A 2003 report generated by the Expert Group for the European Commission as part of its "Best Project on Restructuring, Bankruptcy and a Fresh Start," disclosed that, as of 2002, Portugal had fully adopted 12 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. It had almost fully adopted 26 of these principles and guidelines, and had partially adopted 3 of them. PricewaterhouseCoopers (PwC) reported in 2005 that Portugal passed a new Code of Insolvency and Recovery of Companies in the previous year. This law focused specifically on creditor rights and the liquidation process. An earlier law, originally passed in 1998, directly addresses the procedures to be followed in order for a troubled firm to enter into an agreement with most or all of its creditors in order to achieve an out-of-court resolution of its indebtedness. This law was updated in 2004 to harmonize its provisions with the newly enacted Code of Insolvency and Recovery of Companies. The PwC report notes that there were no plans, at the time of the writing of the report, for further reforms of the insolvency regime.

General Overview

According to the Expert Group commissioned by the European Commission in 2003 to deliver a "Best Project on Restructuring, Bankruptcy and a Fresh Start" report, as of 2002 Portugal had fully adopted 12 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. It had almost fully adopted an additional 26 of the principles and guidelines, and had partially adopted three of them. In a 2005 report by PricewaterhouseCoopers (PwC), it was disclosed that Portugal's insolvency regime is largely governed by the 2004 Code of Insolvency and Recovery of Companies. This legislation is specifically focused on creditor rights, and the satisfaction of creditor claims by means of liquidation proceedings. Because of its strict focus on creditor rights, it obligates debtor firms to adhere to specific insolvency filing requirements according to a fixed schedule, and imposes significant sanctions on firms which fail to comply with these requirements. While the legislation encourages creditors to apply to the courts for relief in the case of insolvency, the PwC report notes that the obligation for creditors to assume most if not all court costs may serve as a deterrent in this regard.

According to the PwC report, an earlier 1998 Decree-Law No. 316 of 1998 directly addresses the out-of-court resolution of financially troubled firms. This law was amended in 2004 in order to bring it into harmony with the then newly passed Code of Insolvency and Recovery of Companies. Rescue provisions of the insolvency laws call for the debtor firm to come to an agreement with some or all of its creditors, and for this agreement to fall under the supervision of the Institute for the Support of Small and Medium Sized Enterprises and of Investment. The goal of the legislation is to enable rescue action to be taken prior to the collapse of a troubled firm, thus avoiding the need for more costly liquidation procedures. The PwC report notes that Portugal's insolvency legislation does not apply to state-owned or state-controlled agencies, nor does it apply to debtor firms in the insurance and financial and credit sectors. According to the "Doing Business 2009 Country Profile for Portugal," published jointly in 2008 by the International Bank for Reconstruction and Development and the World Bank, recent insolvency reforms in Portugal have streamlined the process to some degree. The publication of insolvency notices in the newspapers is no longer required. In addition, limits have been placed on the right to file procedural appeals, and new procedures have been introduced to permit fast-tracking for small debtors. Finally, as a member of the European Union, Portugal is subject to the provisions of EU Council Regulation No. 1346 on Insolvency Proceedings, which was enacted in 2000.

The World Bank's "Doing Business 2009" guide evaluates 181 countries around the world according to a number of factors that contribute to the overall ease of doing business, and one key factor is the ease with which insolvencies are resolved. To assess this factor, the World Bank looks at the average time required to complete a business closing, the average cost of such a proceeding (expressed as a percentage of the debtor estate), and the average recovery rate enjoyed by creditors, expressed in terms of cents on the dollar. To put these data into context, the World Bank offers comparable data derived from the experience of member states in the Organization for Economic Co-operation and Development (OECD). As of October 2008, closing a business in Portugal took an average of 2.0 years, cost 9% of the debtor estate, and yielded a recovery rate of 69.4 cents on the dollar. This compares with OECD figures of 1.7 years, 8.4% of the debtor estate, and 68.6 cents on the dollar.