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Brief Notes on Real Estate Investment Companies


Teresa Anselmo Vaz, partner from the Corporate and Commercial department at SÉRVULO, writes about real estate investments from a corporate perspective

The legal framework for investment and real estate management companies (“sociedades de investimento e gestão imobiliária”, hereinafter referred to as "SIGI") was recently approved by decree-law no. 19/2019, of January 28, which entered into force on February 1, 2019.

Despite being a recent legal framework, it has already been the subject of some criticism, particularly in view of the corporate purpose of the SIGI and their tax regime. Because of this, although in force, the legal framework is currently still under parliamentary review.

This short note contains a brief overview of some aspects of the new legal framework that should be highlighted, from a perspective of deviations from the general rules applicable to joint stock companies. The legislator’s goal, as expressed in the preamble of the decree-law referred herein, was the promotion of "investment and dynamism of the real estate market, particularly of the real estate lease market" as well as the dynamization of capital markets given the less stringent requirements for admitting SIGI shares to trading.

A SIGI must be a joint stock company (cfr. article 3, point a) of the decree-law), and may be constituted "ex novo" or result from a change of the articles of association of an existing joint stock company (and also from the conversion of a real estate investment fund in the corporate form), provided that the company complies with the legal requirements of said statute (cfr. respective articles 5 and 6). The conversion into a SIGI by an existing company will take effect on the first day of the tax period following the date of registration at the commercial registry of the amendments to its articles of association.

A SIGI must adopt the supervisory model provided for in item b) of article 413 (b) of the Companies Code (hereinafter "CC"), consisting of a supervisory board and a certified accountant (or an audit company) that is not a member of the supervisory body. This also means that the type of management structure is the one comprising a board of directors (article 278, paragraph 1 a) of the CC).

The minimum share capital is €5,000,000, which must be fully subscribed and paid up (in cash or in kind), and be represented by ordinary shares.  All shares representative of the share capital of a SIGI must be admitted to trading on a regulated market or selected for trading in a multilateral trading facility situated or operating in Portugal or in another Member State of the European Union or the European Economic Area, within one year as of the commercial registry of the incorporation of the SIGI or from the date of the effectiveness of the changes to the articles of association of an existing company.

The corporate purpose of a SIGI is the acquisition of real estate rights (property rights or "other equivalent rights") for lease or other forms of economic use, namely "the development, construction or real estate rehabilitation projects" and / or their "allocation to the use of a store or space in a commercial centre, or use of office space" (article 7).

SIGIs are subject to certain limits on the composition of their assets, established in article 8 of the decree-law. However, although it is mentioned that such limits are requirements that must be "met" by a SIGI, which means that they must be verified in order to be qualified as a SIGI (article 3, paragraph d) of the decree-law), article 8 (2) establishes that they are mandatory only starting from the second year after the incorporation (or amendment of the articles of association, in an extensive interpretation) of a SIGI.

A SIGI is required to distribute dividends in the percentages established in article 10: (i) 90% of yearly profits resulting from the payment of dividends and income from shares or units distributed by other SIGI subsidiaries or from real estate investment undertakings and real estate investment funds; (ii) 75% of the remaining distributable income for the year.

This regime does not apply to reserves and retained earnings existing at the date of registration of the amendments to the articles of association of a company converted into a SIGI.

The legal reserve cannot exceed 20% of the share capital, and it is not possible to constitute other non-free reserves (it is not entirely clear which regime will apply to realities that are, under the terms of the CC, subject to the legal reserve regime, such as those described in no. 2 of article 295 of the CC, namely premiums obtained in the issuance of shares and other equivalents).

The members of the board of directors and of the supervisory body are liable before the shareholders (in the general terms of civil liability) for damages that are directly caused to them as a result of the loss of qualification as a SIGI.

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Teresa Anselmo Vaz