Contractors with Lawsuits and Insolvencies in Portugal - How to Check
In 2024, 2,080 insolvencies were registered in Portugal's construction sector, an 8.2% increase from the previous year. That is more than 5 companies per day collapsing. Add to that the fact that, according to IGAMAOT, 94% of construction projects have some form of irregularity, and the picture that emerges is concerning for anyone thinking about hiring a contractor.
The good news is that many of the warning signs are available in public records. The bad news is that almost nobody checks them before hiring. This guide explains how to check if your contractor has court proceedings or insolvencies, and how to interpret what you find.
Every case is different, always consult a lawyer for your specific situation.
How CITIUS works
CITIUS is the Portuguese courts' information system and the main public tool for checking court proceedings. In the public consultation section, you can search by tax number or company name and see all proceedings in which that entity is involved.
What you can find:
- Insolvency proceedings (CIRE) - when the company was declared unable to pay its debts
- Special Revitalization Processes (PER) - when the company is trying to restructure before reaching insolvency
- Civil actions - lawsuits filed against or by the company (contractual breaches, debts, construction defects, etc.)
- Interim injunctions - emergency measures requested from the court
The search is free, but the interface is not exactly intuitive. Results can be difficult to interpret for anyone not familiar with legal terminology.
What each type of proceeding means
Insolvency (CIRE proceedings)
Insolvency is the most serious proceeding. It means the company cannot pay its debts and the court has formally declared that inability. In most cases, the consequence is liquidation: the company's assets are sold and the money is distributed among creditors according to a legal hierarchy.
An active insolvency is the biggest red flag you can find. A company in insolvency cannot legally accept new work. If you are considering hiring a company that is in active insolvency, do not do it under any circumstances.
Historical insolvencies (already closed) are less serious but still relevant. They indicate the company went through financial difficulties in the past.
PER (Special Revitalization Process)
PER is an attempt to avoid insolvency. The company acknowledges it has difficulties but presents a plan to restructure its debts and continue operating. If creditors approve the plan and the court ratifies it, the company continues to function.
An active PER is a significant warning sign. It is not as serious as a declared insolvency, but it clearly indicates that the company has serious financial problems. Hire with extreme caution, and if you have alternatives, consider them seriously.
Civil actions
Civil actions are lawsuits filed by or against the company. They can be of a very diverse nature: contractual breach, debt claims, construction defects, labor disputes.
One or two civil actions are not necessarily concerning, any company of some size may have proceedings. What should alert you is a pattern: multiple proceedings in a short period, all of the same nature (for example, several clients suing for breach of contract), indicates a systematic pattern of problems.
Creditor vs. debtor: the crucial distinction
When analyzing court proceedings, it is fundamental to distinguish the company's role in the case:
- The company as creditor - it appears in the proceedings because someone owes it money. This is neutral or even positive: the company is defending its credits.
- The company as debtor/defendant - it appears because it owes money to someone or because someone is suing it. This is what should concern you.
On CITIUS, this distinction is not always immediately obvious. But it is crucial: a company that appears in 10 insolvencies as a creditor (it is owed money by other insolvent companies) is in a completely different situation from a company that appears in 10 proceedings as a debtor.
The company carousel: the most dangerous pattern
If there is one pattern you need to know, it is this one. It works like this:
- The contractor opens Company A
- Company A accumulates debts, complaints, lawsuits
- Company A declares insolvency or is simply abandoned
- The contractor opens Company B, with a different name but the same business model
- The cycle repeats
This is legal, in the sense that anyone can open a new company. But it is an enormous red flag. The system detects this pattern because, when checking a company's directors, it automatically cross-references their names with other companies and court proceedings. A director with 3 insolvent companies on their record is a risk that no explanation can disguise.
This is why checking just the company is not enough. You need to check who is behind it.
New companies with zero records: safe?
A newly created company with no court proceedings may look clean. But the absence of records is not necessarily a positive sign. It may simply mean that:
- The company is so new it has not had time to accumulate proceedings
- It is a shell company created after the collapse of another (the carousel described above)
- It operates with such a small volume that it has not yet generated legal conflicts
For very recent companies (less than 2 years), it is essential to check the directors. If the director of a company founded 6 months ago has 15 years of experience in construction, where were they before? What companies did they manage? What happened to those companies?
The typical sequence before collapse
Construction companies rarely collapse overnight. There is a typical sequence of signs that manifest gradually:
- Phase 1: Social Security debts - when money starts running short, social security contributions are usually the first to go unpaid
- Phase 2: Tax debts - VAT and corporate tax stop being paid. The company appears on debtor lists
- Phase 3: Court proceedings - suppliers and clients start suing for breach of contract
- Phase 4: Insolvency - when the illusion can no longer be maintained, the company is declared insolvent
- Phase 5: CIRE 30-day deadline - creditors have a limited period to file credit claims
The crucial point is this: if you catch a company at Phase 1 or 2, you can still decide not to hire and avoid the problem entirely. If you only find out at Phase 4, it is too late.
Why checking early makes all the difference
The difference between checking before and checking after is the difference between avoiding the problem and trying to recover money that probably will not come back. The statistics are clear: in insolvency proceedings, ordinary creditors recover on average a minimal fraction of their credits. In many cases, recovery is zero.
A verification that takes minutes can save you months of court proceedings and thousands of euros in losses. It is not an absolute guarantee, no system is, but it is a fundamental layer of protection that most people simply do not use.
Automatic verification with ObraXRAY
ObraXRAY automatically cross-references data from CITIUS, IMPIC, commercial registry, debtor lists, and director history to generate a complete report on any construction company in Portugal. The search takes minutes and delivers a clear risk score, with all court proceedings identified and classified.
Instead of trying to navigate CITIUS and interpret legal terminology, you receive everything already processed and organized. No technical knowledge needed, no complications.