The Portuguese Companies Code (“CSC”) expressly provides, under article 257, for the possibility of removing directors at any time by resolution of the shareholders. However, where the removal is based on just cause, the legislator establishes an enhanced protection regime for the company and minority shareholders.
Pursuant to article 257(6) of the CSC, just cause for removal includes, among other situations: (i) a serious breach of the director’s duties; and (ii) incapacity to properly perform his or her functions.
Conduct capable of justifying removal for just cause includes, among others: (i) abusive use of company assets or resources; (ii) concealment of accounting or financial information; (iii) harmful or grossly negligent management; (iv) conflicts of interest; (v) repeated breaches of information duties towards shareholders; and (vi) unlawful acts capable of causing significant damage to the company.
As a general rule, removal may be approved by the shareholders at a General Meeting. Nevertheless, the articles of association may require qualified majorities or other special requirements for the approval of such resolution. However, where just cause exists, removal may always be approved by simple majority.
Particularly relevant is the limitation applicable to companies composed of only two shareholders. In such cases, article 257(5) of the CSC establishes that the removal of a director for just cause may only be decided by a court, through proceedings brought by the other shareholder.
In addition to the legal framework, recent case law from the Portuguese Supreme Court of Justice, dated 27 January 2026 (Case No. 1197/23.7T8AMT.P1.S1), clarified important aspects relating to the right to seek judicial removal of a director for just cause.
The Supreme Court clarified that: (i) the limitation period for filing judicial proceedings seeking removal is five years; and (ii) such period begins when the harmful facts become known or are disclosed to the person entitled to seek the removal, and not only after a final criminal judgment relating to the same facts has been issued.
This interpretation is particularly relevant in practice, as it prevents shareholders from waiting indefinitely for the conclusion of criminal proceedings before initiating judicial removal proceedings against the director.
Furthermore, it should be noted that a director removed without just cause may be entitled to compensation for losses suffered, unless otherwise provided in the articles of association, pursuant to article 257(7) of the CSC.
In conclusion, the removal of directors for just cause constitutes a fundamental mechanism for protecting the company, its shareholders and creditors, enabling action against abusive, irregular or harmful management practices. Nevertheless, the use of this mechanism requires a rigorous legal analysis of the facts, the corporate structure and the available evidence, as well as prompt action, taking into account the legally applicable limitation periods.
Belzuz Abogados, S.L.P. is an International law firm headquartered in Madrid, with offices in Lisbon and Porto, providing legal advice to companies, shareholders and investors on matters relating to directors’ liability, judicial removal of directors, shareholder disputes and corporate protection mechanisms.