Exoneration is the right of a shareholder to exit the company when a legally or contractually defined circumstance arises that is unfavourable to the shareholder, by placing the equity interest at the disposal of another shareholder, a third party or the company, or for redemption.
Pursuant to Article 240 of the Portuguese Companies Code (CSC), a shareholder may exercise the right of exoneration when:
- The company resolves, against the shareholder’s express vote, on any of the following matters:
- A capital increase to be subscribed, wholly or partially, by third parties.
- A change to the corporate object.
- An extension of the company’s duration.
- The transfer of the company’s registered office abroad.
- The resumption of activity of a company that had previously been dissolved.
- There is just cause for the shareholder’s exclusion and the company neither resolves on such exclusion nor initiates judicial exclusion proceedings.
Exoneration may only occur if all the shareholder’s equity interests are fully paid up.
The shareholder’s disengagement may also occur indirectly, through the administrative dissolution of the company initiated ex officio, in accordance with Article 143 of the CSC.
Under this regime, the competent registration authority must initiate the administrative dissolution procedure of its own motion, where it has not been initiated by the interested parties, in any of the following circumstances:
- For two consecutive years, the company has failed to deposit its annual accounts, and the tax authorities have notified the registration authority of the failure to submit the corporate income tax return for the same period.
- The tax authorities have notified the registration authority of the absence of effective business activity, as determined under tax legislation.
- The tax authorities have notified the registration authority of the ex officio declaration of cessation of the company’s activity, in accordance with the applicable tax legislation.
In such cases, although this does not constitute voluntary exoneration in the classical sense of Article 240 of the CSC, administrative dissolution leads, in practice, to the termination of the corporate relationship and the disengagement of the shareholders, operating as a legal exit mechanism where the company is in a situation of structural non-compliance.
Procedure and deadlines
A shareholder wishing to exercise the right of exoneration must, within 90 days of becoming aware of the event giving rise to that right, notify the company in writing of their intention to withdraw.
Following such notification, the company has 30 days to:
- Redeem the equity interest.
- Acquire the equity interest; or
- Arrange for its acquisition by another shareholder or by a third party.
In the absence of any of these solutions, the shareholder may request the administrative dissolution of the company.
Consideration payable to the exonerated shareholder
The consideration payable to the exonerated shareholder is calculated in accordance with Article 105(2) of the CSC and, in cases of statutory exoneration, may not be lower than the liquidation value of the equity interest.
The payment of such consideration is subject to the regime set out in Article 235/1 (b) of the CSC.
Where the consideration cannot be paid, the shareholder is entitled, if they wish, to request the administrative dissolution of the company.
The same right applies where the acquirer of equity interest fails to make timely payment, without prejudice to the company’s right to substitute the acquirer.
Belzuz Abogados, S.L.P. – Portuguese Branch is an international law firm, with headquarters in Madrid and offices in Lisbon and Porto, with solid experience in advising national and international clients on corporate law matters, in shareholder exoneration and exit processes, corporate reorganizations, restructuring of shareholding structures and the resolution of corporate disputes.