COVID-19 – Extraordinary measures for protecting the credit of families, companies, IPSS and other agents of the social economy
The measures imposed by the Government to prevent and contain the COVID-19 pandemic will have serious consequences for the economy. The Government has been adopting protective measures for companies and households, aiming the mitigation of effects of reduced economic activity.
Exceptional support and protection measures for families, companies, charitable rity institutions, non-profit associations and other social economy entities were approved.
The support measures decreed under Decree-Law no. 10-J/2020 of 26th of March are intended to defer compliance with obligations to the financial system, creating moratorium of credits which will take effect up to 30th of September 2020.
Which measures were decreed?
• Prohibition of revocation, in whole or in part, of contracted credit lines and granted loans;
• Extension of all credits with capital payment at the end of the contract, which are already in force, including interest and guarantees, namely provided through insurance or credit titles;
• Suspension of payment of principal, rents and interest, in respect of credits with installment repayment of principal or with installment repayment of other cash installments, until 30th of September 2020. The contractual plan for the payment of the installments of capital, rents, interest, commissions and other charges will be automatically extended to a period equal to the duration of the extraordinary measures, ensuring that there are no charges other than the variability of the reference interest rate underlying the contract. All elements associated with the contracts covered by this measure, including guarantees, are also extended.
Note: The extension of the payment period for principal, rents, interest and commissions does not lead to any breach of contract, activation of acceleration clauses, suspension of interest due during the period of extension or termination of guarantees granted to beneficiary entities by third parties.
Beneficiary Entities
1. Companies that fulfill all the following requirements:
a) To have its headquarters and its economic activity in Portugal;
b) To be classified as micro, small or medium-sized enterprises;
c) To not be in arrears or have not paid cash benefits for more than 90 days as of 18th of March 2020; or, if they do, not reach the limits for these credit obligations to be considered as “significant” in accordance with the criteria of Banco de Portugal and the European Central Bank and are not in a state of insolvency, suspension or payment session, or on that date are already in execution by any of the institutions;
d) To have a regular tax and customs situation before the Tax Custhoms Authority and Social Security, with no reference to the debts contracted in March 2020 until 30th of April.
Note: Large enterprises in the financial sector are excluded from this range.
2. Self-employed workers who are eligible for extraordinary support due to reduction of economic activity;
3. Workers from entities which establishment or activity has been shutdown during the period of the state of emergency;
4. Individual entrepreneurs, as well as charitable institutions, non-profit associations and other social economy entities;
5. Individuals, relating to credit for own and permanent housing, even if subsidized, who:
a) are in a situation of prophylactic isolation or illness;
b) provide care for their children or grandchildren;
c) are in a reduction of their normal working hours or in suspension of their employment resulting from the declaration of a state of emergency;
d) are unemployed and registered with the IEFP;
e) beneficiaries of the Social Security Fund of Lawyers and Solicitors who have their respective contributory situation regularized or in the process of regularization.
How to proceed to access the moratorium?
• Sending to the lender institution, by letter or e-mail, a declaration of accession to the moratorium signed by the borrower in the case of individuals or sole entreperneurs; or by the legal representatives if they are charitable institutions, non-profit associations and other social economy entities;
• The declaration must be accompanied by documentation proving the regularity of the tax and social security situation;
• Upon receiving of the declaration, the measures must be implemented within 5 working days, with effect from the date of its submission;
• If the beneficiary entity does not comply with the necessary requirements, it is up to the lending entity to inform the beneficiary of this by sending a communication by letter or e-mail (depending on the means chosen by the beneficiary entity), within a maximum of 3 working days.
Supervsion and sanctions
Entities accessing support measures which do not meet the requirements are liable for damages arising from their misrepresentation, as well as for the costs incurred in implementing exceptional measures (in addition to other liabilities generated by the conduct, such as criminal liability).
Banco de Portugal is the entity responsible for the oversight and inspection of the moratorium regime.
