Successful implementation of a large investment project requires careful planning, one of the key stages of which is the assessment and development of internal policies to mitigate potential risks. The analysis starts at the initial stages of the project, during the preparation of the investment strategy, and continues throughout the project cycle. Economic analysis should be coordinated with financial and environmental analysis, which is an integral part of investment appraisal.
Competent legal support of an investment project at the initial stage of its launch will allow to protect investors' interests to the maximum extent possible and create favourable conditions for project development by developing a policy to minimise potential risks.
Support of investment activities in Portugal
Entrepreneurs find it difficult to keep up with the changing legal environment, which is why legal advice on investments abroad plays a key role in the process of developing the concept of a start-up project. A lawyer should be seen as a partner who is able to properly develop a strategy for the development of entrepreneurial activity, closely following the current changes in the applicable legislation.
When entrepreneurs decide to turn an innovative idea into a business, they have to deal with a number of bureaucratic procedures. This is why they need to rely on a team of subject matter experts who can determine the best solution for the business needs. Timely legal advice can avoid financial, economic and fiscal problems for the company.
Regulation of investment endeavors in Portugal
Over the span of over a decade, foreign capital infusion within Portugal has stood as a paramount focus within governmental doctrine. A multitude of juridical and strategical propositions have been set forth to enhance the nation's worldwide competitiveness. In accordance with the World Bank's assessment, Portugal holds the 39th position globally in terms of business conduct ease and ranks 12th among European Union member states (preceding the Netherlands, Belgium, and Italy).
2022 marked a period of statutory alterations. Specifically, the Securities Act underwent a comprehensive overhaul with the aim of promoting the advancement of the Portuguese securities exchange and incentivizing enterprises to leverage this marketplace for their commercial undertakings.
One of the extant governmental notions to allure overseas straightforward investment to Portugal is to metamorphose the realm into an "experimental ground" for technological enterprises. Another avenue to entice investment encompasses the extraneous advocacy of particular of Portugal's pivotal holdings (e.g., elemental reserves), coinciding with the establishment of global alliances to cultivate these holdings. Furthermore, in accordance with the goals of the European Union's European Verdant Arrangement, another fundamental domestic maneuver to captivate investment has been to concentrate on the sustainable energy sector.
Why invest in Portugal?
Portugal boasts one of the most kinetic entrepreneurial frameworks within Europe, an outcome of investments channeled into human capital, infrastructure, and technology over the past decade. These endeavors offer substantial prospects for those contemplating the inception or allocation of resources into fresh commercial ventures.
Lusitania is adeptly situated to ingress substantial European and global marketplaces, boasting a productive workforce replete with advanced learning in commerce-aligned domains. It stands as a steadfast realm, touting one of the most meager delinquency percentages across Europe. Lusitania assumes a pioneering stance in techno-services and ranks amidst the most competitive realms within Europe. As per the Estratégia Nacional para o Empreendorismo (National Entrepreneurship Strategy), instigating a nascent enterprise in Lusitania confers accessibility to financial backing and an assemblage of inducements to bolster its progression.
Furthermore, the Lusitanian Domicile Grant Initiative is a stratagem affording financiers entree to a domicile permit via investments commencing at 280 thousand euros. Financiers solely necessitate to sojourn in Portugal for an mean of seven days annually. The initiative not only sanctions financiers and their kinsfolk to voyage, labor, inhabit, and study without restraint in all Schengen territories but is also the solitary initiative in Europe that endows them to attain European nationality in merely five years devoid of the compulsion to relocate to the nation.
Numerous investment avenues exist in Portugal for acquiring the Golden Visa residency permit. However, a primary focal point for many investors revolves around Portuguese real estate. Investors are required to allocate a minimum of €280k into real estate or, alternatively, Golden Visa aspirants can enter the program by investing in a Portuguese investment fund with a minimum valuation of €500k. As of 1st January 2022, adjustments were made to the program, introducing geographic constraints on eligible regions for real estate investments. Residential properties are now exclusively accessible to investors in Portugal's interior and its islands. Consequently, investments in coveted cities like Lisbon or Porto are only feasible if directed towards commercial or non-residential properties such as offices.
If you want to start your own business in Portugal as a foreigner, a limited liability company or LDA is the most popular form of business and the choice of most foreign investors in this country. An LDA in Portugal with a simpler management structure is particularly popular with those taking their first steps in Portugal or looking for a small or short-term investment.
There exists no obligatory minimum capital stipulation, and the registration process is conducted at the Registrar of Companies. Limited Liability Companies (LDAs) can be overseen by a solitary manager or multiple managers. Decisions regarding management matters are resolved through general assemblies. If your intention is to invest in more substantial endeavors, opting for a Limited Company or a Public Limited Company (PLC) might be a more advantageous choice. You have the opportunity to avail yourself of our team's extensive assistance and seek guidance in the incorporation of a business entity in Portugal.
What does "legal support of investment activities" mean?
Although the Portuguese market is becoming increasingly open for investment, local laws and business practices can pose challenges for investors. We provide accompanying services to businesses and individuals investing in Portugal. Investment support for new companies and start-ups in Portugal includes (the list of services is incomplete):
- advising on the most optimal corporate form of companies, taking into account the needs and objectives of the business;
- advising on company organisation and management, including preparation and review of constituent documents, articles of association and other organisational documents;
- Advice on legal aspects of mergers, acquisitions and other corporate transactions;
- legal due diligence of the investee to determine its transparency and reliability;
- accompanying licence and permit services;
- preparation of project documentation in compliance with the norms and requirements of regional and local town-planning and land legislation;
- support in registering title to assets;
- consulting on compliance with laws and regulations, including data protection;
- representing the company in legal disputes, including contractual disputes and intellectual property disputes.
This succinctly outlines the services encompassed by legal backing for investment initiatives "from the ground up." Nevertheless, situations frequently arise wherein a corporation seeks to broaden its sphere of influence and thus elects to amalgamate with another entity, perhaps to streamline revenue generation. In such instances, the investment undertaking will involve obtaining command over companies already engaged in the marketplace or procuring operational property complexes. In essence, a merger and acquisition deal will transpire within the investment venture, leading to the restructuring of the corporations and the amalgamation of their resources.
If you have an intention to invest in an existing Portuguese company, our experts can analyse the following issues:
- ownership structure of the company;
- corporate governance structure;
- availability of relevant permits, licences;
- legal disputes in which the company has been involved;
- ownership of immovable property.
In addition, legal support of existing investment projects includes:
- Due diligence of the legal status of the acquired assets.
- Analysing commercial risks after the acquisition of an asset and developing internal policies to mitigate such risks.
- Advising on models of contractual relations with partners/counterparties (co-operative activities, investments, franchising agreement, etc.).
Due diligence(DD)
Due diligence of a project is a comprehensive, multi-purpose legal investigation of an investee aimed at identifying risks for the investor. Two key questions that lawyers must answer:
- Are investments safe?
- Do legal aspects affect the price of an investment?
In other words, the due diligence procedure will help assess the legal cleanliness of the object, potential risks, and the likelihood of claims arising from the transaction. In addition, due diligence is conducted to minimise all possible conflicts of interest with the counterparty or to minimise the risk of invalidation of the investment agreement. Legal due diligence may require a lawyer to study all areas of law in detail: from checking corporate issues to analysing the correctness of intellectual property rights registration.
In practice, considerable attention is paid to the analysis of the management team and organisational structure. Compliance occupies an important place and has become a key factor in operational and reputational risk management. But due to the rapidly changing market environment, market analysis is also becoming more important in DD procedures. Another aspect of DD when launching an investment project in Portugal is that this analysis identifies problems that determine a high level of risk in investing in the project. The most common problems include unreliable information in the business plan, non-compliance of the founding documentation, licences with the requirements of the current regulatory framework.
Financing of start-ups in Portugal
Regarding investment projects, various forms of financing are available in Portugal, among them we can highlight:
- Self-financing.
- Crowdfunding is a system of collective financing in which investments in a project are raised without the intervention of financial institutions.
- A bank loan is the most traditional type of financing. If you choose this method, it is important to review offers from several institutions to ensure the best terms for your business.
- A microcredit is a smaller loan that requires no guarantees and is designed for entrepreneurs and micro-enterprises with a viable initiative.
- Business angels invest in businesses that are still in their infancy. In exchange for funding the business, they receive a minority stake in the company.
- Venture capitalists specialise in investing in emerging companies, which means acquiring a portion of the capital.
- Government support is aimed at stimulating growth and job creation, as well as financing projects that contribute to achieving the goals agreed with the European Union for the next decade.
Investment agreement: peculiarities of conclusion
The first steps in launching an investment activity in Portugal are the development of a detailed strategy governing the relationship between the parties and an appropriate business model. The legal regulation of the relationship within the investment project must be properly secured. The form of such security is the investment agreement.
Conclusion of investment agreements requires qualified support, which is why lawyers should be involved in the process of drafting such an agreement. Conclusion of an agreement minimises property risks and allows legal protection of investors' rights.
Specialists of our firm can draft an investment agreement within the framework of support of investment activities in Portugal. We can also offer such services:
- Verification of counterparties for reliability.
- Legal due diligence of contracts.
- Assessment of potential risks associated with the conclusion of an investment contract and development of effective measures to mitigate them.
Investment activity in Portugal: prioritised sectors
Portugal has many economic opportunities for investors interested in realising investment projects or expanding their business and has become an alternative option as a target market for investors from different sectors.
Portugal focuses on the following key sectors that have a significant impact on the country's economy:
- Transport and Logistics. The Portuguese logistics and warehousing market has shown positive growth over the past few years due to increased public investment in logistics infrastructure, e-commerce and increased exports.
- ICT (Information and Communication Technologies). ICT constitutes an exceedingly pioneering and kinetic industry that already represents almost 10% of Portugal's GDP, reaching almost USD 20 billion in total turnover, according to the latest data. Over the last decade, the profile of ICT companies has shifted from traditional ICT providers to specialised and innovative start-ups. The development of Lisbon's technological environment has contributed to the fact that the city is now one of the fastest growing technology centres in Europe, establishing itself as Europe's Silicon Valley.
- Manufacturing. Portugal has a diverse manufacturing industry. New investors and business in Portugal should focus on technology-based products/services such as computer software and pharmaceutical products. Other current areas for investment in Portugal include information technology, biotechnology and aerospace.
Other sectors attracting significant foreign investment in Portugal are:
- Automotive sector.
- The chemical industry, which utilises a lot of expertise, especially in sectors from mining to petrochemical processing.
- Biological industries.
Portugal harbors a Free Trade Zone (FTZ)/Free Port within the self-governing vicinity of Madeira, where corporations can reap the advantages of incentives linked to imports and exports, alongside financial and fiscal incentives. Madeira proffers an extensive array of adept support services proffered by indigenous enterprises, along with state-of-the-art and advanced infrastructure, a proficient and youthful labor pool in a congenial commercial milieu marked by elevated security standards and a superlative quality of life.
Madeira entices global investors hailing from various corners of the globe. This stems not solely from its meager fiscal encumbrance but also from its competitive operational expenditures in contrast to certain other European locales. Prior to embarking on investment endeavors in Madeira, it proves advantageous to acknowledge that the MIBC scheme proffers the advantage of a diminished income tax rate (5%) for enterprises engaged in cross-border service pursuits. The gains ought to originate from dealings conducted exclusively with non-resident entities or with other enterprises engaged within MIBC. Nevertheless, no constraints are imposed on the evolution of business pursuits with Portuguese entities, which shall be susceptible to the prevailing corporate levy rate in Madeira (14.7%).
An array of service-centric enterprises can solicit a commercial charter within Madeira's International Business Center (IBC), enjoying comprehensive eligibility for the prevailing preferential fiscal system. These companies can engage in pursuits such as commerce, advisory services, intellectual property supervision, property dealings, electronic commerce, and telecommunications. Foreign financiers intending to inaugurate a firm in Madeira may elect to partake in manufacturing or warehousing operations, which can be systematically arranged within the Industrial Free Trade Zone (IFTZ), an industrial precinct integrated into the statutory structure of the Madeira IBC, accessible to both Portuguese and global investors.
Output
The business environment never remains static. Companies and entrepreneurs investing in new projects may encounter difficulties with far-reaching consequences for their business. Therefore, any investment activity abroad requires competent support, as only a specialised specialist understands the legal formalities of doing business and is aware of current legislative changes.
Foreign investment project support services provided by our firm's experts include, among others:
- Consulting on choosing the most appropriate legal structure for a business.
- Legal audit of the project.
- Assistance in preparing documents of title.
- Assistance in drafting international agreements.
- Assistance in drawing up authorisation documentation, e.g. registration of intellectual property rights.
By the way, in order to obtain various types of permits, it is necessary to collect a package of legally defined documents. If you are inexperienced, applying for permits on your own may result in significant costs and expenses.
