and stock will be raised.

The company´s own quotas or shares participate in this type of capital increase, unless otherwise determined by the members.

The management body and auditing body, if any, shall declare, in writing, to have no knowledge of the occurrence of a reduction of assets having taken place between the date of the balance sheet which served as the basis for the resolution to increase the share capital, and the date of the resolution, as this would serve as an obstacle to the increase.

New capital contributions in cash

An increase of share capital through new cash contributions cannot be approved until a prior increase is registered on a definitive basis and all obligations to pay up the share capital (original or increased) have accrued. Capital contributions in cash can be deferred.

If the resolution fails to mention the requirement for initial capital contributions in cash, which legislation establishes may be deferred, the contributions fall due as soon as the capital increase is definitively registered.

New capital contributions in kind

Similarly, an increase of capital through new in kind contributions cannot be approved until a prior increase is registered on a definitive basis and all obligations to pay up the share capital (original or increased) have accrued.

Capital contributions must be totally paid in by the increase-in-capital resolution date. They must be assessed by a statutory auditor and a report issued.

Transfer of ownership of quotas

The transfer of ownership of quotas is the procedure concerning the transfer of quotas between living persons, which is achieved by two means: free of charge or with attached charges.

Generally, untied transfer takes place, as long as the company consents and the resolution by members is taken by a simple majority.

Consent from the company is not required if the transfer is made to a spouse, ascendants, descendants, or other members. However, the Memorandum of Association may exempt transfer of ownership from consent, both in general and specific situations.

The transfer of ownership of quotas must be recorded in writing and registered in the Company Registry Office within 60 days.

IMT tax may become due on the transfer of ownership of quotas if the company holds real estate in Portugal and if, as a result of the transfer of ownership of quotas, one of the member´s holdings accounts for at least 75% of the capital, or if the number of members is reduced to husband and wife, married with general community of estate or community of estate subsequent to marriage.

Company Consent

1. Expressly:
   This is provided by means of members´ resolution to this end, within 60 days of the request being received by the company. If there is no response 60 days after the request was received by the company, then the transfer of ownership no longer requires consent for implementation.
    
2. Tacitly:
   If the transferee participates in a members’ resolution and no other member challenges the resolution, consent is deemed to have been granted.

Refusal to provide consent

If refused, the note providing the decision must compulsorily contain a proposal for the amortisation or purchase of the quota, at the risk of the transfer of ownership becoming open to all.

The transferor has 15 days to state his position on the proposal. Rejection of the proposal will render the transfer ineffective, and the refusal of consent will stand.

Contratual Provisions

The articles of association can govern the transfer of ownership of quotas as follows:

1. Just simply prohibiting it;
2. Declaring it to be totally untied;
3. Making it dependent on the company´s consent;
4. Limiting the company´s consent via specific requirements.

When the company approves changes to the memorandum of association that aim to prohibit or create obstacles to the transfer of ownership of quotas, all members affected by this decision must consent to the same.

Amendment of business name, object and registered office

The amendment of the business name, object and municipality of the registered office require prior authorisation of the National Legal Person Registry, through the issue of the respective Certificate of Admissibility.

Conversion of companies

The conversion of a company consists of modifying the legal type of company previously registered, without altering the company´s identity or implying the winding up of the company.

Unless otherwise agreed by all interested members, the par value of the equity interest of each member in the capital and the proportion held by each equity interest relative to the capital cannot be altered in the conversion.

If legislation or the memorandum of association provides any member that voted against the conversion with the right to resign, the resigning member may demand, within one month of the date on which the resolution was adopted, that the company purchase its equity in the company or arrange to have it purchased.

The conversion shall not affect the member's liability for company debts prior to the conversion. The transformation should be registered in the Registry of Companies within 60 days.

Impediments to conversion

A company may not be converted if:

• The capital has not been fully paid in or if not all of the initial capital contributions established in the memorandum of association have been paid in;
• The balance sheet shows that the company´s equity is less than the sum of its capital and statutory reserves;
• Members owning special rights that cannot be maintained following conversion, oppose the transaction;
• In the case of a public limited company, bonds convertible into shares have been issued and these have not been fully redeemed or converted;

Requirements for converting a private limited company into a public limited company:

1. The management of the company drafts a report justifying the conversion, which includes the company balance sheet and draft of the new articles of association;
2. The Auditing body or Certified Official Auditor, which ever the case may be, will be responsible for drawing up an opinion in respect of the these documents;
3. The general meeting is convened to ratify the conversion;
4. These documents are available to the members and company creditors for consultation;
5. The General Meeting is held, to: approve the balance sheet, the conversion and approve the new memorandum and articles of association;
6. Requirement of special quorum: majority of ¾ of the votes corresponding to the capital.

Reduction of Capital

The articles of association may further establish that this alteration is reliant on the consent of a specific shareholder that as long as the mentioned shareholder remains in the company.

The notice of meeting must indicate the purpose and how the reduction of capital will be performed. A qualified majority of three-quarters of the votes of the total capital is necessary, though the articles of association may establish a higher margin.

The articles of association may further establish that this alteration is reliant on the consent of a specific shareholder that as long as the mentioned shareholder remains in the company.

The capital can be reduced to a value below the minimum required by law as long as the resolution is dependent on an increase in capital of equal or greater value within 60 days of the reduction, or if the resolution involves the transformation of the company into one with a different legal nature, that can possess a lower share capital.

The reduction of capital can only de approved if the company´s net worth after the capital reduction exceeds the new share capital by a minimum of 20%.

The share capital can be reduced for the following purposes:

1. To cover losses;
2. To free up capital;
3. For a special purpose.

The steps to be taken to reduce share capital are:

• Special notice of meeting in the event that the meeting is not called under the provisions of Article 54 of the Portuguese Companies´ Act;
• Minutes of the general meeting;
• Registration and publication of the resolution to reduce share capital;
• Publication of the registration.

Any company creditor can, within one month of the publication of the registration of the share capital reduction, file a suit to prohibit or limit the distribution of available reserves or profits for a financial year for a defined period of time, unless the applicant’s credit is paid off, if it has become due, or it is suitably secured in all other cases.

This facility can only be exercised if said creditor(s) have requested that the company settle its debt or provide appropriate guarantee for the same, at least 15 days previous, without the request being complied with by the company.

The company may not perform monetary distributions before the termination of the period of time provided to company creditors under the previous paragraphs. This prohibition comes into effect as soon as the company becomes aware of any such demand by any creditor.