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Commercial Law

Quota Company or LDA

Published on: May 6, 2022
Reading time: 4 min
Quota Company or LDA

In Portugal there are many ways of incorporating a company, but today we will focus on the quotas company, since it is one of the preferred ways of incorporating a legal entity in Portugal. It is considered that joint stock companies and joint stock companies constitute more than 98% of the existing commercial companies in Portugal, but the joint stock company is considered to be the most widely used type of company in Portugal. #1

The corporate name of this type of company must include the word “Limitada” or the abbreviation LDA, a name given to it because the partners of the quota companies have limited liability as a general rule. Normally, a quota company must have a minimum of two partners, but there is the possibility of the company remaining with only one partner for a period not exceeding 1 year, if it decides to have a sole proprietorship by quotas, the special regime of these would apply, which we will mention later on.

Capital of quota companies

Currently, the minimum share capital of a quota company would be 2 euros in the case of two partners, since the minimum is 1 euro per person (therefore, 1 euro would be enough if it is a sole proprietorship). This capital stock is divided into shares (quotas) which may not be represented by certificates and whose par value may be different from one another, but never less than one hundred euros each quota.

Unless otherwise provided in the bylaws, the rights and obligations inherent to each quota are determined according to the proportion between the nominal value of such quota and the amount of the capital stock. The right to one vote at the general meeting of members shall correspond to each euro cent of nominal value of the quotas.

Notwithstanding the foregoing, the Company’s bylaws may stipulate that there shall be two votes for each euro cent of par value of certain quotas, provided that such quotas do not represent more than 20% of the capital stock. Without prejudice to other matters that may be attributed to the general meeting of shareholders, either by law or by the bylaws, this corporate body will be competent to decide on, among others, the following matters: consent to the assignment and division of quotas; approval of the management report and the annual accounts, as well as the allocation of results; amendments to the bylaws; merger, spin-off, transformation or dissolution, as well as the reactivation of the company in the event of dissolution).

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Partner participation

The partners are not liable before the corporate creditors, but before the partnership each partner is liable for the realization of his own entry and subsidiarily, each partner is also jointly and severally liable with the others for the entries of the other partners. However, it is permitted to agree in the company’s bylaws that one or more partners, in addition to being liable to the company in the aforementioned terms, are also liable to the company’s creditors up to a certain amount.

This liability, according to what is stipulated, may be either joint and several with that of the company, or subsidiary in relation to the same. Membership entries must be made up to the time of contract conclusion. However, provided that the law permits it, entries may be made up to the end of the first fiscal year, as of the date of final registration of the partnership agreement, and the partners may, in cases and under terms permitted by law, contractually stipulate the approval of cash entries. The amount of the capital stock is freely determined in the partnership agreement and corresponds to the sum of the shares subscribed by the partners. The capital stock is represented by “quotas”, which may or may not have the same value (but never less than €1 each).

The transfer of quotas must be executed through a written contract duly registered with the competent Mercantile Registry. The bylaws may establish limits or conditions for the transfer of quotas or preemptive rights in favor of other partners or the company itself. The assignment of quotas has no effect on the company as long as it is not consented to by the latter, unless it is an assignment between spouses, between ascendants and descendants or between partners.

Some legal aspects of Sociedad por Quotas

The General Assembly must approve the annual accounts within 3 months of the end of the fiscal year. Publication of the accounts is not mandatory, but the annual accounts must be deposited online through IES. Unless otherwise stipulated in the bylaws or approved by a majority of 75% of the respective capital stock, a silent partnership must distribute at least 50% of the distributable annual income. The distribution of profits by managers is permitted, but subject to certain economic and legal requirements and if the company’s bylaws also authorize it.

One of the most important legal requirements is the constitution of a legal reserve equal to 5% of the results of the fiscal year until this reserve reaches an amount corresponding to 20% of the share capital (in any case, the minimum amount applicable to quota companies cannot be less than €2,500). The company’s bylaws may establish a higher minimum amount for the legal reserve.

However, it is also possible to incorporate a single shareholder, whether individual or collective, who will own the entire share capital. These companies are called Sole Proprietorships and must include this designation in their corporate name.

In conclusion, we can affirm that this is a corporate type relatively similar to the SAS and LTDA in Colombia, giving a wide margin of freedom to its associates, being its use quite attractive. If you wish to create a Quota Corporation and need legal advice, here you will find expert lawyers in Incorporation of Companies, ready to help you with your case.

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