Startup and Scaleup Status Regulation

•  Framework

Ministerial Order 401/2023 of December 4 (“Ministerial Order 401/2023”) was published, establishing the procedure for the recognition and termination of startup and scaleup status under the Startups Law (Law 21/2023 of May 25 - the subject of our Legal Update “Startups and Scaleups Legal Regime”).

• Recognition of status

Recognition takes place trough prior communication addressed to Startup Portugal, using the electronic form on the single public services portal and, in exceptional cases when the portal is unavailable, the communication can be sent by email, as indicated on the Startup Portugal website. Startup Portugal also provides a manual of procedures for submitting the form on the single public services portal and on its website.

• Submission method and information considered

Interested parties must submit the fully completed electronic form with certain information, as listed below.

Recognition of startup status:

a)   Applicant company’s identification details

b)   Activity start date

c)    Number of employees

d)   Turnover

e)   Proof that the company is not the result of a transformation or spin-off from a large company

f)     Proof of compliance with one of the following conditions set out in article 21.f) of the Startups Law:

·                 It is an innovative company with high growth potential, with an innovative business model, products or services, and falls within the scope of Ministerial Order 195/2018 of July 5, or has been recognized by the Portuguese National Innovation Agency (ANI-Agência Nacional de Inovação, S.A.) in the practice of research and development activities or certification of the recognition process for technology sector companies, except for promotional, intermediation, investment, or real estate development companies; or

·                 It has successfully completed at least one venture capital financing round by an entity legally qualified to invest in venture capital subject to the supervision of the Portuguese Securities Market Commission (CMVM) or a similar international authority, or through equity or quasi-equity instruments provided by investors who are not founding shareholders of the company; or

·                 It has received investment from Banco Português de Fomento, S.A. or from funds managed by it, by its subsidiaries, or one of its equity or quasi-equity instruments.

If one of the conditions established in article 2.1.f) of the Startups Law is not met, it is possible to remedy the lack through a prior declaration requested from Startup Portugal, with a decision made within 30 working days.

 Recognition of scaleup status:

a)   Applicant company’s identification details

b)   Proof that the company is not the result of a transformation or spin-off from a large company

c)    Proof of compliance with one of the conditions previously established for startups (which can be met by a prior declaration, as stated above)

d)   Confirmation of compliance with the criteria for obtaining Tech Visa certification established in article 3 of Ministerial Order 328/2018 of December 19.

• Digital certificate and validity period

The digital certificate of startup or scaleup status is issued within five days from the date the electronic form is submitted or the prior declaration is issued. Unfavorable decisions can be appealed under the general terms of the Administrative Procedure Code.

Recognition of startup or scaleup status is valid for three years and renewed by Startup Portugal for the same period. However, it is subject to periodic checks by Startup Portugal.

For the purpose of periodic status verification, Startup Portugal may request information from relevant entities such as the National Registry of Legal Entities or the Tax and Customs Authority.

• Termination and annulment of status

The status may be terminated whenever the conditions that led to its recognition no longer exist:

(i)          through a communication, by the legal entity itself; or

(ii)         ex officio, by Startup Portugal.

In the latter case, Startup Portugal initiates a procedure to verify the maintained status and notifies the interested party of its intention to terminate the status, starting a termination procedure in accordance with the Administrative Procedure Code.

The termination of the status takes effect from the date of notification.

Whenever the administrative procedure results in a change of conditions, Startup Portugal:

(i)   notifies the interested party of the final decision;

(ii)  informs the Tax and Customs Authority; and

(iii) updates the records on the platform used to communicate the relevant status.

On the other hand, the annulment of the status can occur due to:

(i)          false statements; or

(ii)         data manipulation.

This mechanism is triggered by sending a notification to the interested party, followed by an administrative procedure, under which Startup Portugal communicates with the responsible entities for the provision of all the necessary evidence.

As with termination, annulment follows the procedures and effects provided for in the Administrative Procedure Code.

• Entry into force

Ministerial Order 401/2023 came into force and has been effective since December 5, 2023.