Madeira was discovered by Portuguese explorers in the 15th century and was subsequently colonized by farmers from the Algarve region of southern Portugal. In the Portuguese constitution of 1821 Madeira was recognized as part of metropolitan Portugal.

The population is about 245,800 making Madeira one of the European Union's most populated regions with an estimated average population density of 195 persons per square mile. The Islands are largely Roman Catholic and as with most traditional societies the church exercises a strong influence over organs of government and the cultural life which largely revolves around religious and harvesting festivals.

The official language is Portuguese, but English is quite widely spoken, particularly in business. Madeirans tended to emigrate in search of work until recently, when the trend has somewhat reversed. The global Madeiran diaspora is supposed to be near 1m. The Madeiran life-view was traditionally somewhat melancholy, although tourism and EU money infusions have tended to flatten out this idiosyncracy, like so many others.

At the time of writing, the following countries have double-tax treaties with Portugal (an * indicates that the treaty is under negotiation or awaiting ratification):

Madeira Private Limited Liability Company

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 This sum can be withdrawn for corporate purposes after the execution of the deed.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.

Madeira Stock Corporation

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 This sum can be withdrawn for corporate purposes after the execution of the deed.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).

Madeira Holding Company

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 Trusts

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.