NEWSLETTER I CORPORATE LAW
CONTENTS CORPORATE LAW NEWSLETTER I 3RD QUARTER 2017 I LEGAL FRAMEWORK FOR THE CENTRAL REGISTER OF BENEFICIAL OWNERS II NATIONAL LEGISLATION III NATIONAL CASE LAW
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CORPORATE LAW NEWSLETTER
I LEGAL FRAMEWORK FOR THE CENTRAL REGISTER OF BENEFICIAL OWNERS
The legislation recently approved with a view to the transposition of Directive (EU) 2015/849 of the European Parliament and of the Council, of 20 May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing into Portuguese law, is now joined by Law No. 89/2017, published on 21 August 2017, which approved the Legal Framework for the Central Register of Beneficial Owners and implemented an extensive series of legislative amendments.
The Central Register of Beneficial Owners (RCBE), managed by the Instituto dos Registos e do Notariado, I.P., will consist of a database intended to organise and maintain updated information on natural persons who exercise ownership or control, even if indirectly or through a third party, of entities subject thereto (this is the legal concept of "beneficial owner", established in Law No. 83/2017, of 18 August).
The creation of this database aims to increase transparency in business relations and compliance with duties in respect of the prevention of the use of the financial system for the purposes of money laundering or terrorist financing as laid down by Law No. 83/2017, of 18 August.
1. ENTITIES SUBJECT TO RCBE
The following entities are subject to the RCBE:
i) Associations, cooperatives, foundations, companies governed by commercial and civil law, as well as any other entities with legal personality, subject to Portuguese law or to foreign law, that are engaged in activity or practice legal acts or business in national territory requiring them to obtain a tax identification number (NIF) in Portugal;
ii) Representations of international or foreign legal persons engaged in activity in Portugal (e.g. branches);
iii) Other entities that, pursuing specific objectives and activities differentiated from those of their members, do not have legal personality;
iv) Trusts registered in the Madeira Free Trade Zone; v) Offshore financial branch registered in the Madeira Free Trade Zone; and vi) When not covered by any of the entities referred to above, trust funds and the
other legal arrangements with a similar structure or function, provided certain circumstances are met.
Certain entities are however excluded from the scope of the RCBE, including:
i) Companies with shares traded on a regulated market, subject to disclosure requirements consistent with European Union law or subject to equivalent
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international standards, which guarantee sufficient transparency of information concerning ownership of the shares; and ii) Consortiums and complementary groups of companies.
2. NEW DUTIES UNDER THE RCBE
The legal framework of the RCBE sets out important duties for the entities subject to it and for their shareholders, associates or participants, in particular:
i) The duty that companies maintain an up-to-date register of the identification details of (i) shareholders, with a breakdown of their holdings; (iii) natural persons with holdings, even if held indirectly or through third parties; and (iii) those who have effective control thereof, in any way. This duty applies, mutatis mutandis, to the other entities subject to the RCBE. Failure to comply with this duty constitutes an administrative offence punishable by a fine of 1,000.00 to 50,000.00.
ii) The duty of shareholders (or associates or participants, in the case of other entities) to inform the company of any change in the identification details referred to in i) above, within a period of 15 days from the date of such change. Without prejudice to this obligation, the company may notify the shareholder to update their identification details within 10 days. The unjustified breach of this information obligation by the shareholder, after notification of the company, shall lead to redemption of their shares, under the terms of the Commercial Companies Code.
The duty of entities subject to the RCBE to declare, at the scheduled times and at the intervals established in the RCBE, sufficient, accurate and up-to-date information about their beneficial owners, all the circumstances indicating such capacity and information about the economic interests held in them.
3. DECLARATION OF BENEFICIAL OWNERSHIP
The declaration obligations to be observed by entities subject to the RCBE can be described as follows:
i) Obligation to provide a first declaration of beneficial ownership, entities already set up to provide this declaration within a time limit to be defined by Government ordinance to be published and entities yet to be set up after the entry into force of the new law to provide such declaration on registration of the company or with the first registration in the Central File of Legal Persons, depending on whether or not it is an entity subject to commercial registration;
ii) Obligation to update the information contained in the RCBE in as short time as possible, without ever exceeding 30 days from the date of the fact that determined the change; and
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Obligation to make an annual declaration, up to 15 July, for confirmation that the information on beneficial ownership is accurate, sufficient and up-todate.
The obligation regarding the declaration of beneficial ownership is met by completing and submitting an electronic form, to be defined by ordinance, or, alternatively, at a registration department, by means of assisted electronic filing, together with the application for company registration or for registration of any fact in the Central File of Legal Persons.
Among other subjects, the following are entitled to make the declaration of beneficial ownership: (i) members of the management bodies of companies or people who perform equivalent duties in other legal persons; (ii) founder members of legal persons set up by means of special fast-track or online procedures; (iii) lawyers, notaries and "solicitadores" (legal agents); and (iv) chartered accountants, following a declaration of start of activity or when associated with compliance with the obligation to submit Simplified Corporate Information.
The new law also regulates the content of the declaration of beneficial ownership, which must contain a large amount of information, including:
i) With regard to the entity subject to the RCBE, the VAT number (NIPC) attributed in Portugal by the competent authority and, in the case of a nonresident entity, the tax number or equivalent number issued by the competent authority of the area of residence, if any; the company or business name; the legal nature; the registered office, including registration jurisdiction, in the case of foreign entities; the economic activity code (CAE); the legal entity identifier, where applicable; and institutional electronic address.
ii) With regard to holders of share capital of companies, in addition to a breakdown of their shares, the details referred to in i) above in the case of a legal person and the following in the case of a natural person: full name; birth date; place of birth; nationality; full address of permanent residence; identification document data; tax number, where applicable, and, in the case of foreign citizens, the tax number issued by the competent authorities in State(s) of their nationality or equivalent number; and electronic address, if any.
iii) With regard to managers, directors or those in charge of the management of the entity subject to the RCBE, the details referred to in ii) above, concerning natural persons.
iv) With regard to beneficial owners, who, by definition, are natural persons, the details referred to in ii) above and, additionally, in the case of persons not resident in Portugal, the identification of their tax representative, if any, with name, full address and tax number.
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v) With regard to the person making the declaration, the name; full address of permanent residence or of place of business; details of the identification document or professional identification card; the tax number, where applicable; the capacity in which they act and; the electronic address, if any.
4. ACCESS TO THE RCBE
As explained in the Explanatory Memorandum for Legislative Proposal No. 71/XIII, which gave rise to the law in question, with regard to access to the information set out in the RCBE, three-level access was established, namely:
i) A public access level, providing any interested party, through the web page, with information on the entity subject to the RCBE and on the beneficial owners (the information provided on beneficial owners includes their name, month and year of birth, nationality, country of residence and the economic interest held). It is to be noted that the choice of the legislature to make these data on beneficial owners public merited strong criticism from National Data Protection Commission, which, in Opinion No. 29/2017, of 9 May 2017, stated that this option "does not reflect the balance determined by the European legislature between the public interest of prevention of money laundering and terrorism financing and fundamental rights and respect for private life and for the protection of personal data; such widespread and permanent disclosure clearly goes beyond what is necessary in terms of restriction of these fundamental rights to safeguard the intended purposes, being excessive and therefore in clear violation of Article 18 , no. 2, of the Constitution, as well as Article 52, no. 1, of the Charter of Fundamental Rights of the European Union".
ii) An intermediate access level, reserved to the so-called obliged entities (financial entities with registered office in the national territory and non-financial entities engaging in activity in the national territory listed in Art. 4 of Law No. 83/2017, of 18 August), that may access most of the details set out in the RCBE, with the exception of the data regarding the declarant, in relation to which they only have access to the name and to the capacity in which it operates. Here, the legislature intended to create a tool to assist with compliance with the legal obligations of obliged entities in connection with the prevention and control of money laundering and terrorism financing.
iii) A level of unrestricted access to the information contained in the RCBE reserved to judicial authorities, police and the sectors provided for in Law No. 83/2017, of 18 August, as well as the Tax Authority.
5. CONSEQUENCES IN THE EVENT OF DEFAULT
The entities subject to the RCBE that do not comply with the information and rectification obligations provided for in the corresponding legal regime must not:
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i) Distribute annual profits or make advances on annual profits; ii) Enter into supply contracts, public works or procurement contracts with the
State, autonomous regions, public institutes, local authorities and private social solidarity institutions funded mainly by the State Budget, or renew the term of existing contracts; iii) Bid for public service concession; iv) Admit to trading on a regulated market financial instruments representing their share capital or convertible thereto; v) Issue public offerings of any financial instruments they have issued; vi) Benefit from European structural and investment funds and public funds; vii) Intervene as a party to any business aimed at the transfer of property, whether for a consideration or free of charge, or the constitution, acquisition or sale of any other rights in rem or guarantees over any immovable property.
6. ENTRY INTO FORCE
The law that approved the Legal Framework for the Central Register of Beneficial Owners will come into force 90 days after its publication, in other words, on 19 November 2017.
II NATIONAL LEGISLATION
Decree-Law no. 123/2017 - Dirio da Repblica no. 185/2017, Series I of 2017-09-25 Establishes the regime for the conversion of bearer securities into registered securities, pursuant to Law no. 15/2017, of 3 May.
Decree-Law no. 120/2017 - Dirio da Repblica no. 179/2017, Series I of 2017-09-15 Amends the legal framework for gold and silver working and assayers, approved by Law No. 98/2015, of 18 August.
Rectification no. 21/2017 - Dirio da Repblica no. 164/2017, Series I of 2017-08-25 Rectifies Decree-Law No. 79/2017, of 30 June, amending the Commercial Companies Code and the Insolvency and Business Recovery Code, published in the Dirio da Repblica, 1st series, No. 125, of 30 June 2017.
Law no. 92/2017 Dirio da Repblica no. 161/2017, Series I, of 2017-08-22 Requires the use of a specific means of payment in transactions that involve amounts of EUR 3,000.00 or more, amending the General Tax Law and the General Rules on Tax Offences.
Law no. 89/2017 Dirio da Repblica no. 160/2017, Series I, of 2017-08-21 Approves the Legal Framework for the Central Register of Beneficial Owners, transposing chapter III of Directive (EU) 2015/849, of the European Parliament and of the Council, of 20
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May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. Amends Codes and other legal texts.
Law no. 69/2017 Dirio da Repblica no. 155/2017, Series I, of 2017-08-11 Regulates debt recovery funds.
Law no. 66/2017 Dirio da Repblica no. 153/2017, Series I, of 2017-08-09 Makes the first amendment of Law no. 119/2015, of 31 August, which approves the Cooperative Code.
Notice no. 8544/2017 Dirio da Repblica no. 147/2017, Serries II, of 2017-08-01 Finance Directorate-General of Treasury and Finance Publication of Supplementary Rates of Interest on Arrears, for the 2nd half of 2017.
Law no. 62/2017 Dirio da Repblica no. 147/2017, Series I, of 2017-08-01 Regulations concerning gender balance in the management and supervisory bodies of stateowned enterprises and publicly listed companies.
Decree-Law no. 89/2017 - Dirio da Repblica no. 145/2017, Series I of 2017-07-28 Transposes into the internal legal order Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups.
III NATIONAL CASE LAW
Judgment of the Court of Appeal of Guimares, of 22 June 2017, Case no. 1333/11.6TBVRLB.G1, Reporting Judge ANTNIO BEA PEREIRA, available on www.dgsi.pt The insolvency of a debtor that is not a natural person is always considered culpable when its directors, whether de jure or de facto, have repeatedly breached their duty of submission and of cooperation up to the date of preparation of the report on the qualification of the insolvency.
In the case in question, for more than six months, despite notification by the insolvency administrator, the director of the insolvent company did not fulfil his obligation to provide the documents and accounting records requested. The passivity of the director over this time is thus particularly reprehensible, reflecting repeated breach of his obligation to present documents and cooperate, for which reason the insolvency was qualified as culpable.
Although the term of appointment of the director was for a fixed period of time, no new director having been appointed at the end of that period, it must be understood that the director remains in office until the appointment of new director, through application by
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analogy of the solution set out in Article 391, no. 4, of the CCC. Therefore, the director may be held responsible for the failure to provide the documents and accounting records.
Judgment of the Court of Appeal of Lisbon, of 20 June 2017, Case no. 810/16.7T8PDL-D.L17, Reporting Judge LUS FILIPE DE SOUSA, available on www.dgsi.pt
The claim of a company whose sole director was also the director of the (future) insolvent company, which was bound by his sole signature, having in this capacity constituted a unilateral mortgage in favour of the first company, must be classified as a subordinated claim insofar as that director exerted a dominant influence over the debtor.
Judgment of the Supreme Court, of 30 May 2017, Case no. 4891/11.1TBSTS.P1.S1, Reporting Judge ALEXANDRE REIS, available on www.dgsi.pt
The concept of "just cause" advocated in Art. 257, no. 6, of the CCC, for the purpose of dismissal of a director, must be considered through the prism of protection of trust and with the dose of malleability or flexibility that the law grants in its application, given the specific circumstances of each case: there is just cause for dismissal of a director when the established facts demonstrate that said director committed acts that are a serious breach of the relationship of trust that holding the position presupposes and it is not fair to require the company to maintain a binding contractual relationship of directorship; in other words, according to the tenets of good faith, make it impossible for the company to engage in its business.
Unlike disciplinary or labour law, for example, commercial law does not contain general or special procedural regulations against decisions taken or to be taken by collegiate bodies, requiring a form of "notification of charges" that "establishes" the facts to be considered in the action: assessment of the question of just cause examines the facts raised and proven in the case, even if not specified in the dismissal decision, but merely covered, in general terms, by the broad perspective of the reasons for that decision.
Even if this were not the case, one would have to consider that the established facts reveal, moreover, the wrongful use by the plaintiff of company property for his own benefit, constituting a breach of duties of diligence and loyalty, as provided for in Art. 64 of the CCC, with a special emphasis on the breach of the duty of loyalty, inseparable from the principle of trust, regarding both the company and the other shareholders. For this reason, we would have acknowledge that the plaintiff relying upon his claim to indemnity, following the dismissal, would always be wrongful and, consequently, void, under Art. 334 of the Civil Code, because it is an "unjustified requirement", underlying which is "disloyal conduct" and, in short, it is conduct that is a blatant and intolerable abuse of that trust that constitutes the indispensable foundation of human relationships, trampling on the instrumental function of the right exercised and the justification for its conferral by law to its holder.
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Judgment of the Court of Appeal of Coimbra, of 14 March 2017, Case no. 1327/12.4TBLRA.C1, Reporting Judge FONTE RAMOS, available on www.dgsi.pt
The rights associated with shares including voting rights will be exercised in accordance with the registration of the issuer (see Art. 327 of the CCC).
However, the transfer of certificated and book entry shares, outside the stock market (not part of the centralised system), is only completed with delivery (certificated bearer shares), declaration of transfer written on the certificate (registered certificated shares), or registration in an account (book entry shares). Nevertheless, these acts are not sufficient, in themselves, to operate the transfer, which requires them to be supported by a valid document, by a legal transaction, the underlying causal transaction (the existence, validity and acceptance of just cause for attribution is always required).
In other words, for the transfer of the shares, material delivery and registration are not sufficient; just cause for attribution, a valid underlying causal transaction is also required.
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