By Moustafa Daly
Until recently, investors seeking Portugal’s golden visa could simply buy property and then apply. It has changed since a new law came into effect earlier this month, scrapping the real estate investment option.
To qualify for Portugal’s golden visa under the new rules, investors now have to contemplate a number of different business and cultural investment routes. The business route entails investing at least €500,000 in a venture capital fund in Portugal, and is widely expected to be popular amongst investors despite its relatively high threshold – the cultural investment route is half as expensive at €250,000.
In response to the changes, Portuguese law firms that operate within the golden visa industry are increasingly helping launch venture capital (VC) funds that satisfy the government’s requirements to shortcut the process for foreign investors, sources tell Uglobal.
“Yes, it’s true,” confirms Tiago Gali Macedo, managing partner at Gali Macedo & Associados. “There is a new trend to incorporate funds to be able to comply with the new regulation.”
“In the meanwhile, it reduces the risk of investment by diversification, and also control by the Portuguese security exchange comity,” he adds.
The news symbolizes the industry’s ability to not only survive, but also thrive amidst quickly changing dynamics. “The market is highly active, actively seeking solutions to present to clients interested in applying for the Golden Visa program in Portugal,” explains Raquel de Matos Esteves, founding partner at RME Legal.
“We have established new connections with multiple eligible funds that also express interest in expanding their offerings to foreign citizens seeking Portuguese residency through investment,” she adds.
Are Portuguese law firms setting up Venture Capital (VC) funds for investors?
However, incorporating funds can takes long as six months due to the need of establishing a fund managing company first, Macedo explains.
The industry sees the move to launch venture funds as a natural evolution, but it should be approached with caution. “It is normal for law firms to be involved in the legal structuring of VC Funds,” says Sara Sousa Rebolo, partner at Lisbon-based Prime Legal.
“However, if they are more than legal advisers, it is important to keep in mind the duty of avoiding conflict of interests,” she adds.
Rebolo cautions that if law firms own stakes in VCs, it might not be in the best interest of investors.
“Investors shall decide their investment independently and by their own choice, being even advisable to diversify between different funds due to the risk involved in the financial market,” she explains.
Law firms should instead focus on their main job. “It is understandable the argument of “making the investor’s life easier”,” Rebolo says. “But in fact, it is the job of the legal advisor to confirm the eligibility of any fund the client might be interested in.”
Funds in Portugal are seeking legal advice to appeal to golden visa investors
Following the change in the law, private equity and venture capital funds are increasingly trying to attract the expected influx of golden visa investments.
“[Private equity and venture capital] funds are asking legal opinions from independent law firms to confirm their eligibility and facilitate this due diligence step,” Rebolo reveals.
When it comes to the process for investors, Rebolo says it remains the same with any fund and can’t be shortcut due to strict oversight by government bodies, which she views as leveling of the playing field that is in the investor’s benefit. “It does not make much difference for the clients [to pursue investment in one fund or another]. They can only benefit of a good competition and diversified offer of funds available in the market.”
Portugal’s golden visa industry is evolving
Given the relatively short lifespan of the golden visa industry in Portugal, launched in 2012, the industry is yet to fully mature and have actors that defend its interest, explains Rebolo. Therefore, she sees the ongoing attempts by industry actors to clarify and streamline the new process for investors as a healthy sign of an industry finally coming together.
“This year we could finally see the market acting together in the defense of this industry, which has already had a significant relevance in the Portuguese economy,” she says.
Despite the restrictive changes, the Portuguese program continues to be attractive “considering the flexibility with the minimum staying period of 7 days / year and the access to effective European citizenship for applicants and their children,” explains Rebolo.
Long processing periods and complicated legal rules may hinder the industry, but Rebolo maintains optimism.
“When looking in detail to other countries we will see that these are downsides common to the immigration industry in general,” she argues.
“As such, we see it positively that the market adjusting to the new law and organizing new options of investment; not only in the VC funds area but also in the corporate and cultural areas,” she adds.
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