Portugal
Lending in Portugal can be structured in several different ways to include a variety of features depending on the commercial needs of the parties.
A loan can either be provided on a bilateral basis (a single lender providing the entire facility) or syndicated basis (multiple lenders each providing parts of the overall facility).
Syndicated facilities by their nature involve more parties (such as agents and trustees which fulfill certain roles for the finance parties), are more highly structured and involve more complex documentation. Larger financings will typically be done on a syndicated basis with one of the syndicates taking the lead in coordinating and arranging the financing.
Loans will be structured to achieve specific objectives, eg term loans, working capital loans, equity bridge facilities, project facilities and letter of credit facilities.
Loan durations
The duration of a loan also varies between:
- a short-term loan, with a maturity date not exceeding one year;
- a medium-term loan with a maturity date exceeding one year but not exceeding five years; or
- a long-term loan, with a maturity date exceeding five years.
Loan security
A loan can either be secured, unsecured or guaranteed. For more information, see Giving and taking guarantees and security.
Loan commitment
A loan can also be:
- committed, meaning that the lender is obliged to provide the loan if certain conditions are fulfilled; or
- uncommitted, meaning that the lender has discretion whether or not to provide the loan.
A breach of a loan commitment will only create a contractual liability by the breaching party, which gives the innocent party the right to call for a contractual remedy or to be indemnified.
Loan repayment
A loan can also be repayable upon demand, on an amortizing basis (in installments during the life of the loan) or scheduled (usually meaning the loan is repayable in full at maturity).
Are there any restrictions on giving and taking guarantees and security?
Some of the key areas affecting the giving of guarantees and security are as follows.
Capacity
It is important to check the constitutional documents of a company giving a guarantee or security to ensure it has an express or ancillary power to do so and there are no restrictions on the directors' powers that would be preventative. Under Portuguese law, directors have a general duty to promote the success of the company for the benefit of its members as whole; as such, they will need to be able to show that adequate corporate benefit is derived from the company giving the guarantee or security. This is often more difficult in the case of upstream or cross-stream guarantees or security provided by a subsidiary to its parent or sister company. The safe approach is often to have the members of the company approve the giving of the guarantee or security by resolution.
Insolvency
Guarantees and security with a determined term prior to the onset of insolvency may be at risk of being set aside under Portuguese insolvency laws. Guarantees and security might also be challenged on other grounds relating to insolvency.
Purchase of own shares
It is unlawful for a public company to grant loans or issue guarantees or to provide financial assistance for the purchase of its own shares (however the law expressly provides for limited exceptions).
What are common types of guarantees and security?
Common forms of guarantees
Guarantees can take different forms, as follows.
Performance guarantee
A third party (guarantor) personally undertakes the obligation of the debtor if the debtor fails to fulfillment its obligations.
Promissory note (fiança)
The guarantor promises in writing to pay a determinate sum of money to the creditor if the debtor fails to fulfill its obligations.
Common forms of security
There are two basic types of security interest that can be created under Portuguese law:
- a pledge; and
- a mortgage.
Different types of security are suitable for securing different types of assets (eg financial pledge and a fiduciary alienation/transfer of collateral).
Are there any other notable risks or issues around giving and taking guarantees and security?
Giving or taking guarantees
Depending on the type of guarantee provided, specific requirements may apply. For instance, personal guarantees (fiança) need to be in writing and signed by the guarantor and the obligation guaranteed must be determined or determinable.
Giving or taking security
A security document may need to be executed as a deed if it contains a mortgage over land or other assets subject to registration (eg cars, airplanes and boats).
There are no notarization requirements for security documents under Portuguese law.
Like guarantees, security granted during a period of time prior to the onset of insolvency may be at risk of being set aside under Portuguese insolvency laws and may also be challenged on other grounds relating to insolvency.
Nuno Neves
Partner
DLA Piper ABBC
[email protected]
T +21 358 36 27
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