Stabilisation and restructuring law in Portugal

1. Which financial (not tax or labour) short-term compensation schemes for immediate losses due to social distancing measures have been implemented? For which industries/sizes of business?

A moratorium has been enacted by Decree-law no. 10-J/2020, under which companies benefit of:

  • a prohibition imposed on credit institutions from terminating credit facilities or loans for as long as the moratorium is in force
  • extension for a period corresponding to the moratorium period of payment dates of capital and interest payments
  • suspension until the end of the moratorium of the obligation to pay capital and interest.

The extension operated by the moratorium shall not give rise to any breach of contract, trigger termination clauses/acceleration events, suspend interest due during the extension, which shall be payable on the payment of the loan with reference to the time when they are due, and termination or cancellation of security created by the companies benefiting from the moratorium (or third parties).

The moratorium shall last until 30 September 2020.

Government has also approved measures in respect of public incentive schemes, as follows:

  • advance payments of public incentives to companies
  • deferral of maturity of reimbursable incentives, within the public programmes QREN, PT2020, and Wine and Vineyard Institute (Instituto do Vinho e da Vinha)
  • assessment of the effects of COVID-19 on the agreed objectives, there being no penalty for insufficient measures or goals achieved due to COVID-19. Within PT2020, costs borne with events cancelled or postponed are eligible for these measures.

Government to create State guarantees in order to increase credit insurance lines, envisaging the support of export and customer diversification, particularly to markets outside the European Union.

2. Which medium- to long-term stabilisation measures are in place in your jurisdiction?

See responses to questions 1 and 3.

3. Which measures (Guarantees, Loans, Equity Injections, etc.) are available?

Government has proposed six credit facility programmes to assist businesses with working capital and cash-flow requirements:

3.1 Credit Facility Funding (Capitalizar) 2018 – COVID-19

  • mostly directed to small- and medium-sized enterprises (SMEs) or other companies that:
    • have a positive net position on the last approved balance sheet, or have that situation regularised on an interim approved balance sheet up to the date of the transaction; and
    • do not have any irregular situation in the banking sector on the date of executing the contract and have their situation regularised with the Portuguese Tax and Social Security Authorities.
  • the maximum amount of the credit facility per company is EUR 3 million, respectively with EUR 1.5 million for working capital requirements for a period of 4 years (with 12 months’ grace period) and EUR 1.5 million for cash-flow requirements by way of a revolving loan for a period of 1 to 3 years. Interest rate may be fixed or floating plus a spread.  

3.2 Credit Facility for Micro-companies in the Tourism Sector (60 ME)

  • directed to micro-companies in the tourism sector, which have up to a maximum of 10 employees and whose annual turnover or annual balance sheet total does not exceed EUR 2 million
  • this credit facility grants EUR 750 per month for each existing job in the company on 29 February 2020, multiplied by the period of three months, to a maximum of EUR 20,000, for a period of 3 years (with 12 months’ grace period)
  • at least one shareholder has to provide personal suretyship as security for due payment of the facility.

3.3 Credit Facility for Restaurants and Related Sectors (600M)

  • directed to companies (from micro-companies to midcaps) in restaurant and related sectors, up to a maximum amount of EUR 1.5 million, per company, for a period of 4 years (with 12 months’ grace period)
  • interest rate may be fixed or floating plus a spread of 1% (one year loans), 1.25% (1 to 3 year loans) or 1.5% (loans over 3 years).

3.4 Credit Facility for Travel Agencies, Tourist Animation, Event Planning and Related Sectors (200ME)

  • directed to companies (from micro-companies to midcaps) whose business consists of travel agencies, tourist animation, event planning and related sectors, up to a maximum amount of EUR 1.5 million, per company, for a period of 4 years (with 12 months’ grace period)
  • interest rate may be fixed or floating plus a spread of 1% (one year loans), 1.25% (1 to 3 year loans) or 1.5% (loans over 3 years).

3.5 Credit Facility for Companies in Tourism Sector (including tourist complexes and tourism accommodation)

  • directed to companies (from micro-companies to midcaps) in the tourism sector, up to a maximum amount of EUR 1.5 million, per company, for a period of 4 years (with 12 months’ grace period)
  • interest rate may be fixed or floating plus a spread of 1% (one year loans), 1.25% (1 to 3 year loans) or 1.5% (loans over 3 years).

3.6 Credit Facility for Industry – textile, clothing, footwear, extractive industries and wood sector (1,300ME)

  • directed to companies (from micro-companies to midcaps) in these sectors, up to a maximum amount of EUR 1.5 million, per company, for a period of 4 years (with 12 months’ grace period)
  • interest rate may be fixed or floating plus a spread of 1% (one year loans), 1.25% (1 to 3 year loans) or 1.5% (loans over 3 years).

4. Have these mid- to long-term stabilisation measures already been notified with EU or other antitrust bodies?

Yes.

Please specify.

On 22 March 2020 the European Commission approved EUR 3 billion Portuguese guarantee schemes for SMEs and midcaps affected by the Coronavirus outbreak and, more recently, on 4 April 2020, a EUR 13 billion state aid programme for Portugal.

5. Which prerequisites are necessary to qualify for a programme?

In order to benefit from the moratorium, companies must have their seat and their business in Portugal, not being in breach or arrears of monetary obligations before the relevant creditors, not being insolvent or in a similar situation and have their situation regularised with the Portuguese Tax and Social Security Authorities.

In order to benefit from credit facilities, the following must be verified:

5.1 Credit Facility for Micro-companies in the Tourism Sector (60 ME)

Ccompanies shall:

  •  not be in a situation of financial distress
  • not have been subject, in the two years prior application, to any administrative or judicial fine related with the use of workforce
  • not have been convicted in the two years prior to the application date by illegal dismissal of pregnant or breastfeeding women.

5.2 Other Facilities i.e. Credit Facility for Restaurants and Related Sectors (600M), Credit Facility for Travel Agencies, Tourist Animation, Event Planning and Related Sectors (200ME), Credit Facility for Companies in Tourism Sector (including tourist complexes and tourism accommodation), and Credit Facility for Industry – textile, clothing, footwear, extractive industries and wood sector (1,300ME)

Companies shall not be in a financial distress situation for purposes of Article 2(18) of European Commission Regulation No 651/2014 of 17 June 2014, and:

  • have a positive net position in the last approved balance sheet; or
  • have a negative net position, provided that it has been regularised in an interim balance sheet approved up to the date of the transaction; or
  • regardless of their net position, if they started operating less than 12 months from the date of the respective application for the facility.

6. Are there any major reasons that may inhibit an applicant from successfully applying for a stabilisation measure?

Yes.

Please specify.

See responses to questions 5 and 7.

7. In an international context, are subsidiaries and branches of foreign parent/holding companies eligible to apply? For EU-States: Also for non-EU-third countries?

Yes.                                                                                             

Comments

Yes, if the subsidiary qualifies under the criteria set out above (even if they belong to a foreign corporate group).

8. Do your country’s stabilisation schemes foresee restrictions on use of cash/other restrictions?

Yes.

Please specify

The Credit Facility Funding (Capitalizar) 2018 – COVID-19 is to be allocated to working capital or cash flow requirements.

Restrictions on the use of other credit facilities are not yet known.

9. How are insolvency application deadlines handled in times of Corona?

Insolvency procedures are urgent proceedings. As such they are not suspended or interrupted as long as it is possible to carry on the proceedings using remote communication, namely teleconferencing, video calling, or other equivalent means.  Only in the event of a situation of impossibility or inadequacy of such acts being performed should proceedings be suspended.

This being said, note that the deadline to voluntarily file for bankruptcy has been suspended. This does not mean one cannot file for insolvency during this period. It is merely that the usual deadline to do so would be of 30 days as of knowledge of the insolvency situation. This suspension is merely a relief at the disposal of the insolvent and it should last until the exceptional situation of prevention, containment, mitigation and treatment of the epidemiological infection by SARS-Cov2 and COVID-19 disease has ceased. The date for cessation will be defined by decree, in which the termination of the exceptional situation will be declared.

10. To what extent have local insolvency/restructuring laws been changed/eased which might have an impact on international businesses?

See 9. There are no material differences between the insolvency/restructuring laws being applicable to national and international businesses. Nevertheless given the situation we anticipate delays namely driven by market constraints in what concerns namely the winding up and sale of insolvency estate assets.

No. However see 9 and 10.

There are no special rules concerning Corona. Apart from winding down, there is the possibility to approve insolvency plans having in mind the recovery of the insolvent company within the insolvency proceedings, and there are specific proceedings such as the Revitalization regime and similar to achieve a recovery of the insolvent company through negotiation with creditors.

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Francisco Xavier de Almeida
Partner
Lisbon