PORTUGAL Law and Practice Contributed by: Manuel Magalhães, Mafalda Ferreira Santos, Francisco Boavida Salavessa and Maria José Lourenço, Sérvulo & Associados
cally, members of supervisory bodies will be jointly and severally liable with the company’s directors for their actions or omissions in the performance of their duties when the damage would not have occurred if the members of the supervisory board had fulfilled their surveillance obligations. 7.4 Other Consequences for Directors and Officers The qualification of insolvency as culpable produces a range of substantive effects of a civil nature in the legal sphere of the persons affected (ie, the directors). In fact, when the insolvency is deemed as culpable, the court may: • bar the directors from managing the assets of third parties for a period of between two and ten years; • bar the directors from carrying out any commercial activity for a period of between two and ten years, including holding a position at any statutory body in any commercial or civil company, association or private foundation, public company or co-opera - tive; • determine the loss of any credits on the insolvency or on the insolvent estate held by the directors and order the reimbursement of the assets or rights already received by them as payment of such credits; and • sentence the directors to compensate the creditors of the company in an amount equal to their unful - filled claims, on a joint and several basis. Insolvency or substantial economic damage to a com - pany may imply criminal liability for its directors if cer - tain circumstances are met, such as the following. • Intentional insolvency – if the directors: (a) act with intent to injure creditors and diminish the legal entity’s assets – namely, destroying, damaging, rendering useless or making part of its assets disappear; (b) fictitiously diminish the legal entity’s net equity, simulating in any way an economic situation worse than the reality, or artificially creating or worsening losses or reducing profits; or (c) delay insolvency proceedings, by concealing the true economic situation of the legal entity.
• Negligent insolvency – if the directors indulge in gross negligence, prodigality or grossly exagger - ated expenses, ruinous speculation or serious negligence in the exercise of their activity, create a state of insolvency and, despite being aware of the economic and financial difficulties of the legal entity, do not request timely recovery measures. • Undue preference – if the directors, knowing the state of insolvency of the legal entity or foresee - ing its imminence, pay debts not yet due or pay by means other than cash or customary amounts, or provide guarantees for debts to which the legal entity was not obliged, with the intention of favour - ing certain creditors to the detriment of others. 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Transactions executed before the beginning of the insolvency proceedings that diminish, hinder, obstruct, jeopardise or delay the satisfaction of insolvency creditors may be annulled and/or terminated and the assets returned to the insolvent estate, provided that the counterparty acted in bad faith (ie, was aware of the situation of insolvency, of the commencement of insolvency proceedings, or that the insolvency was imminent and that the transaction was detrimental to the insolvent estate). Bad faith is presumed in the case of transactions between related parties. Specific transactions may be annulled and/or terminated, regardless of bad faith (eg, agreements with no consideration for the insol - vent, the repayment of obligations not yet due, the encumbrance of assets to secure pre-existing obliga - tions, or the reimbursement of shareholders’ contribu - tions in the year before the beginning of the insolvency proceedings). However, this action is subject to a look-back period of two years before the onset of the insolvency pro - ceedings, which means that any act that took place more than two years before the onset of the insol- vency proceedings cannot be set aside.
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