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Offshore Company Formation Madeira: Professional offshore incorporations and offshore banking services
Offshore Company Formation Madeira
The most common types of corporate structure under Portuguese law are the Private Limited Liability Company ("Sociedade por Quotas") and the Stock Corporation ("Sociedade Anonima"). Companies may also be limited by guarantee or unlimited. General partnerships ("Sociedade em Nom Colectivo"), and limited partnerships ("Sociedade em Comandita") are possible, and sole trader status is also permitted.
Madeira companies are governed by the Portuguese Companies Code as set out in Decree Law No 262/86 and subsequent amendments. The laws covering disclosure of confidential information are set out in Decree Law No 298/92. The Tax Reform Act of December 2000 included some more permissive rules governing the disclosure of information. Decree law No 212/94 regulates Stock Companies and the creation of sole shareholder Private Limited Liability Companies.
Decree Law No 21/87 regulates the activities of service and trading companies whilst Decree Law No 225/95 governs the use of foreign names. Decree Law No 495/88 covers Holding companies.
Some of the concepts governing Portuguese companies are alien to persons acquainted with common law jurisdictions. Shareholders are known as "quota holders", capital is represented by "registered quotas" rather than shares and part ownership of a company is evidenced not by the issue of share certificates but by registration of the quota on the registration certificate. Changes in share capital and the transfer of shares must be evidenced by the execution of a notarial deed prior to registration in the Companies Registry.
Incorporation procedures are cumbersome by the standards of common law jurisdictions. Companies cannot be incorporated without the prior authorization of the Madeira Regional Government. The certificate of incorporation must be executed by way of notarial deed and in front of a notary public. After execution of the notarial deed of incorporation the company must register with the local tax department. Corporate accounts must be audited and filed with the tax authorities.
Re-domiciliation: Portuguese law allows a Portuguese company to transfer its seat to another jurisdiction, provided the other jurisdiction has suitable legislation and a resolution has been passed to this end by at least 75% of the shareholders. Likewise foreign companies may re-domicile to Portugal if the proper law of the foreign company so allows, and provided a resolution of at least 75% of the shareholders has been passed.
Company Secretaries do not exist under Portuguese law. Madeira companies must have a registered office where all legal documents, minute books, official accounting books and records must be kept. Information available at the Corporate Public Registry consists of details of the registered office, directors, shareholders, mortgages, objects clause and the share capital. Meetings must be held at the registered office.
No stamp duty is payable on issued share capital. The minimum annual tax or registration fee payable by a Madeiran company is EUR1,800.
A company can use a foreign name provided it refers to its main activity. Although non-resident directors are allowed, in practice a number of disadvantages attach to their use. Foreign directors must be registered with the local tax and social security offices and must act through a resident agent in order to comply with the laws and fiscal requirements of Portuguese companies. Corporate directorships are not permitted.
The Private Limited Liability Company (Sociedad por quotas de responsibilidade limitida - Lta) (PLLC) has a minimum of one shareholder ('quota-holder') and minimum capital ('registered quotas') of EUR5,000. Prior to the execution of the notarial deed of incorporation 50% of the share capital of the company or another amount designated by the authorities (previously 400,000 escudos), whichever is the lesser, must be deposited with a bank. This sum can be withdrawn for corporate purposes after the execution of the deed.
PLLCs are not permitted to have bearer shares but nominees are permitted (even though Madeira is a civil law jurisdiction which does not recognize the concept of a bare trust). The minimum number of directors is one.
The Stock Corporation (Sociedade anonima - SA) has a minimum of 5 shareholders ('quota-holders') and minimum share capital ('registered quotas') of EUR50,000. Prior to the execution of the notarial deed of incorporation 33% of the share capital of a Stock Corporation or another amount designated by the authorities (previously1.5m escudos), whichever is the lesser, must be deposited with a bank. This sum can be withdrawn for corporate purposes after the execution of the deed.
By way of exception, the Stock Corporation can have one shareholder if that shareholder holds as a nominee, if the company includes the name "Sociedade Unipersonal" in its name and where the company is not the sole shareholder in a subsidiary.
Stock Corporations are permitted bearer shares so long as their share capital is fully paid up. The transfer of bearer shares can be by way of registration, by way of deposit with a financial institution or by physical delivery. When bearer shares are transferred by registration the transfer of ownership only occurs upon the completion of the re-registration process in the company books. When they are transferred by deposit with a financial institution the transfer of ownership occurs when the re-registration process is completed in the institution's books. When bearer shares are transferred by physical delivery the transfer of ownership occurs on acquisition of physical ownership.
If the share capital is less than EUR200,000 only one director is permitted; if the share capital is more than EUR200,000 any number of directors can be appointed. Nominees are permitted. Shares of no par value are not permitted.
In the case of Stock Corporations, accounts are a matter of public record. The information to be filed with the tax authorities must include a statement listing the registered shareholders.
Unlike common law jurisdictions, a Madeira Stock Corporation normally includes a statutory audit committee in its composition. A statutory audit committee (conselho fiscal) is an internal auditing board which is composed of one person where the share capital of the company is less than 20m escudos and 3-5 persons if the share capital of the company is above 20m escudos. At least one member of the committee has to have a relevant accountancy qualification. Alternatively, a Stock Corporation can have a three-tiered supervisory structure, with a directors' board (directao), a shareholders' board (conselho geral), and a certified auditor (revisor oficial de contas).
A Holding Company (sociedada gestora de participacoes sociais) is a corporate entity which for a period of at least 12 months holds at least 10% of the voting share capital of the company in which it has a participating shareholding. Holding companies are governed by Decree law 495/88 and Decree Law No 21/87.
Holding companies can be either Private Limited Liability Companies or Stock Corporations and must have their accounts audited annually. The initials SGPS must be included in the Holding Company's name.
A Holding Company is not permitted by law to buy its own shares, purchase debentures in companies in which it does not hold a participating shareholding (subject to certain exceptions), make loans other than to companies in which it holds part of the share capital or engage in any commercial activities other than holding shares in other companies.
Mixed Holding Companies: As its name suggests, a Mixed Holding Company can both hold shares in other companies and trade in its own right. It cannot engage in the type of trading activities which are carried on by banks and financial institutions and which require licensing and authorization from the Bank of Portugal.
A Mixed Holding Company must combine its activities. Its trading activity cannot be exclusively limited to the holding of shares; nor can it be a pure trading company which does not hold shareholdings in any other company. Mixed Holding companies can be either Private Limited Liability Companies or Stock Corporations. License authorization comes from the regional authorities.
Most European Union member countries do not accept that the Parent Subsidiary Directive No 90/435 on withholding tax on dividends applies to Mixed Holding Companies.
NB: The Tax Reform Act of December 2000 somewhat reduced the tax advantages of both Pure and Mixed Holding Companies, particularly for Portuguese residents.
Madeira is a civil law jurisdiction, subject in general to Portguese law, and thus the trust does not exist as such. Portugal has not ratified the Hague Convention on the law applicable to trusts and their recognition.
Nonetheless when the Free Trade Zone Legislation of Madeira was enacted, provision was made for the creation of offshore trusts. Decree Law No 352/88 & Decree Law No 149/94 deal with the registration and management of offshore trusts whereas Decree Law 264/90 concerns authorization by Government of trust corporations and branches. The property of trusts must be outside Portugal, and their income must be derived from outside the country.
An offshore trust lasting for more than one year needs to register in the Free Trade Zone registry, although the identity of the beneficiaries need not be disclosed. Neither settlor nor beneficiaries may be residents of Portugal. Only Stock Corporations (see above) and branches of foreign trust corporations licensed to operate under the Free Trade Zone Legislation of Madeira can act as trustees.
Trusts are not subject to the vestigial exchange controls operated by the Bank of Portugal. Trusts are not subject to tax.
Trusts are free to emigrate without authorisation by substituting their proper law with that of another jurisdiction.