The Porto Court of Appeal has ruled that Article 192(2) of the Insolvency and Corporate Rescue Code does not preclude the reduction or waiver of debts, as these two legal measures have an effect on liabilities and are expressly provided for in Article 196(1)(a) of the code.
The financial crisis has led to greatly increased use of insolvency proceedings in Portugal. However, such proceedings are not only slow and inefficient, but also open to misuse, as many recent petitions for declarations of corporate insolvency have failed to fulfil specific legal requirements.
Acquiring distressed businesses has benefits and risks. Portugal's legislative framework is likely to be further tested in the present economic climate and a would-be acquirer must ensure that it understands the full effects and implications of the Portuguese insolvency regime.
The Constitutional Court has struck down an interpretation of Article 30(2) of the Insolvency and Corporate Rescue Code that disproportionately disadvantaged creditors. The court of first instance had held that if a debtor fails to submit a list of its five main creditors with its statement of opposition to an initiation of insolvency proceedings, it may not do so retrospectively and its opposition will be void.
The Constitutional Court has ruled on the constitutionality of two provisions of the Insolvency and Corporate Rescue Code. The court was asked to consider whether the managers of a bankrupt company may be prohibited from carrying out actions in relation to the company's assets or may be banned from engaging in business or holding a position within the governing body of a corporate entity.
Creditors' privileges have always been a cumbersome issue in Portuguese civil and banking law. A Constitutional Court decision that ranked mortgage creditors ahead of employees with a claim for unpaid wages is welcome news for banks, but the court's subsequent comments on Labour Code provisions on employers' privilege creates an additional concern for mortgage lenders.
Including: Need for New Regime; Avoiding Bankruptcy; Recovery Measures; Debt Composition; Company Reconstruction; Financial Restructuring; Controlled Management