‘On the Spot’ company set-up, Portugal
In 2005, the Portuguese Secretary of State of Justice implemented an initiative in order to relieve the bureaucratic burden accompanying the setting up of new companies. By simplifying the administrative requirements, it is now possible to create a company ‘on the spot’ in a single office in a single day. Although it is not an explicit objective, this measure should contribute to combating undeclared work.
In 2005, the Portuguese Ministry of Justice announced the ‘Simplex Programme’, a programme for administrative and legislative simplification. Its main objectives are to improve citizens’ quality of life and the operating conditions of companies, by promoting economic growth and development, and reducing the bureaucratic burden on public services users. The programme emerged from the need to change the procedures and processes integrated in law and regulations, following a negative assessment of their impacts and relevance.
‘On the Spot Firm’ (Empresa na Hora) is one of the provisions of the Simplex Programme, alleviating the bureaucratic burden of setting up an enterprise. This initiative makes it possible to create a company in a single office – a ‘one-stop shop’ – in a single day. The interested parties no longer have to obtain in advance a certificate of company admissibility from the National Registry of Companies (Registo Nacional de Pessoas Colectivas, RNPC), nor is it necessary to sign a public deed. During the simplified process, the company or legal person identification card is handed over, the social security number is given and the company immediately receives its memorandum and articles of association, as well as an extract of the entry in the Commercial Register (Conservatória do Registo Comercial). The security of the incorporation procedure for new enterprises is ensured by sending all of the details to the tax authorities.
The ‘On the Spot Firm’ initiative was developed by the Secretary of State of Justice, João Tiago Silveira, coordinated by the Agency for Administrative Modernisation (Agência para a Modernização Administrativa, AMA). It was implemented in cooperation with various ministries: the Ministry of Justice (Ministério da Justiça), the Ministry of Finance and Public Administration (Ministério das Finanças e da Administração Pública), the Ministry of Economy and Innovation (Ministério da Economia e da Inovação), and the Ministry of Labour and Social Solidarity (Ministério do Trabalho e da Solidariedade Social, MTSS).
At present, the initiative involves:
- 10 Enterprise Formalities Centres (Centros de Formalidades das Empresas, CFE), covering most of the mainland of Portugal and the autonomous region of Madeira;
- 90 local Commercial Registers, covering all of the national territory;
- the RNPC in Lisbon.
The number of CFE or one-stop shops for companies is still growing.
The specific objective of the programme is to modernise administration by simplifying the relationship between a company and the public administration throughout its life cycle. This aim corresponds with the strategic objective of promoting a change in Portugal’s economic profile in terms of the sectors of industry and services.
The implementation of this initiative implies the following steps:
- creation of a set of pre-approved and licensed fictional companies at the RNPC, making possible the immediate constitution of one-person companies, private limited companies or partnerships, and public limited companies;
- pre-approved companies’ contracts made available in the Commercial Register and in the CFE;
- exemption from signing a Public Deed in the act of company constitution in the CFE and RNPC. The exemption allows the formation of the company in a single act of control – that is, commercial registration.
Evaluation and outcome
Achievement of objectives
In general, it is possible to conclude that setting up a company in Portugal is now faster, less bureaucratic and cheaper, compared with many other EU Member States. The security of the incorporation procedure for new companies is ensured by sending all of the details to the tax authorities.
Obstacles and problems
The merits of this initiative were discussed at a certain point during its implementation. The debate considered whether ‘on the spot’ companies would relieve the bureaucratic burden to the extent that it would facilitate tax fraud, namely in terms of value added tax (VAT). However, the Ministry of Finance and Public Administration stated that the constitution of companies on the spot does not represent a higher risk of fraud than the usual procedures. Moreover, the ministry underlined that the conditions for establishing an enterprise on the spot are even more demanding than those that existed previously. For example, companies now have to designate an official accounts technician and more rigorous requirements are in place for validating bank accounts.
As detailed below, this initiative is internationally recognised as a good practice, transferable to other countries.
Since 2005, when the initiative started, some 59,068 new enterprises have been formed, as of September 2008: 574 public limited companies (1%), 34,934 private limited companies (59%) and 23,560 one-person companies (40%). The average time taken to constitute the company is one hour and 14 minutes.
Through this project, Portugal has joined the group of countries in which setting up a company is faster than usual. The initiative was considered by the World Bank as a success.
No specific assessment was made in relation to the impact of the initiative on reducing undeclared work. However, it may be presumed that, with more persons registering officially in business, fewer people are working in an informal capacity.
It seems that this initiative can be, with suitable adaptations, transferred to other countries. After being recognised as a success by the World Bank, several countries have shown considerable interest in the Portuguese initiative. Officials from Angola and Cape Verde, for example, have already asked for legal and technical support in this regard. Meanwhile, representatives from countries such as Finland, Hungary, Slovenia and Sweden – as well as Brazil, Chile, China, Egypt and Mozambique – have visited the ‘on the spot firm’ service to familiarise themselves with and understand how Portugal managed to relieve the bureaucratic burden involved in setting up an enterprise.
This initiative has been recognised as one of the measures aiming to tackle undeclared work through reducing the administrative burden on businesses (European Commission, 2007). Nevertheless, before drawing further conclusions in this regard, it would be essential to effectively assess the impact of this measure on the prevalence of undeclared work in Portugal.
Main organisation involved: On the Spot Firm (Empresa na Hora)
www.empresanahora.pt/ENH/sections/EN_homepage (in English)
European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities, European Employment Observatory, Review: Spring 2007, Luxembourg, Office for Official Publications of the European Communities, 2007, available online at: http://www.eu-employment-observatory.net/resources/reviews/EN-ReviewSpring07.pdf.
Heloísa Perista and Jorge Cabrita, CESIS