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Financial Participation

The origin of the legal framework for employee financial participation in Portugal was the 1969 law on profit-sharing – or more precisely on its company taxation. The second part of the legal framework, concerning employee share ownership, resulted from the privatization process. In 1989, a privatization law with special provisions for employee share ownership was introduced.

The legal framework for employee financial participation in Portugal is less developed than in many other Member States of the European Union. The framework is mainly composed of laws regarding the taxation of employees and companies, labour market regulation and privatization.1

Employee share ownership results mainly from the privatization process started in 1988. The 1989 Privatization Law has as its objective “ to allow a wide participation of Portuguese citizens in the ownership of privatized firms […].”2 Thus, part of the shares privatized were reserved for small subscribers and employees, who also benefited from lower prices. Some of the privatized firms included the granting of shares to their employees as remuneration. There were also special payment terms for employees not available to other small subscribers. Particular provisions also refer to delayed payment without interest, payment by instalment, cash discounts and loans granted to employees. Tax concessions were also provided to employee owners (higher income tax deductions).

However, their conversion into immediate profits was limited. A two year period was defined in the 1998 Law 84/88, during which employees were obliged to keep their shares (the so-called unavailability period). In addition, as from 1990 employees were not allowed to delegate their voting rights within this period. The number of shares each employee could buy was restricted. Later (starting with 1991) employees gained the right to form investment funds with the shares bought, so that they could overcome some constraints which small owners face, like limited access to information and real influence on the company’s General Assembly. These funds could also hold assets from other companies. Nevertheless a wider distribution of share ownership schemes was not facilitated.3

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.