I INSOLVENCY LAW, POLICY AND PROCEDURE

i Statutory framework and substantive law
Portuguese Insolvency and Recovery Code

Insolvency proceedings in Portugal are mainly regulated by the Portuguese Insolvency and Recovery Code (CIRE). The CIRE was approved by Decree-Law No. 53/2004 and was amended by Laws No. 16/2012, 66-B/2012 and Decree-Law No. 26/2015 .

Pursuant to the CIRE a company is insolvent when it is unable to pay its debts that have fallen due or when its liabilities are clearly greater than its assets, according to the relevant accounting standards.

A company must file for its insolvency within 30 days of the date it becomes aware of its insolvency or of the date on which it should be aware of its insolvency. When the debtor is the owner of a company, Portuguese law presumes that awareness of the insolvency occurs three months after the general failure to meet debts regarding taxes and social security payment and contributions; debts arising from an employment contract or from the breach or termination of such contract; or rentals for any type of hire, including financial leases; or instalments of the purchase price or loan repayments secured by a mortgage on the debtor’s business premises, head office or residence.

Moreover, the debtor’s insolvency can also be requested by those who are liable for its debts, by any creditor or by the Public Prosecutor if certain events indicative of an insolvency happen.

The court within the territory of which the debtor’s head office or centre of main interest is situated has jurisdiction to open the insolvency proceeding, which begin with the filling of a written petition by one of the above-mentioned entities.

The petition must indicate the facts on which it is based. The contents of the petition will depend on who is the petitioner; the debtor or someone else. The debtor may acknowledge its insolvency. In this event, it can file a petition with the court, which must declare the debtor’s insolvency immediately. If the petition is filed by a creditor, the petitioner must allege and prove the source, nature and amount of its credit or its liability for the debts of the insolvent and disclose any known facts related to the debtor’s assets and liabilities.

The court decides on the admissibility of the petition. Furthermore, at the insolvency petitioner’s request, the court may adopt interim measures whenever it is necessary to protect the debtor’s assets until the insolvency is declared. For instance, the court may name an interim administrator for the company with powers to manage the company or to assist in the management.

The creditor’s petition is considered to be founded and unless the debtor cannot be located, the court will notify the debtor to file its opposition within 10 days, otherwise the facts on which the petition is based shall be accepted and the insolvency declared.

The opposition must include a list of the debtor’s five major creditors. The debtor has the burden of proving its solvency. If the debtor opposes the petition or cannot be located, the court shall schedule a hearing, notifying the petitioner and the debtor and its directors to personally attend the hearing or to be represented by someone else with powers to act on their behalf. In the event the debtor does not attend the hearing, the facts on which the petition is based shall be accepted and the insolvency declared. When the petitioner is a creditor, in the event it does not attend the hearing, the court closes the insolvency proceeding. After the hearing, the court gives its decision on the insolvency of the debtor.2

The court’s decision can be challenged by means of an application to the lower court or by means of an appeal to a higher court. The application must indicate additional facts or proofs that were not previously presented and that, if presented, would impose a different decision on the debtor’s insolvency. The appeal shall indicate why the court’s decision should have been different in light of the facts that were proved.

Among other things, the court’s decision nominates an insolvency administrator, establishes a deadline for filing the credits claims and schedules a creditors’ general meeting. This decision has several effects on the debtor and its directors,3 on the pending proceedings,4 on the credits,5 on the pending agreements6 and on acts prejudicial to the debtor’s assets.7 Further, the debtor’s assets on the date of declaration of insolvency are seized, as will be the assets and rights obtained by the debtor while the insolvency proceeding is pending.

Within the period set out in the court’s decision, all the creditors, even those whose credit has already been recognised by a court decision, must file a credit claim. The credit claim must indicate the credit source, date of payment, amount, conventional and legal interests, terms, nature and guarantees. Fifteen days after the deadline for filing the claims, the insolvency administrator must present a list of credits including those that have been recognised and those that have not. This list can be challenged within 10 days of its publication and any creditor is allowed to respond to the oppositions filed. If there is no opposition to the list of credits the court must immediately deliver its decision on the credits and their priority. Afterwards, the creditors’ committee8 has 10 days to deliver its opinion on the oppositions filed by the creditor. Subsequently, the court must schedule an attempt at conciliation and a hearing and finally give its decision on the credits and their order of priority.

Portuguese law establishes four classes of credits: secured; preferential; subordinated; and non-secured. Secured credits are those with security over assets seized up to the value of such assets. Preferential credits are those with a right to be preferentially paid up to the value of the assets over which such preference exists. Pursuant to the Civil Code, some preferential credits (special preference credits) take priority over all others, including secured credits. Other preferential credits (general preference credits) only take priority over non-secured credits. Subordinated credits are those that will be settled only after the non-secured creditors have been paid in full. The subordinated credits are listed in the CIRE.

In any event, the credits incurred during the insolvency proceeding, for example, court fees or insolvency administrator’s remuneration, take priority over all other credits.

As previously mentioned the court’s decision also schedules a creditors’ general meeting, which all creditors can attend. The credits provide creditors with votes in proportion to the amount of their credits: (1) if they were previously recognised by a court decision, (2) if they were previously claimed or (3) if they are claimed during the creditors’ general meeting when the deadline for filing the credits’ claim has not yet ended and the insolvency administrator or the other creditors do not oppose to the credit’s recognition. Subordinated credits can only vote to approve or reject a recovery plan. Generally, the decisions of the creditors’ general meeting are taken by a majority of the votes, without taking in account the abstentions.

The first creditors’ general meeting is called to: assess the insolvency administrator’s report produced following to the declaration of insolvency; decide whether the debtor’s establishment or establishments must remain open or must be closed; and decide whether the insolvency administrator must prepare an insolvency plan and therefore suspend the liquidation and distribution of the assets or continue the liquidation and distribution of the assets. In any event, the referred suspension ceases and the insolvency administrator must continue the liquidation and distribution of the assets if the insolvency plan is not submitted within the following 60 days or if it is not approved.

The insolvency administrator (if the creditors’ general meetings so decide), the debtor or another person liable for its debts, or a group of creditors representing one-fifth of the total amount of the non-subordinated credits can prepare and submit an insolvency plan for the approval of the creditor’s general meetings. The insolvency plan can set out how to perform the payment of the credits or how to liquidate the debtor’s assets or how to restructure or recover the debtor. The contents of the insolvency plan can be agreed with the creditors, but the insolvency plan shall treat the creditors equally unless the difference in treatment is justified. The insolvency plan shall forecast the measures necessary to achieve the purposes agreed by the creditors’ general meetings, liquidate the debtor’s assets or restructure or recover the debtor, and include the details necessary for its approval by the creditors and by the court. The quorum for approval of the recovery plan is two-thirds of the votes issued at the creditors’ general meeting provided that at least half of the votes issued are not subordinated and one-third of the total amount of credits with voting rights attended the creditors’ general meetings.

Finally, it is important to note that the CIRE sets out a proceeding to punish the insolvent’s or its directors’ fraudulent behaviour, when its conduct caused or increased the insolvency.

Other legislative instruments

EU Regulation No. 1346/2000 on Insolvency Proceedings is also an important instrument in Portuguese insolvency law. This Regulation is applicable to cross-border insolvency proceedings in the EU and it aims to improve the efficiency and effectiveness of insolvency proceedings that have cross-border effects.

As for Portuguese legislation related to hybrid procedures meant to encourage the recovery of companies that are struggling with severe financial difficulties, there are three forms: (1) ‘special revitalisation proceedings’; (2) ‘proceedings to approve extrajudicial agreements’; and (3) ‘the extrajudicial system for corporate recovery’. The special revitalisation proceedings and proceedings to approve extrajudicial agreements were adopted by Law No. 16/2012 while the extrajudicial system for corporate recovery was adopted by Decree-Law No. 178/2012.

ii Policy

An Economic Adjustment Programme was negotiated in May 2011 between the Portuguese authorities and officials from the European Commission, the European Central Bank and the International Monetary Fund. These parties signed a memorandum of understanding9 that, inter alia, listed the need to amend the CIRE ‘to better facilitate effective rescue of viable firms’. Subsequently, the insolvency law was amended by Law No. 16/2012.

The CIRE states that the current purpose of insolvency proceedings is to satisfy the creditors by means of an insolvency plan, namely to recover the company when this recovery is possible, or by means of the liquidation and distribution of the debtor’s assets. The amendments to the CIRE are intended to change the previous tendency to liquidate the debtor’s assets, but were clearly insufficient to achieve that goal. Consequently, the liquidation of a company continues to be the most common option, mostly because the debtor or its directors fail to commence with the insolvency proceedings at an early stage, thus jeopardising the chances of restructuring the company in financial difficulties. In addition, creditors are frequently not willing to take on more risk.

Bearing this result in mind, the insolvency law was amended by Decree-Law No. 26/2015 whereby the government implemented a set of more favourable measures for the approval of recovery plans, the long-term financing of productive activity and hybrid capitalisation instruments in order to facilitate investments of capital and additional know-how.

iii Insolvency procedures
Procedures to wind up or rescue the companies

Portuguese law sets out judicial and hybrid procedures to recover a company and a judicial procedure to liquidate a company.

As concerns the recovery of the company there are different procedures the applicability of which depends on the seriousness of the financial situation of the company. If the company is in a pre-insolvency situation and its recovery is still conceivable the CIRE (pursuant to Law No. 16/2012) sets out two alternatives to the insolvency proceeding: special revitalisation proceedings and proceedings to approve extrajudicial agreements. Special revitalisation proceedings allow a company that is in a difficult financial situation or that is at imminent risk of insolvency to negotiate with all its creditors and prepare a recovery plan without having to be declared insolvent. Proceedings to approve extrajudicial agreements allows a company that is in a difficult financial situation or that is at imminent risk of insolvency to submit a pre-arranged plan signed by the debtor and its creditors for the court’s approval. If the company is already insolvent, the recovery of the company will have to take place in an insolvency proceeding and depends on the approval of a recovery plan by the creditors’ general meeting and the court.

Moreover, Decree-Law No. 178/2012 also sets out an alternative to the insolvency proceeding, the extrajudicial system for corporate recovery, which updated the extrajudicial negotiation proceeding under the mediation the Portuguese Agency for SMEs and Innovation. This proceeding is only available for companies that are in a pre-insolvency situation or an insolvency situation and aims to promote the settlement of an extrajudicial agreement between the company and its creditors, that represent at least 50 per cent of the total amount of the company’s debts, allowing the recovery of the financial situation of the company.

Besides the recovery of the company, the insolvency law establishes a liquidation procedure for insolvent companies. When a company is declared insolvent, the Portuguese creditors can vote the company’s liquidation. The decision to liquidate is taken in the creditors’ general meeting. After the company’s liquidation by the insolvency administrator, the product of the sale of assets is distributed according to the priority of the credits and the insolvency closed.

Ancillary proceedings

Portuguese insolvency law allows for ancillary proceedings when the main proceeding is pending in another EU Member State and under the rules established in Regulation No. 1346/2000 and in the CIRE. Under Regulation No. 1346/2000, the effects of an ancillary proceeding are limited to the extent of the insolvent’s assets that are located in the territory of that EU Member State. In short, when the insolvent has its head office or centre main interests in another EU Member State the ancillary proceeding only covers assets located in Portugal.

Time frames

According to the most recent official statistics on insolvency proceedings in Portugal,10 the approximate time frame of a proceeding has been decreasing since 2007. In the first trimester of 2014 the average time frame between the commencement of the proceeding in court and the declaration of insolvency was three months. The average time taken for the subsequent stages of proceedings up to a full conclusion is 25 months.

iv Starting proceedings
Who may commence plenary proceedings and how

The plenary insolvency proceedings commence with the submission of a written petition requesting the declaration of insolvency. A petition can be filed by: the debtor; those who are liable for its debts; the creditors; or the Public Prosecutor.

How concerned parties may oppose

If the declaration of insolvency is requested by the debtor itself the insolvency will be immediately declared. Otherwise, the court will notify the debtor to file its opposition or the facts on which the petition is based shall be accepted and the insolvency declared.

Who may commence ancillary proceedings and how

Pursuant to EU Regulation No. 1346/2000, the opening of secondary proceedings may be requested by: the liquidator in the main proceedings; or any other person or authority empowered to request the opening of insolvency proceeding under the law of the Member State within the territory of which the opening of a secondary proceedings is requested.

v Control of insolvency proceedings

Insolvency proceedings are controlled by the court from beginning to end. Although the CIRE and its amendments reduced the extent of the courts’ intervention, the courts still have power to control the insolvency proceedings.

The court’s main intervention is the declaration of insolvency, ratification of the insolvency plan and the decisions concerning the recognition of credits and their order of priority.

vi Special regimes

There are several entities excluded from the insolvency regime adopted in the CIRE whenever their specific regime is not compatible, namely: (1) legal persons of public law and state-owned companies; and (2) insurance companies, credit institutions, finance companies, investment undertakings that provide services involving the holding of funds or securities for third parties and collective investment undertakings.

For instance, the insolvency regime of the credit institutions and finance companies is regulated by Decree-Law No. 199/2006 of 25 October, recently reviewed by Decree-Law No. 31-A/2012 of 10 February.

vii Cross-border issues

As to cross-border issues, Portugal applies fully the rules of EU Regulation No. 1346/2000.

As underlined by commentators11 from various Member States, the lack of harmonisation of the differing domestic insolvency laws is an obstacle to preventing forum-shopping. It is clear that whenever the debtor has knowledge of the existence of a more favourable jurisdiction and an opportunity to use it, it is very likely that ‘the centre of a debtor’s main interests’ will be transferred to this jurisdiction to the detriment of creditors’ interests. Therefore, the approval of the recent proposal for a regulation of the European Parliament and of the Council amending Council Regulation No. 1346/2000 of 29 May 2000 on insolvency proceedings might help to prevent forum-shopping. The proposal:

...requires the court to examine its jurisdiction ex officio prior to opening insolvency proceedings and to specify in its decision on which grounds it based its jurisdiction. Furthermore, the proposal grants all foreign creditors a right to challenge the opening decision and ensures that these creditors are informed of the opening decision in order to be able to effectively exercise their rights. These changes aim at ensuring that proceedings are only opened if the Member State concerned actually has jurisdiction. It should therefore reduce the cases of forum shopping through abusive and non-genuine relocation of the COMI.12,13

ii INSOLVENCY METRICS

Portugal was one of the EU members that suffered the most from the world economic crisis that began in 2008. The country was able to complete the bailout funding programme in May 2014. Currently the Portuguese economy is showing moderate signs of recovery but is still far from achieving real financial stability, mainly in light of the euro crisis and the risk of contagion from the financial problems of Greece and its third bailout in July 2015.

In August 2014, and after a loss of €3.6 billion, the Portuguese Central Bank intervened in Banco Espírito Santo, Portugal’s largest listed lender by assets, splitting it into a new, surviving good bank (Novo Banco) and run-off bad bank. The healthy business was transferred to the new bank, as part of a €4.9 billion rescue plan. This, however, had a negative effect on the availability of credit for companies and families.

As a consequence of the global economic crisis and the austerity policies, unemployment in Portugal increased from 7.6 per cent in 2008 to 16.3 per cent in 2013. This path has been inverted recently, and in the second trimester of 2016 the unemployment rate decreased to 11.1 per cent.14

According to the most recent statistics,15 from the first trimester of 2016, the number of insolvency procedures enacted by Portuguese courts decreased in 2013 for the first time since 2007, in a homologous comparison (2014: 5,428; 2015: 4,662; 2016: 4,080; 2007: 992). This means that the impact of the crisis appears to have slowed down and that confidence and investment are slowly returning.

According to the same source, 12.2 per cent of insolvency proceedings had a value of €50,000 or higher and 79.7 per cent of insolvency proceedings had a value of between €1,000 and €49,999. This means that a large majority of this type of proceeding concerns small companies.

In the same period of time, the most affected industry was the wholesale, retail and vehicle repair industry, which made up 28 per cent of all companies that were declared insolvent. This sector of the economy was followed by the construction industry, which made up 15.4 per cent of insolvent companies.

III PLENARY INSOLVENCY PROCEEDINGS

In the scope of the Portuguese jurisdiction it is possible to identify several recent and significant proceedings all of them assuming different substantive and procedural characteristics.16 When we refer to significant proceedings we are not only considering those with a particular economic significance, but also those that have specific characteristics or that have had a noteworthy media exposure.

i Farmácia Central de Lousã SA insolvency

Farmácia Central de Lousã – Sociedade Farmacêutica SA, a company that sells pharmaceutical products, was declared insolvent by the Court of Commerce of Lisbon on 26 June 2012.17 Among the insolvency creditors, which include several banks, was the Portuguese tax authority.

Before the prospect of a possible recovery of the enterprise was analysed, the insolvency creditors approved an insolvency plan, which predicts a set of measures destined to promote the recovery of the company. As for the credit owed to the Portuguese tax authority, the plan foresaw the payment thereof in 36 monthly payments, the first payment being due on the last working day of the month following the approval of the plan. The plan also foresaw a bank guarantee given by the debtor to the Portuguese tax authority or, instead, the payment of the total amount of the credit in one month starting from the approval of the plan. The approval of the plan respected the legally demanded quorum. The Portuguese tax authority, holder of a credit in the amount of €29,338.76, which represented 0.5 per cent of the total debt, voted against the approval of the plan. The Court of Commerce of Lisbon ratified the plan.

The Portuguese tax authority, unsatisfied with the approval of the plan, appealed the judicial approval, requesting the non-authorisation of the plan. The grounds of the appeal were the impossibility, according to Portuguese Law, of approving an insolvency plan that changes the payment terms of a tax credit without the consent of the Portuguese tax authority.

In fact, according to Decree-Law No. 398/98 (the Portuguese General Tax Law) tax credits are unalterable, the consequence being that the reduction, extinction or the concession of a moratorium concerning tax credits may only occur with specific and legally predetermined cases. As a result, an approved insolvency plan may not alter the conditions of a tax credit without the consent of the tax authority. This understanding has been generally accepted given the objectively different nature of tax credits compared to those held by private agents.

The Court of Appeal of Lisbon ruled in favour of the Portuguese tax authority and held that the plan should not have been approved, thus revoking the ratification of the plan.

The consequences of the concept that was reinforced in the above decision are extremely harmful. According to the decision, any insolvency plan that foresees the change of the payment terms of a tax credit, independent of the amount of the credit, has to be approved by the tax authority, otherwise the whole plan may be declared null and void. This represents a strong obstacle to the approval of insolvency plans and, consequently, to the recovery of enterprises that are considered to be viable by the majority of its creditors, thus prejudicing debtors and creditors and jeopardising the primordial goal of an insolvency proceeding, which is, according to the first article of the Portuguese Insolvency and Recovery Code, the pursuance of the creditors’ interest through the approval of an insolvency plan.

The insolvency creditors took the decision on appeal to the Supreme Court of Justice.

The Supreme Court of Justice recognised that the insolvency plan could not alter the payment terms of the tax credit. However, the Court considered that the consequence of such an irregularity is the ineffectiveness of the plan before the tax authority and not the refusal of the plan (i.e., the plan produces all effects, except for the tax credit).

The solution supported by the Supreme Court of Justice is much fairer and balanced than the one put forward by the Court of Appeal of Lisbon, managing on one hand to respect the unavailability of the tax credits and, on the other, to do so without creating a severe obstacle to the viability of insolvency plans that, as previously stated, represent several benefits to all parties involved.

ii Banco Espírito Santo insolvency

Banco Espírito Santo, SA (BES) had been the subject of a resolution by the Bank of Portugal in August 2014, which saw the transfer of almost all assets, liabilities, off-balance sheet and assets under management to a new bank – the Novo Banco, SA.

BES (the bad bank) retained a residual set of assets (loans on GES group entities and branches with complex situations) and liabilities (a series of senior bonds, liabilities to related entities, subordinated bonds and contingent liabilities).

In July 2016 the European Central Bank revoked BES’s authority to carry out the exercise of banking activity. According to the applicable law, this fact implies that the bank is placed into liquidation.

Although the power to revoke the authorisation of credit institutions belongs to the European Central Bank, the settlement system for Portuguese credit institutions continues to be governed by the provisions of Decree-Law No. 199/2006. Therefore, that withdrawal of the authorisation produces the effects of the declaration of insolvency and regulates the liquidation of BES.

Within the sphere of its competence, the Bank of Portugal has applied to the Chamber of Commerce of the First Instance Central Judicial Court of the District of Lisbon for the judicial settlement of BES18 and proposed the appointment of a liquidation commission, which came to be granted following the order of prosecution of the liquidation.

The legal regime that regulates the liquidation of Portuguese credit institutions is applicable to BES, and is governed by the provisions of Decree-Law No. 199/2006 of 25 October and by CIRE.

The time period for BES’s creditors to lodge their claims is currently underway.

iii PFR insolvency

PFR Invest – Sociedade de Gestão Urbana is a company that was established in 2007 and is owned by the Municipality of Paços de Ferreira, which is the only shareholder. The corporate objective of this company is to promote and manage industrial parks in the Paços de Ferreira district. The total debt of the company is €47 million. Among the 89 creditors are two banks: CGD has a credit of €24 million and Novo Banco has a credit of €17 million. It is estimated that the assets of PFR Invest are enough to pay only 30 per cent of its liabilities.

In 2014, PFR Invest filed a petition asking the Court of Amarante to initiate a special revitalisation proceeding for its economic recovery. The court rejected the claim in April 2014 on the understanding that PFR Invest is a corporate public entity and therefore cannot be subject to insolvency proceedings, and as a result any measure provided for in CIRE, such as a revitalisation proceeding, cannot be applied.

However, this decision was appealed and was revoked by the Court of Appeal of Oporto, which held that PFR Invest is not a corporate public entity, and therefore is not excluded from the scope of CIRE. Consequently the Court of Appeal ordered the special revitalisation proceeding to continue.

During the negotiation period, the creditors were not able to approve any revitalisation plan for PFR Invest. Subsequently, the provisional judicial administrator stated that PFR Invest was insolvent. In light of this opinion, the Court of Amarante declared PFR Invest insolvent on 16 February 2015.

The banks appealed the decision arguing, inter alia, that despite the fact that PFR Invest is formally a private company, it is materially a public sector entity, and so should be considered as such for the effects of insolvency proceedings. The appellants argued that these local companies belong in the domain of public administration, are created by public entities and manage public funds, and the Portuguese state, even if indirectly, through the municipalities, is jointly and severally liable for the debts of municipal companies. Thus, if PFR Invest has no way to pay its debts, the municipality of Paços de Ferreira should dissolve it and assume the payment of its debts to its creditors.

In June 2015, the Court of Appeal of Oporto19 ruled in favour of these companies being subject to the common insolvency regime. They may be declared insolvent by the civil courts.

The court ruled that following Law No. 50/2012, some municipal companies are legal persons of private law, and therefore subject to the legal framework that is specific to them, including commercial law and the articles of association of the companies and, secondarily, to the public sector regime, subject to the imperative rules therein. There is no specific rule that prevents municipal companies from being declared insolvent.

This proceeding was followed with great interest by the Portuguese legal community because PFR Invest was the first municipal company to be declared insolvent by a Portuguese court. The decision was confirmed as final in December 2015. This case has opened a very important precedent in the framework of Portuguese insolvency. So far the creditors, and in particular the banks, regarded loans to these municipal companies as safe, as such loans would always be repaid.

If municipal companies opt for filing for insolvency (or special revitalisation proceeding) petitions, creditors may be forced to accept substantial losses. For municipalities, it is an option that is beneficial in that it enables a path of relief for large debts. However, this option can have a serious drawback, which is that bank financing can be limited or refused to companies with higher liabilities, considering the risk that arose from this decision in the PFR Invest case.

IV TRENDS

According to the data available on the Ministry of Justice website, the number of insolvency proceedings in the first trimester of 2016 was slightly lower than the number of insolvency proceedings in the same period in 2015.

However, the recent events related to the crisis at Banco Espírito Santo and Espírito Santo Financial Group might lead to an increase in the number of insolvency proceedings and hybrid procedures. In fact, those events are likely to lead to countless litigation proceedings, such as litigation over directors’ liability and fraudulent transfers and criminal proceedings, currently under investigation by the public prosecutor.

As stated in Section III.iii, supra, the fact that some municipal companies could be subject to the common insolvency regime, and therefore be declared insolvent by the civil courts, may have a huge impact on the framework of Portuguese insolvency.

Footnotes

1 José Carlos Soares Machado is a partner and Vasco Correia da Silva is a managing associate at SRS Advogados – Sociedade Rebelo de Sousa e Associados, RL.

2 The insolvency proceeding cannot be subject to suspension, unless another insolvency petition was previously filed.

3 Generally, the debtor and its directors lose their powers to manage and dispose of the debtor’s assets.

4 For instance, the pending enforcement proceedings filed by the creditors against the debtor or other proceedings affecting the debtor’s assets are suspended, unless these proceedings were filed against others debtors (aside from the debtor declared insolvent), because in this event the proceedings shall continue but only against the other debtors.

5 Usually, with the declaration of insolvency all the credits of the debtor fall due.

6 Commonly, the pending agreements are suspended until the insolvency administrator decides whether to fulfil the agreements or to reject the agreements fulfilment. There are special provisions for several agreements, for instance: sale of goods agreements with a retention of title clause; promise to purchase and sale agreements; sale of goods agreements when the goods were not delivered yet, lease agreements; forward transactions; mandate agreements; long-term service agreements; powers of attorney; and current account agreements.

7 The acts prejudicial to the debtor’s assets carried out in bad faith, within two years before the declaration of insolvency, will be set aside. For this purpose, all acts reducing payment, making it difficult or impossible to pay, or jeopardising or delaying payment to the creditors are prejudicial to the debtor’s assets. There are several acts that are presumed to be prejudicial to the debtor’s assets. Also there are several acts that are presumed to be carried out in bad faith, namely those carried out two years before opening the insolvency proceedings by or with benefit to a person specially related to the debtor. For this purpose, bad faith arises from: (1) the knowledge of the debtor’s insolvency; (2) the knowledge of the damage caused by the act; (3) the knowledge of the debtor’s imminent insolvency; or (4) the knowledge of the commencement of the insolvency proceeding. The agreements settled to allow a company’s recovery, financing the company activity, cannot be set aside.

8 The creditors’ committee is composed of three or five members and two substitutes, being the president of the major creditor, appointed by the court before the first creditors’ general meeting to oversee the insolvency administrator’s activity. The maintenance of the creditors’ committee or of its members depends on the will of the creditors’ meeting.

10 Available at: www.dgpj.mj.pt/sections/siej_pt/destaques4485/sections/siej_pt/destaques4485/estatisticas-trimestrais8132/downloadFile/file/Insolv%C3%AAncias_trimestral_20140731.pdf?nocache=1406814865.06.

11 Georg Friedrich Sclaefer, Forum Shopping under the Regime of the European Insolvency Regulation, 2010.

12 Explanatory memorandum of the proposal for a regulation of the European Parliament and of the Council amending Council Regulation No. 1346/2000 of 29 May 2000 on insolvency proceedings.

13 In April 2015, the Council adopted a favourable position at first reading: ‘The Council believes that its position at first reading represents a balanced package and that, once adopted, the new Regulation will significantly contribute to making cross-border insolvency proceedings more efficient, benefiting debtors and creditors, both corporate and natural persons, throughout the European Union, facilitating the survival of businesses and presenting a second chance for entrepreneurs.’ Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.C_.2015.141.01.0055.01.ENG.

14 Available at: www.ine.pt/xportal/xmain?xpid=INE&xpgid=ine_destaques&DESTAQUESdest_boui=249886065&DESTAQUESmodo=2.

15 Available at: www.dgpj.mj.pt/sections/siej_pt/destaques4485/estatisticas-trimestrais1065/downloadFile/file/20160721_Insolvencias_trimestral_1T_2016.pdf?nocache=1469786124.6.

16 The information concerning the proceedings that are described in this chapter, results from interviews with parties that are directly involved in the proceeding. As such, the information hereby provided does not dismiss a further consultation of the judicial proceedings in court.

17 Case No. 12/12.1TYLSB-I.

18 Case No. 18588/16.2T8LSB.

19 Case No. 169/15.0T8AMT.