Employment

Whether an SME or large business, taking your first steps into the Portuguese market can take less than a day or be done online, with innovative systems offering significant costs reductions. Starting or internationalising your business can be a cumbersome affair, not to mention costly. But thanks to Portugal’s advanced systems, from online registration at a reduced 40% cost to its ‘on-the-spot’ one-day incorporation, setting up your business has never been easier. Is there a way to test the waters for temporary or one-off projects? If you’re not ready to jump in with both feet and prefer to work with a Portuguese partner before setting up your own subsidiary, then the unincorporated joint venture (JV) is a way for you and your partners to come together to work on limited or temporary projects in Portugal without having to create a formal legal structure. A JV has no legal personality and no common funds; cooperation is merely for a specific project, in the pursuit of a particular objective or in the development of an activity. JVs can either be ‘internal’ or ‘external’. ‘Internal’ means having the freedom to determine your own obligations without any formal bodies. ‘External’ means having a leader, steering body and supervisory board. Leaders take on both internal administrative obligations, such as the organisation and implementation of cooperation among all parties, as well as external ones, namely the power to represent the UJV before third parties. If you already have a base in Portugal, how can you collaborate with other domestic companies? For companies that already have a foothold in Portugal, a way to collaborate is using an ‘ACE’ - an Enterprise Group. This is where two or more domestic companies collaborate creating a new legal entity with its own organisational structure to improve respective business performance and generate results. The structure comprises three core bodies: General Meeting (deliberative), Board (management and representation) and Supervisory. An ACE can own assets in the form of member contributions and each member is personally responsible for its debts. What’s the best business form for an EU company to cooperate with a Portuguese company? To collaborate with businesses in other Member States you can form an EEIG (European Economic Interest Grouping), which is an ACE but at EU level. With an international legal personality, the EEIG allows parties to come together and carry out activities in the EU to improve the exercising or result of their business activities. The main differences to note when comparing an EEIG with an ACE are that individuals can form EEIGs, something you cannot do with an ACE, and the parties to the EEIG must be located in different EU countries. Can a business start operations in Portugal without establishing a company? If you’re looking to take a first step into Portugal, you can take a minimalist approach without having to establish a fixed corporate structure by opening a branch. This operates merely as an extension of the parent company without legal personality, assets, corporate bodies or equity requirements. You can, of course, allocate funds to the branch for operational purposes. A branch doesn’t need a corporate body merely an appointed legal representative to manage the business, and a simple registration is sufficient for incorporation. What types of companies can you set up in Portugal? To take the next step and establish a legal entity, the most common methods are private limited liability companies and public limited companies. Portugal offers the added advantage of being able to incorporate either entity online or in just one day using a system known as the ‘On-the-spot’. What are the obligations and requirements for a private limited liability company? With a simpler governance structure, a private limited liability company (LDA) is particularly popular with those taking their first steps into Portugal or looking for smaller or shorter-term investments. There’s no minimum compulsory share capital, shares numbers are usually equal to the number of shareholders (a minimum of two is needed), shares must be of at least €1 and registration is with the Companies Registrar. You can incorporate a sole shareholder company, but your liability as sole shareholder is not limited as you are personally and unlimitedly liable if you do not keep your company’s assets separate from your personal assets. An LDA can be managed by one or more managers. General meetings are used to resolve managerial issues - such as the disposal / subscription of holdings in other companies or disposal / encumbering of real estate - and decisions are taken by a simple majority. Supervision of LDAs is by a supervisory board or external auditor, but you must set up a supervisory board if you exceed at least two set thresholds for two consecutive years, namely: your balance sheet exceeds €1.5m, turnover exceeds €3m and/or your average number of annual workers exceeds 50. What are the obligations and requirements for a public limited company? If you’re looking to invest in larger or longer-term investments, a public limited company (PLC) is for you. With a minimum share capital of €50,000 divided into shares at a minimum nominal value of €0.01, PLCs require at least five shareholders - domestic or foreign - and shares are free to trade privately or on the Stock Exchange, in case of listed companies, without the need to register the sale or the acquisition with the Companies Registrar. Do note, however, that it is now mandatory that the company or the bank holding the shares keep a record identifying the shareholders and the number of shares they hold. If your PLC’s share capital doesn’t exceed €200,000 you can have just a single manager, otherwise you need a board of directors and must adhere to one of the following models: A board of directors plus a supervisory board or sole supervisor. Listed companies must have a supervisory board as well as any company that exceeds two of the following thresholds: balance sheet over €20m, turnover exceeding €40m and average number of annual employees exceeds 250; A board of directors plus an audit committee made up of managers and an external auditor; or An executive board of directors, a general and supervisory board and an external auditor. The board of directors manages all aspects of your company’s business and is responsible for resolving any management issues, namely: acquisition, sale and encumbering of real estate; any collateral or guarantees; management reports and financial statements; partnerships or forms of cooperation with other companies; opening or closing of important business or relevant fractions; and any major changes in the company’s organization - acquisition of other companies, reduction of its activity and preparation of mergers. General meetings don’t touch on managerial matters unless requested by the board and are instead used for resolution of any legal matters or those specified in the articles of association, such as: changes to the articles or share capital, assessment of the administration; election of corporate body members and their remuneration; removal of directors, members of the supervisory board or of the audit committee; and, resolutions relating to mergers, spin-offs or transformations of the company. To note, three months after year-end, the General Assembly must approve your company's annual accounts and register them online at the Portal das Finanças by the fifteenth day of the seventh month after year-end. What is the process to incorporate a company? When it comes to the actual incorporation process, you can go the traditional route, online, or the speedy ‘On-the- spot’ method. What does the traditional route of company incorporation involve? Traditional incorporation involves more cumbersome steps, physically going to the relevant authorities, and of course a longer timeline and potential costs. You first request a company name certificate with the National registry of Legal Entities – RNPC – either in person or online at www.portaldaempresa.pt or www.irn.mj.pt. Next you must execute the articles of association by public deed or private document and deposit your minimum initial share capital in a bank (in the case of public liability companies). Then follows registration with the Commercial Registry Office, publication of the articles of association and the member list of the company’s corporate bodies and finally registration with the Tax Authorities, Social Security and the Working Conditions Authority (ACT). What benefits are there to incorporating online and how does it work? For a 40% reduction in incorporation fees, and to avoid having to go to the relevant authorities, you can incorporate online through www.portaldocidadao.pt, with registration taking up to two working days. You first fill in the relevant application form online, choosing from pre-approved documentation (including company name and articles of association, all available online) or submit your own. Do note that the online application must be made within 24 hours of starting your business activity. A declaration of commencement of the activity then has to be filed with the Tax Administration within 15 days but you can choose to appoint a chartered accountant or choose one from the available list to do it for you. If share capital is involved, you must agree to deposit this within five days from the application. The company is then registered either immediately or within two working days, depending on whether you choose pre-approved articles of association or submit your own. To note, you cannot apply online if your company’s capital is subscribed to by contributions in kind because the transfer of assets requires an auditor’s valuation. Be aware that to apply online the applicant must have a Portuguese ID card and a digital certificate to access the authorities online. Costs range from €180 using pre-approved articles to €380 for using your own articles, and you can even register a trademark for an additional €100. What is ‘On the spot’ incorporation and what are the conditions to qualify? ‘On-the-spot’ is an instant way of incorporating your company at any of the many Desks around the country, with legalities and administrative issues taking as little as an hour and costing €360 if your company name is pre-approved or €435 if you request approval. Certain conditions must be fulfilled on the day. All shareholders must be present with ID and Taxpayer info, or a relevant representative with a Power of Attorney, and certain documentation must be presented, but this is easily done with pre-approved models available online. There is a list of chartered accountants to choose from as well as articles of association etc previously approved and certified by the Companies Registry and notary services. Again, a declaration of commencement of the activity then has to be filed with the Tax Administration within 15 days but you can choose your own chartered accountant, one from the pre-approved list or do it yourself. Share capital must be deposited within five business days following the incorporation. Your company is registered that same day with all the relevant authorities – Tax, Social Security and ACT - and you receive the articles of association certificate, the company access code to its permanent certificate at the Commercial Registry, access to the company’s electronic card and its social security number. To find out more about this and any other aspects of starting a business in Portugal, and how we can help, do visit our platform ‘Why Portugal’. Lisbon, 11th september 2019 Macedo Vitorino & Associados

Employment laws play a particularly important role in decision-making when it comes to setting up business or working in any country. Whether as an employer or employee, Portugal’s employment regime ensures you know where you stand. The employer-employee relationship has long been a sticking point for potential investors into any country due the rigidity of the laws as well as the obligations, constraints and fine print that come with it. Ten years ago, Portugal addressed this point with a change in the legal regime that it has been revising and adapting to strike the right balance between securing employee rights and giving employers a level of necessary flexibility. If you look at recent data from the World Economic Forum (WEF), the European Trade Union Institute and PORDATA (the statistical database of socioeconomic subjects) you will see Portugal has a less rigid system and is at the lower end of labour dispute figures and days lost to labour disputes when compared with other EU countries. Your go-to for everything employment is the 2009 Labour Code, with everything you need in one place including the type of contracts, duration, working hours, holidays, absences and termination. It’s employer-friendly, as it allows certain types of flexible working schedules without increasing costs to the employer, as well as having an overall flexible regime designed by the Government to make the country’s employment legal framework fairer, more balanced and increasingly investor-friendly. Looking to hiring employees? The mandatory rules set forth in the Labour Code, as well those part of any collective bargaining agreements with Trade Unions, set out the legal framework that you must follow when hiring an employee in Portugal. Under certain circumstances, however, you and your employees may be allowed to agree different rules, if more favourable to the latter. You need to be aware of employees’ obligations and entitlements, working hours and holidays. These are figures to take note of. You have a maximum 40-hour work-week and a 8-hour work-day, along with a minimum rest of 11 consecutive hours between workings days and a mandatory weekly rest day. Employees’ are entitled to 22 working days of paid annual leave. This limit may be increased by collective bargaining agreements.   Employees are also entitled to public holidays – a total of 13 days in the year 2019. Working out salaries. You need to be aware that for 2019 the minimum national wage is set at €600 per month. In addition to this you must pay two extra month’s salary known as the ‘Christmas allowance’, payable up to 15 December each year, and “holidays allowance” payable preferably before the holidays. And what are the employees’ rights in relation to absences? Be aware that Portugal has a rigid regime when it comes to absences. The labour code establishes an exhaustive list of justified absences, which as a general rule do not affect any rights of the employee. As for employment contracts, what do you need to be aware of? Contracts can be for indefinite term (permanent) or for a fixed or unfixed term, and certain types must be made in writing, i.e. those with a ‘term’, part-time contracts, contract executed with a minor. To note, ‘term’ contracts can only be used to meet temporary work needs of the employer and for specific periods, and have a maximum duration of two years, renewable up to three times and the total duration of renewals may not exceed the contract’s initial duration. The duration of the unfixed term contract may not exceed four years. Does the law allow for probation periods? Yes, and the length of the probation period depends on the type of contract. Thus, for permanent contracts, the probation period is equal to 240 days for management positions, 180 days for employees performing functions of high responsibility or high complexity, first job seekers and long-term unemployed, and 90 days for the rest of the employees. For fixed or unfixed contracts, the probation period is equal to 30 days for contracts over six months and 15 days for contracts of less than six months. During this period both parties are free to cut the contract short, without justification or notice period. What are the key rules in relation to terminations and dismissals? Again, the Labour Code sets out all the circumstances covered as well as the processes to follow. And you must comply with the set criteria otherwise the termination will not be considered effective. An employee, of course, has the right to quit, terminating the contract with or without a just cause, being that in this last case notice must be given, equal to 30 days for contracts up to two years, of length, or 60 days for contracts over two years. And contracts can of course be terminated without consequence by agreement between the parties. Can employers terminate ‘permanent’ contracts? Permanent contracts can only be terminated with just cause, i.e., when the employee breaches his/her duties or when it becomes impossible for them to continue to perform the hired functions. Termination of permanent employees is also possible in cases of redundancy (individual redundancy or collective dismissal), when the company needs to reduce its work force due to market, structural or technological reasons. And what about ‘term’ contracts? ‘Term’ contracts expire at the end of their ‘term’. However, the employer must give a prior notice. For fixed-term contracts, the employer must give a 15 days’ notice before the term, while the employee must give an eight days’ notice. For unfixed-term contracts, the prior notice is equal to seven days for contracts up to six months, 30 days for contracts with a duration between six-month and two years and 60 days for contracts with a duration over two years. What is key when it comes to dismissals? Employers may terminate a permanent employment contract only for just cause. Generally, this would be on account of the employee’s gross misconduct that leads to a fundamental breach of contract, or for objective reasons such as redundancy. However, it is not enough for the employer to have a fair reason for dismissal: a strict pre-dismissal procedure must be followed. Otherwise, the termination will be deemed as an unfair by the Labour Court. What are the rules for collective dismissals or redundancy? Collective dismissal refers to the termination of several contracts either simultaneously or separately over a period of three months. A company will be before a collective dismissal if the termination includes at least two employees, if the company is small, or five employees if it is a medium or large company. On the other hand, individual redundancy exists whenever the number of employees to be terminated fall below the above-mentioned limits. Both forms of termination must be based on market, structural or technological reasons and subject to a very strict proceeding. Is there an obligation to provide severance pay? Severance does come into play for Collective dismissal and individual redundancy. The calculation rules regarding the amount of such severance pay have been changed following Troika’s austerity measures, which means that different regimes are applicable depending on the contract’s execution date. How is this calculated? For “new permanent contracts”, executed as of 1 October 2013, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service However, for “old contracts” the rules are as follows: For contracts executed between 1 November 2011 and 30 September 2013, the compensation considers three periods: period between 1 November 2011 and 30 September 2013, the compensation is equal to 20 days of base salary and seniority allowance per each year of service; period between 1 October 2012 and the date on which the contact completes three years of duration, the compensation is equal to 18 days of base salary and seniority allowance per each year of service; period subsequent to the first three years of duration of the contract and the date of the termination, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service. For contracts executed before 1 November 2011, the compensation considers three periods: period until 31 October 2012, the compensation is equal to one month of base salary and seniority allowance per each year of service; period between 1 November 2012 and 30 September 2013, the compensation is equal to 20 days of base salary and seniority allowance per each year of service; and period of duration of the contract after 1 October 2013, the compensation corresponds to 12 days of base salary and seniority allowance per each year of service. For fixed-term contracts: Until 31 October 2012: contracts with a length up to six months, two days of base salary and seniority allowance per each month of service. For contracts over six months, three days of base salary and seniority allowance per each month of service; As of 31 October 2012: 12 days of base salary and seniority allowance per each month of service. After 1 October 2013: the New Rules apply: 18 days of base salary and seniority allowance per each year of service. For a more detailed insight into this and other employment issues, do read our Guide Why Portugal 2019 and for further clarifications or a more tailor-made approach, please do get in touch.

Presidential Decree 43/17, of 6 March 2017 (“DP 43/17”) just enacted new regulations on the performance of a professional activity by non-resident foreign workers, repealing former Decrees 5/95, of 7 April 1995 and 6/01, of 19 January 2001. The new regulations could pose significant challenges to companies operating in Angola: DP 43/17 also applies to the so-called Technical Cooperation Agreements, but proffers no definition for this type of agreement; Expats’ remuneration is to be paid in kwanzas, and the Central Bank of Angola is expected to determine how much of their remuneration may be wired abroad; Expats’ additional benefit packages paid in cash or in kind must not exceed 50% of their base salary; Expats need to be integrated in the company’s job qualifier in the same conditions of the national employees; Expats’ employment contracts to be filed with the employment center must now also attach copy of the job qualifier. Failure to comply with these obligations is punished with heavy fines: between five and ten average monthly salaries per expatriate employee.