Partners of a Company in Portugal

The parties to a deed must be identified by means of the following:

• Full name;
• Marital status (if married, full name of spouse and type of marriage contract concerning estate);
• Place of birth;
• Residential address;
• Taxpayer number;
• Nationality (for non-Portuguese);
• Identification.

If the contracting party is representing a legal person, then:

• The legal person must also be duly identified (company name, registered office, capital, registration no. and taxpayer's no);
• Documentary proof that the contracting party acts in the capacity of the legal person and holds sufficient powers for the act.

The following acts, in addition to others established in law or in the memorandum of association, require resolutions by the members:

1. Calling in and repaying supplementary contributions;
2. The amortisation of quotas, the acquisition, sale and encumbrance of own quotas and consent for the division or transfer of ownership of quotas;
3. The dismissal of members;
4. The removal of managers and members of the supervisory body from office;
5. The approval of the annual report and accounts for the financial year, profit sharing and the apportionment of losses;
6. The waiver of the liability of managers or members of the supervisory body;
7. The instigation of legal action by the company against the management, members or members of the supervisory body, as well as discontinuing and transacting such proceedings;
8. The amendment of the memorandum of association;
9. Merger, division, conversion and winding up of the company and the reopening for business of the wound up company.

Should the memorandum of association not provide otherwise, the members are also responsible for deciding the following:

• The appointment of managers;
• The appointment of members of the supervisory body;
• The sale or encumbrance of real estate, the sale, encumbrance and leasing of premises;
• The subscription or acquisition of equity interests in other companies and their sale or encumbrance.

Rights of members

• Right to a share in the profits.
• Right to participate in members resolutions.
• Right to obtain information on the life of the company.
• Right to be appointed to company bodies and supervisory bodies.
• Special rights established in the articles of association, which entitle one or more members to special benefits which are not made available to the others.
• Profit sharing.

Obligations of members

• Obligation to provide capital contributions for the initial share capital, usually through the payment of a certain amount of money at the time of incorporation.
• Obligation to share in the company’s losses pro- rata to the value of the share capital represented by the relevant quota interests.
• As provided for in the articles of association, the members may be required to make ancillary or supplementary contributions or provide loans to the company.

Member's resolutions can only take place as stipulated by law for each specific company type.

In any company type, members can:

Written unanimous resolutions taken in universal meetings

The members can adopt unanimous resolutions in writing or convene a general meeting, without observing any prior formalities, as long as:

• All are in attendance;
• All demonstrate that they agree to the convening of the meeting to discuss a given matter.

Once all of these conditions have been met, the meeting functions according to all the legal and contractual rules relating to how the general meeting functions. However, only issues enjoying the consent of all partners may be discussed.

A member can only be represented in deliberations under these terms, if for this purpose, the representative is expressly authorized.

General meeting

Members of a Private Limited Liability Company can:

Convening the general meeting

Any manager is responsible for convening the general meeting. The general meeting is convened by registered letter, sent at least 15 days in advance, unless legislation or the articles of association require other formalities or establish a longer term of notice. Notice of the general meeting can be provided via e-mail with viewing receipt to those members that have previously consented to accepting this means of notification.

General meetings must be convened whenever stipulated by law or whenever the management or supervisory board see fit to convene one.

A member can request, in writing, that a general meeting be convened, precisely indicating the matters to be included in the order of business and justifying the need for such a meeting.

The notice to convene a meeting must contain the following, at the very least:

• The business name, company type, registered office, Company Registry Office and respective registration number;
• The meeting´s time, date and place;
• The type of meeting - general or extraordinary;
• Any pre-requisites to which participation in the meeting and the exercise of voting rights may be subject;
• The order of business;
• When postal voting is not prohibited in the articles of association, a description of the manner in which postal ballots shall be processed, including the physical or electronic address, security conditions, deadline for receipt of postal ballots and the date on which they shall be counted.

How the general meeting functions

The General Meeting´s main operating rules:

• Except where otherwise established in the memorandum of association, each general meeting is chaired by the member attending the meeting possessing or representing the largest share of the capital. Where two partners account for equal shares of the capital, the older partner takes precedence;
• No member shall be prevented, not even by means of any provision in the memorandum of association, from participating in a meeting, even if said member is prevented from exercising the right to vote;
• The minutes of general meetings must be signed by all partners participating therein;
• Each cent of the par value of a quota counts as one vote;
• However, the memorandum of association may confer, as a special right, two votes for each cent of the par value of the quota or quotas held by members which, in total, do not account for more than 20% of the capital;
• Unless otherwise provided for in law or in the memorandum of association, resolutions are deemed to have been passed when they achieve a majority of the votes cast, not taking abstentions into account;
• Under the law, unless the memorandum of association requires a larger majority, the changes to the articles of association or the winding up of a company must be approved by members holding equity interests representing three quarters of the share capital.

Resolutions in writing

Members can pass a resolution by written vote if this is not forbidden by legislation or provision of the memorandum of association. This type of resolution is little used due to the formalities it entails.

The process involves the following phases:

1. The members are consulted as to whether a meeting is required
   The managers must send a registered letter to the members indicating the resolution to be taken and informing the addressee that no reply within fifteen days of the dispatch date is considered to be consent to waive the need for a meeting.
    
2. Proposed resolution
   On obtaining the consent of the members, the manager sends all members the proposed resolution together with the documents necessary to provide clarification. A term of no less than ten days is defined for voting.
    
3. Written vote
   The written vote must indicate the proposal and the approval or rejection of the same. Any modification to the proposal or limiting factor associated to the vote implies rejection of the proposal.
    
4. Minutes
   The manager shall draw up the minutes, which shall include verification of the circumstances permitting the resolution to go to a written vote, as well as define the proposal and the vote of each partner, declare the resolution adopted and submit a copy of the minutes to all members.

The resolution shall be considered adopted on the day on which the last response is received or at the end of the established term, in the event that a member fails to respond.

A written vote on a resolution is not permitted when any partner is prevented from voting.

Representation of members

• Voluntary representation is not permitted in resolutions voted on by written means.
• Instruments of voluntary representation which do not state the means of resolution included shall only be valid for resolutions to be adopted at regularly convened general meetings.
• Instruments of voluntary representation which do not state the duration of the powers conferred shall only be valid for the calendar year in course.
• At a specific general meeting, no matter whether it is meeting on the first date or fall-back date, a letter addressed to the respective chairman suffices for the purpose of representation.

Voting restriction

A member must not vote either by itself or through a representative, nor in representation of a third party, whenever there is a conflict of interests with the company relative to the matter proposed for resolution.

Said situation of a conflict of interests is deemed to arise whenever the matter to be discussed and approved relates to:

1. Release from an obligation or member-specific liability, either in that capacity as a member or as a manager or member of the supervisory body;
2. Litigation relative to a claim of the company against the member or of the member against the company, in any of the capacities referred to in the previous sub-paragraph, either before or after having recourse to law courts;
3. Loss by the member of part of its quota, under the circumstances provided for in Article 204, paragraph no. 2 of the Portuguese Companies Act;
4. Dismissal of the member;
5. Consent for the managers to carry out an activity competing with the company’s activity;
6. Removal of the management or a member of the supervisory body from office, with just cause;
7. Any relations, established or to be established, between the company and the member that are foreign to those provided for in the memorandum of association.

Ancillary capital contributions

The company's articles of association may require all or some of the members to make contributions to the share capital in addition to the contributions to pay up the initial share capital. These contributions can be provided through an amendment to the articles of association, but, in such a case, the increase of contributions will only be effective for members which give their consent thereto.

Usually, ancillary contributions, which may be gratuitous or remunerated (if there is, or not, a counterpart to the shareholder) can consist of:

• Capital contributions in cash (ex.: loan of a given sum);
• Providing the company with the right to use a specified asset (ex.: motor vehicle or an office);
• Rendering specified services (ex.: a management position).

The requirement for ancillary capital contributions terminates with the winding up of the company, and unless a contractual provision states otherwise, the failure to comply with ancillary contributions obligations does not impact the status of a member, as such.

Supplementary capital contributions

A private limited company often uses supplementary capital contributions to increase the company´s capital without having to resort to raising the share capital, which can be an expensive, bureaucratic and slow process.

The main differences between supplementary capital contributions and increases in capital are as follows:

• Supplementary capital contributions do not provide voting rights nor the right to dividends;
• Supplementary capital contributions are always in cash;
• Recovery by members 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 statutory reserves, and if the member has already paid in its quota.

Other characteristics of supplementary capital contributions:

• Supplementary capital contributions are carried out simply, through a members’ resolution, which should fix their amount and deadline;
• Supplementary capital contributions may only be demanded if the memorandum of association establishes their use (the memorandum must define the overall amount, the members required to pay and the criteria for dividing supplementary capital contributions amongst them);
• No interest is payable;
• They cannot be reimbursed if the company is declared bankrupt;
• Reimbursement must be allocated amongst the members in proportion to the input contributions;
• If a member does not pay the supplementary capital contribution the same may be subject to removal from the company and partial or total loss of the quota held.

The share capital often becomes insufficient for the company to pursue its purposes; an insufficiency which can be overcome through the mechanism of shareholder loans.

The shareholder loan agreement is a loan in cash or other fungible thing given by the member to the company, which becomes bound to return it.

The loan must be permanent in nature, with a reimbursement period of greater than one year.

The contract need not be written. Its validity does not actually depend on any special requirements.

The execution of shareholder loan agreements does not need to be provided for in the articles of association and is not subject to prior resolution of the members. Unless the articles of association provide otherwise, no member is required to make a shareholder loan, which is optional, and based on an agreement between the company and the member who makes the loan.

Reimbursement must be made in the contracted period, or according to a term defined by a law court.

Any real guarantees provided for repayment are null and void.

Members holding outstanding shareholders’ loans cannot file for bankruptcy, based on such loans.

In the event of bankruptcy or winding-up:

• The debts of the members to the company cannot be set off against the debts of the company arising from shareholders loans;
• Shareholder loans can only be repaid after the company´s debts with third parties have been entirely settled.

Unless something different is agreed in the articles of association of the company or a resolution is passed by a majority corresponding to 75% of the share capital in a general shareholders meeting called for such purpose, half of the yearly net profits, which are distributable, must be distributed to the shareholders.

The distribution of dividends that each shareholder is entitled to matures 30 days subsequent to the respective resolution, unless the shareholder agrees to a deferred payment. However, in exceptional company circumstances, shareholders may request an extension of said period for a further 60 days.

However, there is a minimum legal reserve that cannot be distributed to the shareholders. A minimum of a twentieth part of the net profits of each year of the company is destined for the legal reserve until it represents 20%of the share capital.

The articles of association may set up a higher minimum percentage and higher amounts to the legal reserve. Nevertheless, the legal reserve cannot be less than 2500 Euros.

The legal reserve may only be used:

1. To cover the portion of losses in the balance sheet that cannot be covered by the use of other reserves;
2. To cover the portion of losses from the previous year that cannot be covered by net profits from the present year or by the use of other reserves;
3. To increase share capital.

Further to the mentioned legal reserve, there are some limitations to the distribution of dividends to the shareholders:

• Company assets cannot be distributed to the shareholders when the equity capital, including the year net income, as shown in the approved accounts, is less than the sum of the share capital and the reserves or becomes less than this sum as a result of the distribution;
• Dividends cannot be distributed to shareholders if they are necessary to cover accumulated losses or to form or reconstitute reserves required by law or by the articles of association;
• Dividends cannot be distributed to shareholders if the incorporation costs or research and development costs are not completely paid, unless the amount of free reserves and retained earnings is at least equal to those costs not paid;
• The reserves whose existence and amount does not appear explicitly in the balance sheet cannot be used for distribution to shareholders;
• The distributed reserves, in whole or in part, either alone or together with the yearly profits, must be expressly mentioned in the shareholders resolution.

The articles of association may authorize that, in the course of a year, advanced payments of profits are made to shareholders, provided that some rules are followed:

1. The board of directors approves the advanced payment;
2. Such resolution shall be supported by a interim balance report, no more than 30 days old and certified by a statutory auditor, showing the existence of available amounts, according to the legal limits and taking into account the results obtained during the elapsed period of the year in which the advance is to be made;
3. Only one advanced payment is allowed during each year and always in its second half;
4. The amounts to be advanced cannot exceed half of what would be distributable, as referred to in 2.

Shareholders must return to the company all the assets received in breach of the law, but those who have received dividends or reserves whose distribution was not permitted by law, are only required to refund if they knew the irregularity of distribution or, given the circumstances, should have not ignored it.

The company’s creditors can propose legal action for refund of the company regarding these amounts.