Directors’ Duties in Portugal

>> Liabilities and Penalties in Portugal

Generally speaking, if a managing director negligently or intentionally practices an unlawful action or omission in breach of his legal or contractual duties from which damages have arisen to the company he is liable to the company for damages, jointly and severally with any other managing director who is also in breach of their duties. A managing director can be held liable for payments made by the company after over-indebtedness was ascertained or illiquidity arose, particularly where those payments would not have been made by a diligent and prudent businessman. In exceptional cases, the managing directors can also be liable directly to the shareholders or third parties, provided that all general requirements for civil liability are met.

In several cases, misconduct of a managing director can lead to criminal liabilities, eg in case of:

  • Reporting false information to the commercial register.
  • Refusal to provide information related to the preparation of shareholder meetings to interested parties.
  • Providing false information pertaining the company to persons with the right to receive information.
  • Failure to inform the shareholders of losses amount to half of the registered capital.
  • Failure to file for insolvency when required by law and provided certain legal requirements are met.
  • Wilfully generating the insolvency of the company, causing a delay in filing for insolvency or preferential treatment towards certain creditors and/or debtors.

Limitation of liability

In principle, a managing director cannot be held liable if the actions undertaken by him were approved by a shareholder resolution, unless such actions are illegal. In such case the managing director is obliged to ignore any instructions received by the shareholders.

The directors’ liability cannot be limited by agreement. Such clause, if in existence, shall be deemed null or void. However, shareholders may waive the company’s right to receive compensation or agree on a reduction thereof, provided that a resolution of the shareholders representing more than 90% of the company’s share capital is passed. This does not apply to criminal offences.

The liabilities of a managing director to third parties cannot be limited.

Delegation of authorities

A managing director may appoint, on behalf of the company, a special proxy or authorized representatives to act, with full authority regarding specific matters or in specific contracts. However, his own powers of representation can only be delegated to another director.

Directors and officers (“D&O”) insurance

D&O insurance can be obtained against the liabilities of the managing director’s vis-à-vis the company. Under Portuguese law, third parties generally may have a direct claim against the managing director and the company. The cases where a third party may have a direct claim against the company are not generally covered by D&O insurance.

Please note that the D&O insurance does not protect the managing director against his criminal liabilities.

Latest version updated 6th April 2018

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