Establishing a Company with Foreign Partnerships in Portugal and the Legal Responsibility of Partners

Turkish investors wishing to establish a company in Portugal are not required to find a Portuguese partner or to leave a certain portion of the company's capital to a local investor. Turkish citizens can establish companies on their own, or jointly with Portuguese, Turkish, or other foreign nationals.

Portugal generally does not discriminate based on the nationality of foreign investors, does not require the presence of Portuguese partners, and does not impose a general ban on the transfer of profits or dividends abroad. However, special permits, qualification requirements, or investment reviews may be applicable in regulated sectors such as banking, finance, insurance, energy, defense, and healthcare. (AICEP)

The fact that a company has foreign partners does not mean that the partners' liability is unlimited. In Portugal, in the most commonly preferred types of companies, Sociedade por Quotas (LDA) and Sociedade Unipessoal por Quotas, the company's own assets are generally liable for its debts. However, personal liability of partners or directors may arise due to failure to fulfill capital commitments, the provision of personal guarantees, mixing of company and partners' assets, illegal management practices, or special provisions regarding tax and social security debts.

Therefore, when establishing a company with foreign partners, it is not sufficient to simply determine the ownership percentages. Who will manage the company, the number of signatures required for certain transactions, the capital obligations of the partners, profit distribution, share transfers, acceptance of new investors, and the rules to be applied if a partner leaves the company must all be determined during the establishment phase.

Can Turkish citizens establish a wholly foreign-owned company in Portugal?

Turkish citizens can own all the capital of a company in Portugal. The sole shareholder of the company can be a Turkish citizen or a company established in Türkiye, or all partners can consist of foreign individuals residing in different countries.

Portugal's official investment authority, AICEP, states that there is no requirement for a Portuguese partner in terms of foreign investment, and that foreign investments are generally subject to the same rules as domestic investments. It is not a general rule that foreign investment is subject to a special permit or notification system solely due to its foreign nature. Licensing and regulatory obligations arising from the field of activity are reserved. (AICEP)

If a single investor intends to own the entire company, a Sociedade Unipessoal por Quotas (Unipessoal LDA) can be established. If there are two or more partners, a Sociedade por Quotas (LDA) is preferable. For investments with larger capital and a broader shareholding structure, a Sociedade Anónima (SA) can be established. The Empresa Online system allows for the electronic establishment of all three company types. (Justice Records)

Having 100% foreign capital does not alter the company's tax, accounting, commercial registry, labor law, and social security obligations in Portugal. A company incorporated in Portugal is a separate legal entity subject to Portuguese law, regardless of the nationality of its shareholders.

Required Documents for Foreign Individual Partners

Foreign individuals who will become partners in a company to be established in Portugal must first possess a Portuguese tax identification number (NIF). Foreign partners who do not reside in Portugal are also required to obtain an NIF. Individuals residing outside the European Union and the European Economic Area may appoint a financial representative or participate in one of the electronic notification channels accepted by the Portuguese Tax Administration (AICEP)

For Turkish citizens who are natural persons and partners, the following documents are generally required: a passport, proof of residence in Türkiye, a Portuguese NIF certificate, and a power of attorney if the transaction is to be conducted through a representative. The person to be appointed as the company director must also have a NIF number.

In companies with multiple foreign natural persons as partners, each partner's identity and tax records must be completed separately. The fact that only one partner holds a NIF (Non-Foreign Income Tax) does not eliminate the need for the other partners to be registered within the Portuguese tax system.

The online incorporation process may require digital identity verification and electronic signatures for all partners and directors. Portugal's Empresa 2.0 system allows foreign citizens to conduct transactions using passport-linked Chave Móvel Digital or appropriate European electronic identity verification. Furthermore, the incorporation process can be carried out by a Portuguese lawyer, notary, or solicitador using a professional electronic certificate. (Justice Records)

Can a Turkish company become a partner in a Portuguese company?

A joint-stock or limited liability company established in Türkiye can become a partner in a company to be established in Portugal. In this case, the foreign legal entity must be registered in the Portuguese system, and the company's intention to become a partner in another company in Portugal must be demonstrated by a decision of the competent authority.

According to Portugal's official online company incorporation system, the foreign partner must possess Portuguese NIPC and NIF numbers. Additionally, a current trade register certificate from the country where the company is headquartered, the current articles of association, a company resolution demonstrating the decision to participate in the Portuguese company, and a declaration of ultimate beneficiary must be submitted. Translations of foreign-language documents must also be included in the file. (Justice Records)

If a Turkish company is going to be a partner, the following documents may be prepared in practice:

• Current trade registry certificate
• Certificate of activity,
• The company's articles of association,
• Records showing the company's ownership and management structure,
• In Portugal, a board of directors or general assembly resolution regarding becoming a partner in a company
• A power of attorney given to the person who will represent the company in Portugal,
• Partnership diagram showing the ultimate individual beneficiaries,
• Required apostille and Portuguese translations.

The company decision should clearly state the name, type, and capital of the Portuguese company to be established, the capital to be contributed by the Turkish company, its shareholding percentage, and the person who will represent the company. Decisions containing general statements and not clearly indicating the authority to participate in the foreign company may lead to requests for additional documents.

How to Establish a Company with Foreign Partnerships?

Companies with foreign partners can be established electronically via Empresa Online 2.0 or at Empresa na Hora service points. Depending on the complexity of the company structure and foreign documents, the traditional commercial registry method may also be used.

Prior to incorporation, the company type, trade name, field of activity, CAE codes, capital, share percentages of partners, company headquarters, and the representation authorities of the directors are determined. In the online system, partners and directors are defined, capital and activity information is entered, the company's articles of association are electronically signed, and the necessary foreign documents are uploaded. (Justice Records)

While it may be legally permissible to use a standard articles of association in companies with foreign partners, it is safer to prepare a customized articles of association and a separate partners' agreement for projects where the partners are located in different countries, have invested varying amounts, or hold different roles within the company.

After the company is registered, the bank account, capital investment, commencement of tax activities, appointment of a certified accountant, and registration of the ultimate beneficiary must be completed.

Why is Final Beneficiary Registration Required?

In Portugal, companies incorporated in the country must disclose not only the direct shareholders listed in the register, but also the natural persons who have ultimate control over the company. This process is carried out through the Registo Central do Beneficiário Efetivo (RCBE) system.

RCBE aims to identify the natural persons controlling companies and other legal entities incorporated in Portugal or wishing to do business in the country. Registration is mandatory for all Portuguese companies. (justiça.gov.pt)

The initial declaration of the ultimate beneficiary must be made within 30 days of the company's registration in the commercial register. If there is a change in the ownership, voting rights, or control structure, the RCBE information must be updated within 30 days of the change date. Annual verification is also required even if no changes have occurred. (Justice Records)

For example, if a Portuguese company is wholly owned by a Turkish company, simply stating the name of the Turkish company is not sufficient. The entire chain of ownership, extending to the individuals who directly or indirectly control the Turkish company, must be disclosed.

Discrepancies between the information in the ultimate beneficiary registration and the ownership structure in bank, trade registry, and company documents may delay bank account opening and company transactions.

Partners' Fundamental Rights in the Company

According to Portuguese Company Law, each partner has the right to participate in company profits, to attend partners' meetings, to be informed about the company's operations, and to be elected to management or supervisory bodies in accordance with the law and the terms of the articles of association. Unless otherwise stipulated, the proportion of participation in profits and losses is proportional to the partners' share of capital.

These rights are the same for foreign and Portuguese partners. A partner's residence in Türkiye or another country does not negate their right to obtain information about the company, attend meetings, or claim dividends.

However, voting rights, profit distribution, and management authority are not the same concepts. A partner may own 40% of the company's capital but not be appointed as a director. Another partner, while holding a lower share of the capital, may have special management or veto rights. These special rights may need to be explicitly regulated in the company's articles of association to be valid.

General rights of partners cannot be completely eliminated in a manner contrary to mandatory legislation. In particular, provisions that completely prevent a partner from participating in profits or exempt them from all losses may be deemed invalid.

Is the Liability of LDA Partners Limited to Their Shareholding?

In Sociedade por Quotas (LDA) companies, the fundamental rule is that only the company's assets are liable for its debts. Company creditors cannot directly access the personal bank accounts or personal real estate of partners simply because of their partnership status.

However, the statement that partners' liability is limited only to the capital they have committed for their own shares may be incomplete. According to Portuguese Company Law, LDA partners may be jointly liable to the company for the fulfillment of the capital contributions committed in the company agreement. In particular, if a partner who fails to fulfill their capital contribution is expelled from the company or their share is forfeited to the company, the other partners may be liable to cover the remaining capital contribution.

Therefore, it is important to verify not only the percentage of share a new partner will hold, but also whether they have actually fulfilled their capital commitment. If a partner commits a large amount of capital but fails to invest it, the other partners and the company may face unexpected financial consequences.

Can direct liability be imposed on partners through the Articles of Association?

Under Portuguese law, the articles of association of an LDA (Licensed Partnership) company may include a provision stipulating that one or more partners shall be directly liable to the company's creditors up to a certain amount.

This liability can be structured as joint and several liability with the company, or as secondary liability depending on the company's insufficient assets. The amount of liability and the conditions under which it applies must be clearly stated in the articles of association.

Standard company articles of association do not usually acknowledge such direct liability. However, it is possible for partners to assume additional obligations under investment agreements, loan agreements, or commercial negotiations.

Foreign investors should check whether the articles of association they sign in Portuguese contain any provision that imposes personal liability on them beyond the general limited liability company regime.

Does limited liability protection continue if a personal guarantee is given?

The separate legal personality of a limited company does not prevent partners from voluntarily providing personal guarantees. Banks, business owners, suppliers, or leasing companies may request partner or manager guarantees from newly established businesses.

If a partner acts as a personal guarantor for a company loan, the creditor may resort to the partner's personal assets under the terms of the guarantee if collection from the company is impossible. This outcome does not stem from the partner being generally liable for company debts, but rather from signing a separate guarantee or surety agreement.

Therefore, when signing bank, lease, and supply contracts on behalf of a company, it should be checked whether the individual is signing solely in their capacity as company director or also as a personal guarantor.

In Portuguese contracts in particular, expressions such as "fiador," "avalista," "garante," or similar terms may create a personal guarantee obligation. Signing under a company stamp or name alone does not provide protection if there is an explicit personal guarantee in the contract.

Personal Liability Risk in a Single-Shareholder Company

Since a Unipessoal LDA is a separate legal entity, company debts are, as a rule, not the personal debt of the sole shareholder. However, the separation of the sole shareholder from the company's assets is particularly important.

Portuguese Company Law stipulates that in the event of a company becoming a single-shareholder bankruptcy, if it is proven that the rules regarding the allocation of company assets to company debts were not followed, the sole shareholder is liable without limit for company debts incurred during the period of single-shareholder ownership.

Portuguese court decisions also acknowledge that limited liability protection may not apply in exceptional circumstances, such as the mixing of company and partner assets, the deliberate decapitation of the company, or the use of the company's legal entity to evade creditors.

If a sole shareholder uses the company account as if it were their personal account, withdraws company income without proper records, or presents personal expenses as company expenses, this not only creates a tax risk but can also constitute evidence that the company's independent assets are not being effectively protected.

The Difference Between a Partner and a Manager

Being a company partner and being a company manager, or "gerente," are not the same status. A partner holds a share of the company's capital. A manager, on the other hand, handles the day-to-day management of the company and represents it to third parties.

A person can be both a partner and a director. However, a person who is not a partner can also be appointed as a director. Similarly, a partner with a high shareholding may not hold any management position.

This distinction is important in terms of accountability. A person who is only a passive partner is, as a rule, not held responsible for the day-to-day management decisions of the company like a director. Conversely, a person who actually manages the company, signs contracts, directs employees, and makes decisions on behalf of the company may not be able to rely solely on the defense of "I am not an official director.".

Partnership and directorship duties must be consistent with the articles of association, the commercial registry, and actual operations. Appointing a director merely to facilitate immigration or banking transactions may lead to future disputes regarding responsibility and representation.

The Directors' Duty of Care and Loyalty

Portuguese Company Law mandates a duty of care and loyalty for company directors and managers. A director must act with the knowledge, technical competence, and diligence required by their position; and must safeguard the long-term interests of the company, its shareholders, employees, customers, and creditors.

A director prioritizing personal gain over company interests, using company opportunities for personal gain, facilitating off-market transactions for affiliates, or using company assets for personal purposes may constitute a breach of the duty of loyalty.

In companies with foreign partners, it is common for one of the company directors to be in Portugal while the other partners are in Türkiye. In such cases, audit mechanisms should be established to ensure that the foreign partners have regular access to company accounts, contracts, and accounting information.

Can Directors Be Held Personally Liable for Company Losses?

Directors may be held personally liable to the company if they cause damage to the company through their negligent breach of their legal or contractual obligations. If there is more than one director responsible, liability may be joint and several.

The director may be liable to creditors if they negligently violate legal or contractual provisions protecting company creditors, resulting in the company's assets becoming insufficient to meet its debts. The director may also be held liable under general legal provisions if they cause direct harm to shareholders or third parties during the performance of their duties.

For example, a director's actions such as transferring company assets to a related business without consideration, concealing assets from creditors, or knowingly misrepresenting the company's financial situation could be subject to personal liability claims.

The fact that a company business decision does not yield the expected result does not, in itself, create personal liability for the director. What is important is that the decision was made with sufficient information, without a conflict of personal interest, and as a result of a reasonable business assessment.

Directors' Liability for Tax Debts

As a rule, a company's tax debt is a company debt. However, under certain conditions stipulated in Portuguese tax legislation, secondary liability may be imposed on the director or managers who are actually running the company.

Portuguese court rulings state that, with regard to tax debts, merely being listed as a director in the register is not always sufficient; the actual exercise of management authority is required. Conversely, the director who actually managed the company during the payment period may face the burden of proving that the non-payment of the tax debt cannot be attributed to them. (Diário da República)

Therefore, simply entrusting the company's tax returns to the accountant does not absolve the director of all responsibility. The director must ensure that the returns are filed, the taxes are paid, and that there are sufficient funds in the company's accounts for payment.

Liability Regarding Employee Claims

Employee wages, compensation, and other labor claims are primarily demanded from the employer company. However, if the manager negligently breaches their obligations to protect creditors, and the company's assets become insufficient to cover employee claims, the manager's personal liability may arise.

In Portuguese legal practice, this liability requires unlawful and negligent management conduct, insufficient company assets, and a causal link between the conduct and the resulting damage. The mere existence of a company debt to employees is not sufficient to automatically make the director personally liable.

If there is a group of companies or a controlling company relationship, the joint and several liability of the group companies with respect to employee claims may also be evaluated separately.

Liability of Directors in Case of Company Bankruptcy or Insolvency

If the company is unable to meet its maturing debts, the directors must promptly assess the company's financial situation.

Portuguese bankruptcy law requires the debtor to file for bankruptcy within 30 days of learning of, or having reason to learn of, the bankruptcy proceedings. A breach of this obligation, and the failure to properly prepare the annual accounts, may, under certain circumstances, constitute a presumption of gross negligence on the part of the directors and contribute to the bankruptcy being deemed negligent. (Diário da República)

Even when it is clear that the company can no longer pay its debts, assuming new debts, transferring company assets to shareholders, or favoring some creditors at the expense of others can create significant liability risks for directors.

Director's Representation Authority and Company Affiliation

Directors carry out transactions necessary or useful for the company's business. Transactions carried out by a director on behalf of the company and within their legal authority may bind the company to third parties, despite internal limitations set forth in the articles of association or shareholders' resolution.

For example, even if the articles of association require the approval of the board of partners for contracts exceeding €100,000, if the director signs a contract without obtaining this approval, the company may be bound by the contract in the face of a bona fide third party. The director, in turn, may be held liable to the company for exceeding the limits of his/her internal authority.

Therefore, simply including internal authorization limits in the articles of association may not be sufficient. A system of effective control should be established through double signatures on bank accounts, electronic payment limits, contract approval processes, and accounting statements.

How is a share transfer carried out?

In LDA (Low-Down Partnership) companies, shares are called "quotas". Share transfers must be in writing. As a rule, share transfers to a third party are subject to company approval. In some transfers between spouses, ascendants/descendants, or existing partners, company approval may not be required; however, stricter provisions may be established in the articles of association.

The company's articles of association may completely prohibit the transfer of shares or subject them to pre-emption, approval, and certain conditions. However, for a share transfer to be effective, the company registration and trade registry procedures must be completed.

When a foreign investor sells their stake in a company, they should not simply sign a share sale agreement. The sale price, payment schedule, past debts, company guarantees, tax liabilities, and the seller's responsibility should be separately regulated.

Following the share transfer, the RCBE registration, bank authorizations, and, if necessary, the company's articles of association must be updated within 30-day periods. (Justice Records)

Why Should a Partnership Agreement Be Prepared?

A partnership agreement is a contract separate from the company's articles of association that regulates the relationship between partners. Known as "acordo parassocial" in Portuguese law, this agreement is particularly important in companies with foreign partners.

The articles of association are a publicly available registration document and show the basic structure of the company to third parties. The partners' agreement, on the other hand, may contain more detailed economic and managerial arrangements between the parties.

It would be useful to include the following points in the partnership agreement:

• Partners' initial and subsequent investment obligations,
• Appointment and dismissal of directors,
• Single or dual signature system,
• Approval of the annual budget and business plan,
• Expenditures exceeding a certain amount,
• Profit distribution policy,
• Accepting new investors,
• Share transfer and pre-emption rights,
• Provisions on joint sale and compulsory sale,
• Non-competition and confidentiality,
• Transfer of intellectual property rights to the company,
• The death, bankruptcy, or withdrawal of one of the partners,
• The method for resolving the issue of a vote deadlock is..
• Applicable law and dispute resolution.

Care should be taken to ensure that the provisions in the partnership agreement do not conflict with the company's articles of association. Certain specific rights may need to be included in the articles of association in order to be asserted against the company and third parties.

Risk of Deadlock in an Equal Partnership Structure

In companies where two partners hold a 50-50 stake, it's possible for votes to become deadlocked regarding fundamental decisions. If one party refuses to approve the budget, a capital increase, or a change in management, the company may become unable to make decisions.

Therefore, in companies with equal partnerships, independent advisory voting, rotating management, mediation, share purchase offers, or controlled exit methods may be determined.

If the parties fail to establish a deadlock mechanism based solely on the assumption of "we trust each other," the breakdown of the business relationship could lead to the complete cessation of the company's operations.

Protection of the Minority Partner

A minority shareholder's low capital stake does not negate their right to access information from the company or participate in shareholders' decisions. Every shareholder has legal rights to information, profits, and participation.

However, the majority partner can make a significant portion of ordinary decisions unilaterally. If the protection of minority investors is desired, a qualified majority or unanimous vote may be required for certain transactions.

Matters requiring minority approval may include changes to the company's business activities, high-volume borrowing, sale of company assets, related party transactions, issuance of new shares, and changes to the dividend distribution policy.

Transfer of Dividends to Türkiye

There is no general ban in Portugal on foreign investors transferring profits and dividends abroad. (AICEP)

However, in order for company profits to be transferred to the partners, annual accounts must be prepared, distributable profit must be determined, and a decision must be made by the authorized partners. The money in the company account is not personal money that partners can withdraw whenever they wish.

Portuguese withholding tax on dividend payments, the Turkey-Portugal double taxation avoidance agreement, and whether the partner is a natural or legal person should be considered. Dividend payments made to a Turkish company may not be subject to the same tax consequences as payments made to a natural person partner.

Dividend payments, executive fees, shareholder debt repayments, and company expense payments should be kept separate in accounting records.

Does Establishing a Company with Foreign Partners Grant Residence Permits?

Becoming a company partner or being appointed as a company director in Portugal does not automatically grant a foreign national residency. Company formation is a commercial law process; the right to live and work in Portugal is subject to immigration legislation.

If a Turkish citizen plans to live in Portugal and manage a company, a D2 entrepreneur visa or another visa and residence category suitable to the individual's situation should be considered.

Owning 1% or 100% of the company's shares alone does not guarantee visa approval. The applicant's actual entrepreneurial activity, role in the company, source of investment, business plan, and personal means of livelihood will also be examined.

Common Mistakes in Companies with Foreign Partnerships

One of the most common mistakes in companies with foreign partners is the belief that the company cannot be established because there is no Portuguese partner. Portuguese legislation generally does not require a local partner.

Another mistake is assuming that partners and directors will not bear personal liability under any circumstances once a limited liability company is established. Personal guarantees, unpaid capital, faulty management, tax debts, and the mixing of assets can all give rise to liability.

In structures where a Turkish company is a partner, incomplete preparation of apostille and translation processes for trade registry and authorization documents may delay the establishment of the company.

The absence of provisions regulating the actual relationship between partners in the standard articles of association can create disputes, particularly regarding capital, management, share transfer, and profit distribution.

When establishing a 50-50 partnership, failure to arrange for a deadlock resolution can prevent the company from making decisions.

The fact that a local partner or director in Portugal has unlimited access to company accounts, while a foreign investor cannot monitor the accounting and banking system, constitutes a significant control risk.

Listing the ultimate beneficiary solely by identifying a direct foreign company partner and failing to disclose individual controllers can lead to RCBE and bank compliance issues.

Conclusion

Turkish citizens and Turkish companies can establish wholly-owned companies in Portugal. There is generally no requirement to have Portuguese citizens as partners.

Foreign individual partners must obtain a Portuguese NIF number. If a Turkish company is to be a partner, the foreign legal entity must prepare its Portuguese NIPC and NIF registrations, current trade register, articles of association, investment decision, and ultimate beneficiary documents.

In LDA and Unipessoal LDA companies, the basic rule is that the company's own assets are liable for its debts. However, partners may face personal liability due to unpaid capital contributions, additional liabilities stipulated in the articles of association, personal guarantees, or misuse of company assets.

Company partners and directors have different legal statuses. Directors manage and represent the company; they may be personally liable to the company, creditors, partners, or third parties for negligent actions that violate their duty of care and loyalty.

When establishing a company with foreign partners, in addition to the partners' share percentages, capital obligations, the representation powers of the directors, bank control, profit distribution, share transfer, acceptance of new investors, and dispute resolution should be regulated in a detailed partners' agreement.

After company registration, banking, accounting, tax, and RCBE procedures must be completed; and the natural persons at the end of the direct and indirect ownership chain must be accurately reported.