Coronavirus: Exceptional Measures Applicable to Social Economy Entities 

May, 2020 - Patrícia Dias Mendes

In the context of the Covid-19 legislative process, entities representing the social economy or what is often known as the third sector have already benefited from some consideration by the legislature. Certain legal arrangements have been drawn up to identify the needs and protect against the weaknesses of this charitable / socially supportive economic cluster.

These include, in particular, the moratorium on loans granted to these entities and the support for social and healthcare projects.

Decree-Law 10-J/2020

This Decree-Law is in force from 27 March until 30 September 2020. Among other things, it establishes exceptional measures to protect credit granted to private social solidarity institutions, non-profit associations and other entities in the social economy. It also establishes special arrangements for personal guarantees of the State due to the economic and financial impacts of the downturn in economic activity resulting from the Covid-19 pandemic.

The beneficiaries of these arrangements are private social solidarity institutions, non-profit associations, and other entities in the social economy, except for entities subject to supervision under the Code of Mutua l Associations, providedthat:

  1. As at 18 March 2020, they have not been arrears or in breach of financial obligations for more than 90 days to the Institutions (or, if they are, they do not exceed the materiality thresholds set out in Notice of Banco de Portugal 2/2019 and Regulation (EU) 2018/1845 of the European Central Bank).
  2. They are not in a situation of insolvency or of suspension or cessation of payments.
  3. On that date, the credits are not already subject to enforcement;
  4. They do not have tax or social security debts.
  5. They have their domicile or registered office in Portugal.

The moratorium provided for in this legislation involves the following main measures:

  1. Prohibition on full or partial revocation of credit lines taken out and loans granted, in the amounts contracted on the date of entry into force of this Decree-Law, during the period this measure remains in force.
  2. Extension for a period equal to the period of validity of this measure, of all credits with payment of capital at the end of the contract, in force at the date of entry into force of this Decree-Law, together, in the same terms, with all its associated elements, including interest and guarantees, in particular, provided through insurance or in securities.
  3. In relation to credits w ith partia l reimbursement of capital or staged maturity of other financial instalments, while this measure is in force, the payments of the capital, instalments and interest falling due up to the end of this period are suspended. The contractual plan for payment of the instalments of principal, instalments, interest, fees and other charges is extended automatically for a period identical to the suspension. This is to ensure there are no other charges beyond what may arise from any variation in the reference interest rate underlying the contract. All other elements associated with the contracts covered by this measure, including guarantees, are also extended.

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