COVID-19: Implemented regulatory solutions for the protection of the Portuguese economy

I. Scope of application:

A. The Moratorium Regime applies to all companies that:

• Have headquarters and perform their economic activity in Portugal;

• Are classified as micro, small and medium-sized enterprises, according to Recommendation 2003/361/EC of the European Commission, dated May 6, 2003;

• Have not, as at March 18, 2020, been in default or in breach of any cash repayments for more than 90 days with any financial institutions or, if they have, they do not meet the materiality threshold established in the Bank of Portugal Notice nº 2/2019 and Regulation (EU) 2018/1845 of the European Central Bank, dated November 21, 2018;

• Are not in a position of bankruptcy, or the suspension or cessation of payments or, as at March 18, 2020, subject to enforcement by any of the financial institutions;

• Are in a cleared position in respect of the Tax, Customs and Social Security Authorities, with no debts incurred in March 2020 and posted up to April 30, 2020 being included for these purposes.

The measures established under the Moratorium Regime can also benefit those other companies which, regardless of their size, as at the date of the publication of the regime, meet the conditions described in points a), c), d) and e) above, excluding those from the finance sector.

In the terms of the Moratorium Regime, it is considered that the finance sector includes (i) banks, (ii) other credit entities, (iii) financial companies, (iv) payment institutions, (v) electronic money institutions, (vi) financial intermediaries, (vii) investment companies, (viii) collective investment undertakings, (ix) pension funds, (x) securitization funds, (xi) corresponding management companies, (xii) securitization companies, (xiii) insurance and reassurance companies and (xiv) public bodies administering public debt on a national level, with a status comparable to that of credit institutions in terms of the law.

B. The Moratorium Regime applies to credit transactions granted by credit institutions, credit finance companies, investment companies, leasing companies, factoring companies and mutual guarantee societies, or by branches of credit entities and financial institutions operating in Portugal.

C. The Moratorium Regime does not apply to the following transactions:

• Credit or financing for the purchase of marketable securities or the acquisition of stakes in other financial instruments, whether or not secured by such instruments;

• Credit granted to the beneficiaries of any regimes, subsidies or benefits (in particular tax-related) for establishing headquarters in Portugal, including for investment activities; 

• Credit granted to companies for individual use through credit cards of the members of the administrative or inspection bodies, employees or any other collaborators.

II. Measures:

A. The Government has agreed to approve applicable moratoria with the following effects:

• Prohibition on revoking in full or in part any lines of credit taken out or loans granted, for the amounts contracted as at the date of the entry into force of the Moratorium Regime, during the period in which this measure is in place;

• Extension, during the period in which this measure is in place, of all credits with a repayment of principal at the end of the contract which are in place as at the date of the entry into force of the Moratorium Regime, along with all their associated elements in the same terms, such as interest or guarantees specifically provided through insurance or credit instruments;

• Suspension, in relation to credits with the repayment of principal in installments or the maturity in installments of other cash contributions, during the period this measure is in place, of the repayment of the principal or the payment of rents and interest with the maturity established up to the end of this period, with the contractual repayment schedule of the principal, rents, interest, commission and any other charges being automatically extended for a period identical to that of the suspension, in order to guarantee that there are no other charges apart from those that might arise from the variable nature of the interest rate of reference underlying the contract, with all elements associated with the contracted covered by this measure, including guarantees, also being extended. 

In order to access these measures, the companies must send the lending institution, through electronic or hard copy, a statement declaring they wish to be subject to the application of the moratorium, signed by their legal representatives.

This statement must be accompanied by documentation showing that their respective tax and social security payment positions are up to date.

The institutions will apply the protection measures mentioned in point A above within a maximum period of five business days following receipt of the statement and documents mentioned, with effects as of the date of the delivery of the statement.

Should it be seen that the company does not meet the conditions established above, the lending institutions must inform it of this fact within a maximum period of three business days.

Those companies seeking to benefit from the measures established in points b) and c) of Section II(A) may, at any time, ask for only the repayment of principal, or a part thereof, to be suspended.

The extensions to the repayment periods mentioned in points b) and c) of Section II(A) may not under any circumstances give rise to:

• Any breach of contract;
• The activation of any early repayment clauses;
• The suspension of the maturity of interest accrued during the suspension period, which will be capitalized in the value of the loan in reference to the time they fall due, at the rate of the contract in force; 
• The inefficacy or cessation of any guarantees granted by the entities benefiting from the measures or by any third parties, particularly in respect of the efficacy and validity of any insurance policies, bond and/or sureties.

The application of the measures established under Section A above to credits with financial collateral includes the obligations of the debtor to remargin, and the right of the creditor to execute any stop losses clauses.

B. The Moratorium Regime also implements a special regime for the grant of personal guarantees on the part of the State in the following terms:

• Personal guarantees can be granted by the State within the maximum limits for the grant of personal guarantees established under the National Budget Act, within the scope of credit transactions or any other financial transactions, in any form, to ensure liquidity or for any other purpose, to companies, private welfare institutions (instituições particulares de solidariedade social), not-for-profit associations and any other social economy enterprises or any other entities with headquarters in the European Union;
• The request must be sent to the member of the Government responsible for the area of finance, through the General Directorate for Finance and the Treasury, along with the essential elements of the transaction to be secured, specifically the corresponding amount and term, notwithstanding any additional elements that might be requested for assessing the risk of the transaction and the defining of the conditions of the guarantee to be granted;
• The request established in the previous point is subject to a favorable report from the member of the Government of the business sector of the entity beneficiary of the guarantee, with the transaction having to fall under the scope of the Government policy of the response to the national economic crisis due to the COVID-19 pandemic, the consideration of the relevance of the beneficiary to the national economy, and the likelihood of the economic viability of the company in question and the express need for a personal guarantee from the State.