* Without prejudice to the observations under the heading "Impact on contract management", which are also relevant in this context, to the extent applicable, the purpose of this section is the derogatory regime approved by Decree-Law no. 10-J/2020 of 26 March 2020, and finally amended by Decree-Law no. 78-A/2020, of 29 September. The observations below are not exhaustive and do not replace consultation of the aforementioned statute.

It should be noted that credits outside the scope of the statutory moratorium may benefit from a voluntary moratorium scheme if agreed between lender and borrower. 

In this context, note the protocol entered into within the APB, in relation to the general conditions applicable to two private moratoria, aimed at individuals (for non-mortgage credits and for mortgage credits); you may find additional information here

ASFAC (Association of Specialised Credit Institutions) has published on its website the terms and conditions of Private Moratorium to be enforced by its Associates who decide to make it available for their clients, as well as by other institutions who wish to do so, even if they are not Associates. Such terms and conditions can be view here.

Similarly, ALF (Portuguese Association of Leasing, Factoring and Renting) has created a Private Moratorium regime for individuals holding leasing contracts (Real Estate and Movable Property). Additional information can be found here.

This statutory moratorium scheme foreseen in article 5 of Decree-Law no. 26/2020, of 16 June, may apply to such moratorium, provided that the conditions of its applicability are met.

Bank of Portugal has published on its website the Frequently Asked Questions about the Moratorium on housing loans and the Moratorium on credits to companies, which you can consult here, as well as the statements on amendments thereto occurred in June (which can be viewed here) and July (which can be viewed hereand September (which can be viewed here).

 

 

Which moratorium measures have been put in place?

a)   Prohibition of revocation, in whole or in part, of credit lines and loans, in the amounts contracted, from 27 March 2020 and for all the duration of the measure;

b)   Extension, for a period equal to the term of the measure, of credits with payment of principal at the end of the contract, together with all its associated elements, including interest, guarantees, namely those provided by the way of insurance or securities

c)   Suspension, during the period of the measure, in relation to credits with partial instalments or other cash amounts payable, of payments of principal, rents and interest in such period. The contractual payment plan is automatically extended, for a period equal to the suspension, so that there are no charges other than the variability of the reference interest rate underlying the contract, and all the elements associated with the contracts, including guarantees, are also extended.

Beneficiaries may request, at any time, the suspension  of principal repayments , or part thereof, and benefit from these measures por a shorter period, communicating such intention to the institution with a minimum 30-prior notice from the date of the intended termination of the effects thereof.

Beneficiary entities whose main activity is covered by the list of Portuguese Classification of Economic Activities (CAEs) in the annex to the decree (including certain transport, accommodation, catering activities, among others; the complete list can be view at link) benefit from an additional special regime, referred to bellow under Special maturity extension scheme for certain beneficiary entities (depending on the CAE (Classification of Economic Activity)).

 

Am I covered against contractual consequences?

The regime is aimed at protecting borrowers from negative effects that might otherwise occur. These measures do not give rise to:
a)   breach of contract
b)   triggering of early repayment clauses
c)   suspension of interest due during the extension period, which will be capitalised on the value of the loan by reference to the time at which they are due at the rate in force; and
d)   ineffectiveness or termination of guarantees granted in connection with the credit, including insurance, sureties and guarantees

Without prejudice to the foregoing, cases covered by the moratorium shall be reported to the Central Credit Register.

In any event, and in line with the European Banking Authority (EBA) Guidelines, of 2 April 2020 and the Bank of Portugal Circular Letter no. CC/2020/00000022, of 8 April 2020, institutions should not classify credits as being in “default” or "forbearance" merely as a result of the application of the legal moratorium.

In the event of a declaration of insolvency or submission to Special Revitalisation Proceedings or Extrajudicial Company Recovery Scheme of the beneficiary, the institutions may exercise all their rights, in accordance with the applicable legislation.

 

Who can benefit from these measures?

The regime is aimed at a wide scope of beneficiaries, including companies, natural persons and other legal persons, subject to certain requirements.

Companies that, cumulatively:
a)   are headquartered and carry on their economic activity in Portugal
b)   are classified as micro-enterprises or SMEs
c)   are not, on 18 March 2020, in default or in failure to pay cash benefits for more than 90 days before the relevant institution, or if they are they are not meeting the materiality criteria laid down in regulation, and are not in a situation of insolvency or suspension or cessation of payments, or are already under enforcement by any of the financial institutions covered
d)   concerning the situation before the Tax and Customs Authority and Social Security Services:

(i) have their situation regularised (debts constituted in March of this year are not relevant until 30 April 2020); or
(ii) have an irregular situation where the debt is less than 5,000 Euros; or
(iii) have an ongoing negotiation process to settle the non-compliance; or
(iv) make a request for regularisation of the situation by 30 September 2020.

Other companies, regardless of their size, that on 26 March 2020 meet the conditions referred to in a), c) and d) above, excluding those that are part of the financial sector.


Natural persons that cumulatively fulfil the following conditions:

(i) who fulfil the conditions referred to in subparagraphs c) and d) above, (ii) either resident in Portugal or otherwise and (iii) are in, or are part of a household where at least one of the members is in, one of the following situations in accordance with the applicable legal requirements: situation of prophylactic isolation or illness; caring for children or grandchildren; reduction of the normal working period or suspension of the employment contract, due to a business crisis; in a situation of unemployment, registered with the Institute for Employment and Professional Training; workers eligible for extraordinary support to reduce the economic activity of self-employed workers; workers from entities whose establishment or activity has been determined to close under legal or administrative order, during the period of the state of emergency or during the situation of calamity; or temporary income shortfall of at least 20% on the overall household income, as a consequence of the pandemic of the COVID-19 disease.

Individual entrepreneurs, as well as private charitable institutions, non-profit associations and other social economy entities, except those that meet the requirements set out in article 136 of the Mutualistic Associations Code, that meet the conditions referred to in paragraphs c) and d) above and are domiciled or headquartered in Portugal.

It should be noted that the profit distribution, in any form, the repayment of credits to partners and the acquisition of own shares or quotas by the beneficiaries, determines the termination of the effects of the measures.

 

Which credits are covered?

Credit operations and leasing or operating contracts granted by credit institutions, credit finance companies, investment companies, leasing companies, factoring companies and mutual guarantee companies, as well as by branches of such credit institutions and financial institutions operating in Portugal.

When taken up by beneficiaries that are natural persons, it includes residencial mortgage credit, residential property leasing and consumer credit, under the applicable legal regime, for education purposes, including education and professional training.

It excludes (i)  credit for the purchase of securities or the acquisition of positions in other financial instruments, whether or not guaranteed by such instruments; (ii)  credit granted to beneficiaries of schemes, subsidies or benefits, including tax benefits, to establish head office or place of residence in Portugal, with the exception of citizens covered by the Return Programme; (iii) credit granted to companies for individual use by means of credit cards to members of such corporate bodies, employees or other employees.

 

What impact will this have on credit guarantees?

As mentioned before, these measures do not give rise to ineffectiveness or termination of guarantees granted in connection with the credit, including insurance, sureties and guarantees.

The extension of guarantees, including insurance, personal guarantees and securities in rem and sureties, does not require any other formality, opinion, authorisation or prior act by any other entity, provided for in another legal document, and are fully effective and enforceable against third parties. The respective registration, when necessary, will be promoted by the institutions, without the need to present any other document and without any further process.

The application of these measures to credits with financial collateral covers the obligations to restore the respective maintenance margins, as well stop losses clauses.

As for credit granted on the basis of total or partial financing, including under the form of subsidized credit, or guarantees from third parties based in Portugal, the envisaged measures apply automatically, without the prior authorisation of those entities, and under the initially foreseen conditions.

 

How can I access these measures?

The measures do not apply automatically; beneficiaries must express their will accordingly.

In order to access the measures, the beneficiaries shall, by physical or electronic means, deliver to the lending institution a declaration of adherence to the moratorium, signed by the borrower or its legal representatives.

This declaration shall be accompanied by documentation regarding their tax and contributory situation, as mentioned above.

Beneficiaries who intend to adhere to the measures must deliver the declaration of adherence to the moratorium until 30 September 2020.

The measures shall be implemented within five working days, with effect from the date on which the declaration is submitted, unless the entity does not meet the eligibility conditions. In the latter case, the institutions shall inform the beneficiary by the same means within a maximum of three working days.

 

Duties to inform

Financial institutions have several duties to inform, including, on one hand, to publicize and advertise on their websites and through the regular contacts with clients, the measures provided for in this Decree-Law (including the terms and deadlines to adhere to the moratorium), and on the other hand, to provide full knowledge of all measures provided for in this Decree-Law prior to the formalisation of any credit agreement whenever the client is a beneficiary entity.

Through Notice no. 2/2020, of 7 May, the Bank of Portugal has regulated the duty of the credit institutions to provide information to their moratorium clients (whether legal or private initiative moratoriums in accordance with the EBA’s requirements) applicable to credit operations contracted by private and corporate clients, created within the framework of response to the COVID-19 pandemic.

 

Non compliance with the legal regime

Entities accessing measures without fulfilling the relevant conditions, as well as persons subscribing the documentation required for such purpose, shall be liable for any damage resulting from false declarations, as well as for the costs incurred in the implementation of such measures, without prejudice to other liability arising from the conduct, in particular criminal liability.

In turn, financial institutions failing to comply with the legal regime incur administrative responsibility (without prejudice to possible civil consequences of compensation).

 

For how long will this regime be in force?

The regime entered into force on 27 March 2020, initially valid until 30 September 2020, having been extended first until 31 March 2021, and then until 30 September 2021.

Beneficiary entities who have adhered to these measures but do not intend to benefit from their effects after 30 September 2020 must inform such intention to the institutions until 20 September 2020.

If no such communication is provided, the effects of the measures are automatically extended until 31 March 2021.

Beneficiary entities which, on 1 October 2020, are covered by any of the measures, will benefit from the additional and automatic extension of these measures for a period of 6 months, from 31 March 2021 to 30 September 2021, with the following specifies:

a)                   As from 1 April 2021, the measures related exclusively to the suspension of the repayment of principal, except as provided in the following paragraph;

b)                  In addition to the suspension of the repayment of principal, the following beneficiary entities also benefit from the suspension of payment of interest, fees and other charges:

                              (i)            Natural persons benefiting from the measures concerning mortgage credit, as well as financial leasing of residential property , and consumer credit, under the legal terms, for education, including academic and professional training;

                            (ii)            For operations engaged by beneficiary entities whose main activity is covered by the list of CAE (Portuguese Classification of Economic Activities)  in the annex to the decree (including certain transport, accommodation, catering activities, among others; the complete list can be view here).

                           (iii)            Beneficiary entities that do not intend to benefit from the extension until 30 September 2021 must inform the institutions thereof at least 30 days in advance.

 

Special maturity extension scheme for certain beneficiary entities (depending on the CAE (Classification of Economic Activity))

Beneficiary entities whose main activity is covered by the list of CAE (Portuguese Classification of Economic Activities) in the annex to the decree (including certain transport, accommodation, catering activities, among others; the complete list can be checked here) will automatically benefit from a special maturity extension scheme.

The maturity of their credits is automatically extended, for a period of 12 months, in addition to the period during which these credits were deferred as a result of the measures of this decree. In the case of credits with instalment repayment, the outstanding instalments must be adjusted proportionally and recalculated according to this new maturity.

Without prejudice to the fact that the institutions may continue to exercise all their rights under the applicable contractual and legal terms, the special extension referred to above cease immediately, in which case the original repayment scheme will be resumed increased by the period in which these credits were deferred as a result of the measures contained in this decree:

a) In the event of non-compliance by the beneficiary entity of such extension to comply with any pecuniary obligation to any institution; or
b) In the event of enforcement, by a third party, of any pecuniary obligation of the beneficiary entity of such extension or in the event of seizure or any act of judicial seizure of the assets of such beneficiary entity.


Beneficiary entities which do not intend to benefit from this special maturity extension scheme mentioned above must notify the institutions of their intention at least 30 days in advance.

 

Additional remark – mortgage foreclosure

Also, to remind, Law no. 1-A/2020, of 19 March 2020, determined the suspension until 30 September 2020 of the mortgage foreclosure on the property which is the permanent residence of the borrower.

Additional note – effects on voluntary moratoriums

From the date that it enters into force, Decree-Law no. 26/2020, of 16 June, establishes that operations meeting the eligibility criteria set forth in Decree-Law no. 10-J/2020, of 26 March, who have benefited from any moratorium before the institutions from 27 March 2020 and 17 June 2020 shall be subject to the legal regime set forth therein.

For such purpose, beneficiaries may remit up to 30 June 2020, the legally applicable documentation attesting to the proper fulfilment of their tax and contributory obligations, being therefore applicable thereto the legal regime in force, except when beneficiaries are already subject to the legal regime applicable to other eligible operations, in which case the operations foreseen in the previous paragraph are automatically subject to the legal regime.

 

 

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.