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Legal support during the pre-insolvency phase in Portugal

Get support for your business and avoid bankruptcy

 

Our corporate lawyers will guide you through the process step-by-step.

How can a lawyer help me?

Our lawyers at Lexidy LegalTech Boutique are seasoned experts in the process of negotiating refinancing agreements that comply with legal requirements. We will ensure your position and rights are protected in a stressful situation so that you can emerge from it in the best possible shape.

Having a professionally-written agreement is crucial to ensuring that no clawback action can occur a subsequent bankruptcy happens. With Lexidy’s legal team you can be at ease that your agreement compiles with the law and will be respected by Portuguese’s court no matter what.

¨We will be with you each step of the journey.¨

 

What is a pre-insolvency phase?

Pre-insolvency phase is a state of financial distress. It occurs when a business has significant challenges and is unable to meet its repayments. Eventually, these liabilities spiral into debt.

Much of the difficulty can be avoided by meeting with creditors and agreeing to refinance the existing debt. This agreement allows the company avoid the bankruptcy process. 

The main types of agreement are a special revitalization process and special payment arrangement process. However, following the coronavirus pandemic, the Portuguese government introduced an extraordinary process of companies viability.

When drafting properly, these types of agreement are enshrined by law and are protected from clawback actions if there if bankruptcy occurs at a later date.

What are the requirements for the agreements?

Special Revitalization Process (PER):

A Special Revitalization Process, or PER in Portugal, is for companies that are in a difficult economic situation or facing imminent insolvency, but can recover because they are economically viable. The process aims to encourage negotiations with creditors and approve a recovery plan, so that they can continue their activity and avoid insolvency.

It can be used by private limited companies, single-person limited companies, public limited companies and sole proprietorships.

The process aims restructure the company’s liabilities and functions as an alternative mechanism to corporate insolvency. It can help protect the company and jobs by maintaining the activity and suspending seizures and other enforcement proceedings.

Special Revitalization Process requires:

  • An application to be signed by the company’s directors and the creditor(s). They must owed at least 10% of the outstanding debt to be included.
  • A written statement from a certified accountant that states that the company is not currently insolvent. This statement cannot be older than 30 days.
  • A proposed recovery plan.
  • A description of the company’s assets as well as its financial and debt situation.

The recovery plan must include a proposal to restructure the company’s liabilities, such as an extension of payment terms, a reduction in interest, forgiveness of part the debt, conversion of credits into equity and a proposed new business model.

To approve the plan, at least a third of the creditors must be present at the vote and at least two thirds must vote in favour. Once approved, the special revitalization process suspends all seizures and enforcement proceedings against the company as well as preventing creditors bringing forward new actions.

Usually, the negotiations for the recovery plan are capped at two months but this can be extended by a one month.

Special Process for Payment Arrangement:

The special process for payment agreement, or PEAP, is for individuals and non-profit entities who are in a difficult economic situation. Like the special revitalization process, it aims to promote negotiations with their creditors to help restructure the debtor’s liabilities.

The special process for payment agreement prevents individuals becoming personal insolvency and is a judicial process, so individuals will need to be represented by a lawyers.

The special payment arrangement procedure (PEAP) requires:

  • Filing an application with the Court
  • This document needs to be signed by the debtor and at least one creditor.
  • They must enter negotiations with all creditors with a view to approving a payment arrangement.

The agreement must include a proposal to restructure the debtors’ debts and may include: a reduction in the monthly payment; an extension of the payment period; a reduction of interest; and possibly forgiving part of the debts.

To approve the agreement, the creditors must vote to approve it and generally speaking, there’s one vote for each Euro owed. At least a third of the voters must be present and at least two-thirds of the votes must approve the agrement. 

Extraordinary process of companies viability

The Extraordinary process of companies viability, or PEVE, is a judicial process, which currently runs until June 30th 2023, and is for companies that are in a difficult economic situation, facing imminent insolvency or currently insolvent. The process allows liabilities to be restructured to enable them to continue their activities and avoid insolvency.

It was introduced in November 28, 2020 to help companies given the serious economic consequences of the COVID -19 pandemic. It is available to private limited companies, sole proprietorships by quotas, public limited companies and sole proprietorships, etc.

Individuals and non-profit legal entities can resort to the special payment arrangement process (PEAP).

The extraordinary company viability process is designed to restructure company liabilities and is an alternative mechanism to company insolvency. It seeks to protect the company and jobs by maintaining the activity and suspending seizures.

Generally the process requires a third of the creditors to sign the document and at least two-thirds to vote favourably. Each Euro owed equals a vote, like the above processes.

The agreement will contemplate a proposal to restructure the company’s liabilities, and include an extension of payment deadlines, a reduction in interest, forgiving part of the debts, converting credits into equity and proposing a new business model.

What are the requirements for a PER, PEAP or PEVE?

Special Revitalization Process requires:

  • An application to be signed by the company’s directors and the creditor(s). They must owed at least 10% of the outstanding debt to be included.
  • A written statement from a certified accountant that states that the company is not currently insolvent. This statement cannot be older than 30 days.
  • A proposed recovery plan.
  • A description of the company’s assets as well as its financial and debt situation.



The special payment arrangement procedure (PEAP) requires:

  • Filing an application with the Court
  • This document needs to be signed by the debtor and at least one creditor.
  • They must enter negotiations with all creditors with a view to approving a payment arrangement.



The Extraordinary process of companies viability (PEVE) requires:

  • The company to be represented by a lawyer.
  • A written statement signed the company’s management or Board of Directors confirming that the situation is due to the COVID-19 pandemic.
  • A list of all the creditors.
  • A viability agreement signed by the company and creditors.

What is the process of getting an PER, PEAP or PEVE agreement?

Generally, the process is similar for all three processes. 

The individual or company in question must file an application with the court and this agreement must have:

  • a proposal to resutructure the company’s debts.

This must account for issues such as changing payment terms, lowering interest payments, allowing for some of the debt to be forgiven and, in some cases, convering credit into equity and deciding upon a new business model.

Typically, the minimum number of creditors need to vote on the proposed package and this vote needs to be a minimum number of approving votes. However, once agreed, existing and future enforcement proceedings are suspended.

Usually, the voting power is determined by  the level of debt, so €1 generally equals one vote. 

For the Extraordinary process of companies viability (PEVE) there are allowances for  tax and social security debts, such as allowing monthly installments with a cap on their amount if the debt exceeds €51,000.

Our Story

We are a department formed by qualified legal experts who have been trained in the field of corporate law. We work on these requests every day and it’s our passion. For us, Lexidy is a way of life and what excites us the most is to be able to deliver the happiness and satisfaction of a successful process. We want to help you achieve your goals and dreams.

Ana Carolina Lourenço

Ana Carolina Lourenço

Lawyer

Vitória Galli

Lawyer

Maria Eduarda

Paralegal
Patricia Malhadas

Patrícia Malhadas

Lawyer

Client’s stories

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