Corporate Transformation

The concept of corporate transformation, understood as the modification of the corporate type, allows the legal structure of a company to be adapted to the specific needs of its activity.

As a rule, this mechanism does not imply the dissolution of the company, which continues to exist, albeit under a new corporate type.

However, there are legal obstacles that may prevent the transformation of a company:

• If the share capital has not been fully paid up or if the contributions agreed in the articles of association have not been fully performed;

• If the company’s assets are lower than the sum of the share capital and the legal reserve;

• If shareholders holding special rights oppose the transformation and such rights cannot be maintained after the transformation;

• If, in the case where the company to be transformed is a public limited company, it has issued convertible bonds that have not yet been fully redeemed or converted.

In general terms, and provided that no legal impediments exist, the company’s management must prepare a report justifying the transformation, setting out the reasons for the transaction, for consideration by the shareholders at a general meeting. This report must be accompanied by the company’s balance sheet — which may be the balance sheet of the last financial year, provided it was closed within the six months preceding the resolution — as well as by the draft articles of association by which the company will thereafter be governed.

Furthermore, pursuant to Article 132(3) of the Portuguese Companies Code (Código das Sociedades Comerciais – CSC), by reference to Articles 99 and 101 of the same statute, where the company has a supervisory body, the management body must submit the draft transformation and its annexes to that body so that it may issue an opinion.

In addition to the above requirement (or in its place if the company to be transformed does not have a supervisory body), the management body must arrange for the draft to be examined by a Statutory Auditor (ROC) so that the latter may prepare a report on the transaction.

All of these documents must then be submitted for consideration by the shareholders at a general meeting, where they must be approved. It should be noted that the resolution approving the transformation must be adopted by a qualified majority, and the corresponding commercial registration must be carried out by the company’s management, issuing the legally required declarations.

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