Decree-Law No. 10-J/2020, of March 26, has approved an exceptional, special regime of personal guarantees of the State, in the context of the COVID-19 disease pandemic. 

We must also attend to Decree Law 22-C/2021, of 22 March, which, among other things, extended the grace period for capital payments and the maturity applicable to credit operations concluded between 27 March 2020 and 23 March 2021, which benefit from guarantees provided by mutual guarantee companies or by the Mutual Counter Guarantee Fund. Given its relevance, we must focus on this matter first.

Kindly refer to the information available under "Impact on State Aid to Undertakings" .

 

Grace period and maturity of credit facilities with public guarantee

As a result of the amendments introduced by Decree-Law 22-C/2021, of 22 March, the grace period and maturity of credit facilities with public guarantee was extended as follows:

  1. The credit operations benefiting from guarantees granted by mutual guarantee companies or by the Mutual Counter-Guarantee Fund, concluded between 27 March 2020 and 23 March 2021, under the various protocols entered into between Banco Português de Fomento, S. A. (at the time, SPGM - Sociedade de Investimento, S. A.), the acceding credit institutions and the mutual guarantee companies (Protocols), may benefit from an extension of up to nine months of the grace periods of the contracted credit operations.
  2. As a general rule, the nine-month extension is effective upon notice of accession by the borrower to the banking institution by 31 March 2021. The extension is deemed to have been accepted, there being no need to notify the bank of the accession, in the case of borrowers whose main activity is included in the list of economic activity codes (CAE) in the annex to Decree-Law 22-C/2021 of 22 March (available here), which includes accommodation, catering and similar activities, air transport, and many others). A borrower may rebut such presumption by notifying the banks until 31 March 2021. Any borrower may, even after 31 March 2021, benefit from the extension of the grace period and associated extension of maturity for a period of less than nine months, by notifying the banking institution of such intention no later than 30 days prior to the intended effective date;
  3. When applicable, the extension of the grace period is accompanied by an extension of the respective maturity for the same period, provided that, the total maturity of such credit operation does not exceed the respective maximum term specified in the Protocols, and the conditions of the credit operations are adjusted to comply with the conditions specified in the applicable Protocols.
  4. When the grace period is extended under the terms referred to above, all elements associated with the relevant credit operations, including guarantees and counter-guarantees, are also extended, with waiver of the applicable legal procedures.
  5. The above amendments are also applicable to credit operations concluded between 27 March 2020 and 23 March 2021, even if the grace period was not specifically provided for or, in case it was, it has already elapsed. In this case, the grace period is extended for an additional period, along with the respective maturity, which shall be extended for an identical period. Such additional period will commence as at 23 March 2021, and, during such period, any enforcement actions for the payment of any principal in arrears as of March 23, 2021, and associated contractual penalties are suspended.

The members of the Government responsible for the areas of economy and finance are responsible, for identifying the Protocols covered by this regime, by means of a ministerial order. In particular, ministerial order 3191-b/2021, has identified the following facilities covered by the Protocol: a) AND 2018; b) AGRO GERAL; c) AGRO JOVENS; d) Apoiar Madeira 2020; e) Apoio Economia COVID-19; f) Apoio Revitalização Empresarial; g) Apoio Sector Social COVID-19; h) Capitalizar; i) Capitalizar 2018; j) Capitalizar Mais; k) Capitalizar Turismo 2018/2019; l) Descarbonização e Economia Circular; m) Ensino Superior 2018; n) Garantias financeiras COVID-19; o) Geral; p) Investe RAM 2020; q) Investe RAM COVID 19; r) Linha de Apoio à Economia COVID19 - MPE; s) Linha de Apoio ao Empreendedorismo e à Criação do Próprio Emprego; t) Linha Específica COVID 19 - Açores; u) Programa Operacional da Economia/Programa Quadro de Inovação Financeira; v) RAM PME Madeira II; w) Regressar; x) Seca 2017; y) Social Investe; z) Apoio Economia COVID 19 - Empresas Exportadoras da Indústria e do Turismo; aa) Apoio Economia COVID 19 - Empresas de Montagem Eventos; bb) Apoio Economia COVID 19 - Agências de Viagens e Operadores Turísticos.

 

Public guarantees on new financing schemes:

Decree Law 10-J/2020, of 26 March law also establishes a special system of personal guarantees by the State and other legal persons governed by public law, including to guarantee credit operations or other financial operations, in any form, to ensure liquidity or any other purpose.

The law further regulates the granting of guarantees referred to in the previous paragraph, within the context of the initiatives, programmes and other support measures adopted within the European Union or under European instruments and mechanisms.

 

Who can benefit from State personal guarantees?

Without prejudice to the granting of guarantees within the context of the initiatives, programmes and other support measures adopted within the European Union or under European instruments and mechanisms, the State personal guarantees may be requested by the following entities:

  • Companies
  • Private social welfare institutions
  • Non-profit associations and other social economy entities

 

What is the procedure for granting State guarantees?

The abovementioned entities may benefit from the provision of State guarantees through the following procedure:

  • Request
    This request shall be addressed to the member of the Government responsible for the financial sector, through the Directorate General of Treasury and Finance. The essential details of the transaction to be guaranteed have to be indicted, in particular, the amount and the deadline. In order to assess the risk of the operation and to define the conditions of the guarantee to be granted, additional elements may be required.  
  • Opinion
    The member of the Government of the area of activity of the beneficiary entity must issue an opinion, his favorable opinion being a necessary condition for the application to be granted.
    The opinion shall focus on the framework of the transaction within four aspects:
    • Government policy to respond to the national economic emergency resulting from the COVID-19 pandemic
    • Relevance of the beneficiary entity to the national economy
    • Prospective economic viability of the entity concerned
    • Express need for personal guarantee from the State 
  • Dispatch
    The essential details of the transactions and the favourable opinion shall be published in an annex to the approval or authorization order and any amendment shall follow the same procedure.
  • Follow-up
    The beneficiary entities or other entities, as defined by the order of the Government responsible for the financial sector, shall regularly send to the Directorate General of Treasury and Finance the necessary details to monitor the transactions that are subject to the guarantee and, as soon as become known, of facts making it impossible to duly comply with the guaranteed obligations.
  • Guarantees within the context of the European Union
    The procedure referred to above applies, mutatis mutandis, to the granting of guarantees within the context of initiatives, programmes and other support measures adopted within the European Union, or under European instruments and mechanisms
  • Regulation
    The member of the Government responsible for finance may define by order other terms and conditions relating to the transactions subject to the guarantee, as well as the respective procedure.
  • Decree Law 22-C/2021, of 22 March - Mutual Counter-Guarantee Fund

    This Decree-Law includes the following new provisions:

    1. The Mutual Counter-Guarantee Fund will also be able to, on an derogatory and temporary basis, in order to deal with the economic impacts resulting from the COVID-19 pandemic disease, provide guarantees to companies, provided that the managing entity acknowledges their significant importance to the economic and scientific development or the promotion of innovation;
    2. The amounts guaranteed under the terms of the preceding paragraph are subject to the limits set out in the Temporary Framework on State aid measures to support the economy in the current context of the COVID-19 outbreak and in the European Commission decisions relating to the Portuguese State under such framework.  The total amounts guaranteed under the above mentioned terms shall be taken into account for the purposes of the limit set forth in Article 2(4) of Decree Law 229/98, of 22 July 1998 , and may be repealed in exceptional circumstances by means of a prior order of the members of the Government responsible for the areas of economy and finance.
    3. The operations to be carried out by the Mutual Counter-Guarantee Fund requiring a personal guarantee from the State, are subject to prior authorisation by the Government member responsible for the area of finance, in accordance with the applicable legal terms.

 

 

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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.