Share Capital Threshold Abandoned

Author:Ms Inga Kilikeviciene
Profession:KPL Legal
 
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New Corporate Law Amendments for Limited Liability Companies in Portugal

Portugal starts the 2011th with new amendments to corporate law: there is no more minimum share capital for private limited liability companies and depositing the determined share capital not shall be completed before the initiation of the economic activity but rather by the end of the first year of operations.

In the very end of last year, on the 30th of December, 2010, the Council of Ministers of Portugal approved a Decree-Law which continues implementation of the ambitious bureaucracy simplification programme conceived by the actual Government and adopts new measures further simplifying company formation procedures in Portugal. The actual requirement of the minimum share capital to establish a limited liability company actually is EUR 5.000 was abolished and now members of association will have the right to determine the share capital of their company without any restrictions.

To be more specific, the new rules apply to limited liability companies (Sociedade por Quotas) and individual shareholder limited companies, or limited liability sole proprietorship companies (Unipessoal Limitada). The minimum share capital requirement has however been maintained for public limited companies (Sociedade Anónima) and remains EUR 50.000.

The advantage of the abolishment is long discussed and proven. On one hand, an established share capital threshold is often an obstacle for individual entrepreneurs and leads to fewer occupational choices, especially in case of young people without sufficient financial funds. This is particularly obvious when we talk about services or any home based business where initial monetary investments are rarely necessary. On the other hand, the share capital is no more a safety measure against insolvency and thus, does not provide a reliable guarantee for creditor interests' protection. Indeed, the minimum capital requirement in many countries is so low (for instance, ca. EUR 1.265, in Poland) that it is difficult to see how it can meet the most measured financial and operational risks of a company in the modern business life. Further, it often happens that the subcapitalization rate of companies with remarkable share capital is higher than the liabilities proportion of small companies. Therefore, creditors employ other mechanisms to protect their interests rather rely on the authorised capital.

The other very helpful amendment is that the share capital...

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