PORTUGAL Law and Practice Contributed by: Manuel Magalhães, Mafalda Ferreira Santos, Francisco Boavida Salavessa and Maria José Lourenço, Sérvulo & Associados
Rights and Remedies Enforceability of liens and security
• A representative of the employees having insol - vency claims will be nominated by the judge as a member of the creditors’ committee, regardless of the value of the credit. • In the context of the PER, if certain requirements are met, creditors can be classified according to the existence of sufficient common interests, regardless of the ranking resulting from the appli -
Secured creditors will, in principle, be able to enforce their liens/security in a restructuring/insolvency pro - ceeding, and will not be allowed to enforce such rights outside that proceeding. It is important to highlight that, as a rule, intercreditor covenants will not limit enforceability or the discre - tion of secured creditors in restructuring or insolvency scenarios, even if the breach of such covenants can trigger bilateral claims between creditors. Stay in security enforcement Secured creditors are subject to a general stay in for - mal insolvency/restructuring proceedings, which is automatically triggered, respectively, by the judicial decision declaring the insolvency or by appointing a provisional officer for the debtor. Special procedural protections and rights In addition to the right to be paid ahead of other creditors from the proceeds of the sale of the secured asset, a secured creditor who has a guarantee in rem over the asset to be sold shall be informed about the type of sale and of the base price or the price of the planned sale of a specific entity, and has the right to be compensated if it proposes the purchase of the asset by the secured creditor itself or by a third party for a price higher than that of the planned sale or of the base price, should the sale occur at a lower price. Furthermore, creditors with a guarantee in rem may receive compensation for damages emerging from the delay in the sale of the assets subject to security, unless such delay is attributable to them. Right to block restructuring/insolvency plans Any creditor can challenge a formal restructuring/ insolvency plan by claiming that the end result will be less favourable for its interests when compared with the hypothetical absence of such a plan. As a result, secured creditors can block restructuring and insol - vency plans that do not give them privileged distribu - tion when compared to a no-plan scenario.
cation of the general rules. 2.3 Secured Creditors Liens and Security
In Portuguese law, a variety of liens and security can be placed on the debtor’s assets, with the following
being the most notable. Mortgages and pledges
Creditors can take security over real estate and mov - able property subject to public registration (cars, boats and aeroplanes) through mortgages, which are subject to public registration. Movable property that is not subject to public registra - tion (eg, intellectual property, shares, bank accounts and financial instruments) is commonly used as secu - rity through the creation of a pledge. Mortgages and pledges confer on creditors the right to be paid ahead of common creditors up to the value of the mortgaged/pledged property belonging to the debtor or a third party. Retention of title Retention of title is mostly used by trade creditors and suppliers, allowing them to maintain title over goods supplied until the debt is fully discharged. Retention of title is also commonly used to take security over vehi - cles, because this security can be publicly registered. Financial collateral Financial instruments and cash in bank accounts can be provided by a borrower to a lender under a financial collateral arrangement that benefits from special treat - ment upon the insolvency of the debtor.
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