Crises can cripple a company to a point where it becomes unable to comply with its payment obligations. In such a situation, apart from the general option to file for insolvency and, if necessary, dissolving and liquidating the company, there is the option to rescue and restructure the company. In corporate insolvency matters, advice should be given at the earliest possible stage. For this reason, we see ourselves as your partner in restructuring measures.

If illiquidity is inevitably imminent or has already occurred, we prepare the necessary steps and documents for filing the judicial insolvency proceedings and walk our clients through these proceedings, if necessary, until the company has been liquidated and dissolved.

Insolvency in Portugal: Companies in Difficulties

In Portugal, the start of insolvency proceedings is filing for insolvency. The declaration of insolvency can either be applied for by the debtor or requested by one of the creditors. If the debtor proactively files for insolvency, he or she has to demonstrate credibly that he or she will not be able to comply with his or her payment obligations. If illiquidity has already occurred, the debtor, i.e. his or her legal representatives (directors), is obliged to file for insolvency with the responsible mercantile court. Failing to do so, he or she might incur in liability. Such a liability would apply in the case of negligent insolvency, i.e. when the court considers that the legal or factual representatives of the company have acted wilfully or negligently and have caused or worsened the situation of insolvency. In these cases, we also provide advice.

Initiated the insolvency proceedings, an insolvency administrator is appointed. The insolvency administrator compiles a list of all assets of the insolvency estate and of the creditors, after requiring the creditors whose claims are apparent as receivables in the company’s accounting to lodge their claims.

If no agreement can be reached, the estate is liquidated in accordance with the liquidation plan approved by the insolvency administrator and the court, and the claims are settled according to their rank. Some examples of privileged claims include tax claims, claims for workers’ wages as well as claims which have been guaranteed with specific pledges or a mortgage.

In this context we advise our clients regarding the following matters:

• In cases of imminent illiquidity, advice on insolvency proceedings in Portugal as well as on alternatives (e.g., restructuring, refinancing or creditors’ arrangement).
• Advice on possibilities of rescuing a company and its consequences for the insolvency proceedings.
• Advice on all questions regarding the liability of the directors in case of insolvency.
• Advice and assistance in case illiquidity occurs.
• Application for insolvency and carrying out all steps of the proceedings as well as advice on all questions regarding enforcement, settlements, liquidation and dissolution of the company.

Insolvency in Portugal: Creditors and Shareholders of Companies in Difficulties

The application for declaration of insolvency can be filed by the debtor, however, it can also be requested by the creditor.

Often creditors learn about the insolvency of their business partner by means of the corresponding notification of the debtor or the insolvency administrator. In Portugal, lodging claims in due time and form is especially relevant, since late claims or claims not duly lodged might be assigned a subordinated rank or not be considered at all. Hence consulting and authorising a Portuguese lawyer is recommended. As part of the insolvency proceedings, the involved parties attempt to reach a creditors’ arrangement, which includes either debt forgiveness or a deferral of payment. If such an agreement cannot be reached, the estate of the debtor is sold, and the claims are settled in accordance with their rank.

Regarding all matters in connection with the insolvency of business partners we advise our clients, e.g. on:

• Advice regarding how to handle the situation of financial difficulties or insolvency of a business partner.
• Lodging and enforcing creditors’ claims in insolvency proceedings.
• Advice on all claims with special guarantees (e.g., mortgages, pledges or reservation of title).
• Assistance with all matters regarding the settlement of claims as well as alternative solutions during the entire insolvency proceedings.
• Advice on all matters regarding the corporate tax and the value added tax of the creditor (deductibility of losses or bad debt).