The New Legal Regime for the Conversion of Unsubordinated Credits into Capital

Law No. 7/2018 was published on 2 March and created a legal regime for the conversion of unsubordinated credits into capital in commercial companies, or companies adopting a commercial form, incorporated under the Laws of Portugal.

The new law entered into force on the day after its publication and clearly aims to provide an extrajudicial mechanism for the conversion of credits into capital (“Conversion”), enabling, on the one side, the companies that are in a difficult financial situation, but are still economically viable1, to strengthen their equity and, on the other side, certain of their creditors – unsubordinated – to convert their receivables (unlikely to be recoverable) over these companies into registered capital.