Today a company can be set up in a few hours, in person or online. The speed of the process should not, however, make one forget that some of the decisions taken at that moment may shape the life of the company for years and be hard to change later: the type of company, the share capital, the rules in the articles of association and, where there are several shareholders, what happens when one of them wants to leave or when disagreements arise.

Which type of company?

The Portuguese Companies Code (Código das Sociedades Comerciais — CSC) provides for several types of company. In practice, the choice is often between three:

  • Private limited company (sociedade por quotas): the type most used by small and medium-sized enterprises. As a rule, only the company's assets answer for the company's debts (Article 197(3) CSC), without prejudice to the shareholders' liability for the agreed contributions and to the special situations provided for by law or in the articles.
  • Single-member private limited company (sociedade unipessoal por quotas): a private limited company formed by a single shareholder, whether an individual or a legal person (Articles 270-A et seq. CSC). It allows an individual business activity to be carried on through a legal person with its own assets.
  • Public limited company (sociedade anónima): often suited to larger projects, with several investors or with new shareholders expected to come in. It requires a minimum share capital of 50,000 euros (Article 276(5) CSC) and, as a rule, at least five shareholders (Article 273(1) CSC), without prejudice to the exceptions provided by law, in particular the possibility of incorporation by a single shareholder where that shareholder is a company (Article 488 CSC).

The choice should not depend only on the number of shareholders or the capital available. The size of the project, the financing structure, the intended liability of the shareholders and the possibility of investors coming in or leaving in the future also matter.

Share capital

In a private limited company, the capital is freely set by the shareholders, but each share (quota) must have a nominal value of at least one euro (Article 219(3) CSC).

The law allows, under certain conditions, cash contributions to be paid up by the end of the first financial year (Article 202(4) CSC). This possibility should be weighed at incorporation, in light of the company's actual financial needs.

A merely symbolic share capital is legally possible, but may not suit every project. A low capital may convey little solidity to banks, suppliers and business partners and, where the company lacks sufficient own funds, lead the shareholders to give personal guarantees to obtain financing.

It is therefore important to distinguish the legal possibility of setting up a company with low capital from the economic sense of doing so.

Company name, corporate purpose and form of incorporation

The company name must be admissible and sufficiently distinct from those already registered, in accordance with the applicable legal rules. A certificate of admissibility may be requested from the National Register of Legal Persons or, under the «Empresa na Hora» and «Empresa Online» schemes, a pre-approved name may be chosen.

The corporate purpose must identify precisely the activities the company intends to carry on. It should follow the business project and be broad enough to avoid frequent amendments, without resorting to overly generic wording.

The corporate purpose identifies the activities set out in the articles, but does not, in itself, limit the legal capacity of the company (Article 6(4) CSC). Nor does it alone determine the tax treatment, which depends on the activities actually carried on and on the applicable tax rules.

The articles of association: beyond the mandatory content

Article 9 CSC lists the elements that the articles of association must contain, in particular the identification of the shareholders, the type of company, the company name, the corporate purpose, the registered office, the share capital and each shareholder's holding.

The standard articles available under the fast-track incorporation schemes generally ensure the essential content required by law. However, where there are several shareholders, using a generic template may leave matters that are important for the future running of the company unregulated.

The provisions worth considering include:

  • Transfer of shares: the transfer of shares between living persons generally depends on the company's consent when made to third parties, without prejudice to the exceptions provided by law and to the rules that may result from the articles (Article 228 CSC). The articles may also provide for pre-emption rights of the other shareholders and specific conditions for transfers.
  • Redemption of shares (amortização): allows the company to cancel a share in the cases and under the conditions provided by law or in the articles. The grounds and procedures should be carefully defined, particularly where events such as the death or insolvency of a shareholder, or a shareholder's failure to meet obligations, are concerned (Articles 232 et seq. CSC).
  • Management: it is important to define who manages the company, how the managers are appointed, what powers they have and how the company is bound towards third parties, including the signing rules.
  • Majorities and resolutions: the majorities needed for important decisions should be considered, especially where holdings are equal or shareholders may have diverging positions.

A company with two shareholders holding equal stakes, for example, may become deadlocked when both disagree on an essential decision. Providing deadlock-resolution mechanisms can prevent prolonged disputes and situations that jeopardise the business.

Shareholders' agreements

Shareholders may enter into shareholders' agreements (Article 17 CSC) to regulate between themselves matters they do not wish to include in the articles of association, such as voting commitments, rules on the transfer of holdings, call or put options and exit conditions.

These agreements are different in nature from the articles of association: they bind only their parties and may not concern the conduct of members of the management or supervisory bodies in the performance of their duties.

Whether to include a given provision in the articles or in a shareholders' agreement should be decided according to the legal effects intended. Not every rule can be dealt with interchangeably in one instrument or the other.

Where there are several investors or shareholders with different interests, a shareholders' agreement can be particularly useful to anticipate conflicts and set up exit and transfer mechanisms.

After incorporation

Once the company is set up, other obligations follow that should be planned from the start:

  • Registration of the company in the commercial register, which is handled within the fast-track incorporation procedures;
  • Filing the declaration of commencement of activity with the Tax Authority and the corresponding tax registration;
  • Meeting obligations towards Social Security, where applicable;
  • Organising the accounts, which must be kept by a certified accountant under the law;
  • The initial declaration of beneficial ownership to the Central Register of Beneficial Owners (RCBE), governed by Law no. 89/2017 of 21 August.

The initial RCBE declaration must be filed within 30 days of the registration of the company's incorporation. The information must be updated whenever the declared data changes, within 30 days of the event giving rise to the change. There is also an annual confirmation obligation, by 31 December, unless the entity has made an update in the same calendar year and no relevant change has occurred since.

Meeting these obligations is essential for the company to operate properly from the outset.

Frequently asked questions

What is the minimum share capital of a private limited company?

There is no overall minimum share capital. Each share must have a nominal value of at least one euro. A public limited company, by contrast, requires a minimum share capital of 50,000 euros.

Are shareholders personally liable for the company's debts?

As a rule, no. In private and public limited companies, the company's debts are met from the company's own assets.

In private limited companies, however, the shareholders are jointly liable for the contributions agreed in the articles, under Article 197(1) CSC. The articles may also provide, under the conditions of Article 198, for the direct liability of one or more shareholders towards the company's creditors.

In addition, shareholders may take on personal liability in other ways, in particular by giving guarantees or sureties for the company's financing. Managers and directors may also be personally liable in the cases provided by law, in particular for breach of their duties or for certain damage caused to the company, the shareholders or third parties.

Can I use the «Empresa na Hora» standard articles?

Yes. The templates available make it possible to set up a company quickly, but they may not cover all the rules needed for a project with several shareholders.

The articles of association can be amended later, by a resolution of the shareholders passed by the applicable legal or statutory majorities. However, once disagreements arise between shareholders, approving amendments can become difficult.

It is therefore advisable to assess the needs of the project beforehand and to adapt the articles of association to the company's structure and to the interests of those involved.

Final note

Setting up a company is not just a registration procedure. It means defining a legal, financial and organisational structure that will frame the business and the relations between the shareholders.

It is generally simpler to set the rules for how the company works at incorporation, while the shareholders agree, than to try to change them later, when diverging interests may already exist.

ME&JBA — Advogados, in Lisbon, provides legal advice on company law, including the incorporation of companies, drafting and amending articles of association, shareholders' agreements, corporate reorganisations and ongoing legal support for business activity.*

João Brazete de Almeida
Lawyer

* An artificial intelligence tool was used in preparing this article as an aid to structuring and drafting the text and to its linguistic review. The legal analysis, the selection and verification of the legal grounds and the final review of the content are the responsibility of the author.