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02 March 2000
Scope of the New Code
Director for Minority Shareholders
Disclosure of Information
Increases in Capital
Change of Status
Companies Code Amendments
On November 13 1999 the Portuguese government approved a new Securities Code that will come into force in March 2000. Until then the Securities Market Code, approved in 1999, will continue to regulate most securities market activity. However, the new mandatory takeover regulations in the new code apply as of December 28 1999.
Scope of the New Code
The main objective of the extensive revisions to the former code was to conform national law to EU directives on insider trading, public offers and takeover procedures. As a result, the approach to takeovers and mergers in Portugal has been completely overhauled.
The new code also takes into consideration the recent developments in both the concepts and mechanisms concerning placing and trading securities, such as:
Furthermore, the code overhauled the legal regime with respect to securities, as the legislators considered the beneficial aspects of the Portuguese Securities Law.
The former code provided a complex takeover system with five cases that required a mandatory bid. The new code is quite different and clearly inspired by the English regulations of the City Code on Takeovers and Mergers. The basic features of the new regulations are as follows:
The basis deadlines for the offer period contained in the old code have been maintained in the new law. The offer process in Portugal is longer than in most other jurisdictions and if administrative authorizations are necessary (eg, from the Portuguese or EU competition authorities) the timeframe is further lengthened. Offers cannot be registered until all authorizations are obtained.
Pursuant to Article 392 of the Companies Code, all public companies have the
obligation to provide a director for the minority of shareholders with a participation
of at least 10% of the company's share capital. If all of the directors of a
public company are elected against the votes of the minority shareholders, a
new election must be held to replace one of those directors by a director appointed
by the minority shareholders.
Article 36 of the Portuguese Companies Code establishes that the obligations assumed by directors of a public company cannot be abandoned. Directors' obligations may be set out in the articles of association of the company or established by a resolution approved in a general meeting of shareholders. Personal liability of directors cannot be less than Ecu5,000.
Disclosure of Information
Portuguese law provides that opened companies are subject to special disclosure
obligations. The amount of information that must be disclosed depends on whether
the shares are listed or not on the Lisbon Stock Exchange.
If the company's shares are not listed, the new Securities Code obligates the company to inform the market every time a party acquires a participation representing a certain percentage of the votes corresponding to its share capital. Also, when a shareholder reduces its participation under specified limits, the company must also inform the market. Therefore, both increases and reductions of a participation in the share capital of an open company demand that the company inform shareholders beforehand.
In the case of companies that are listed, such companies must also provide the market with annual and half-year profit reports, important amendments to the articles of association and by-laws, and decisions reached by the general shareholders' meeting.
Increases in Capital
Open companies must raise capital by selling shares for cash consideration even when shares are sold to already existing shareholders. This requirement ensures that all documentation requirements necessary for an offer have been satisfied (eg, the execution of a prospectus).
The costs involved in making an offer of shares is not insubstantial as fees
must be paid to the financial intermediary and to the CMVM. The cost of producing
and distributing prospectuses must also be considered.
The Securities Code provides a compulsory acquisition mechanism in Article 94 that is applicable only to open companies (ie, a 'squeeze out mechanism'). A shareholder that holds (individually or jointly with concerted parties) more then 90% of the votes of an open company, after the launching of a takeover bid, may acquire all the remaining shares within a period of six months after the offer has ended. Also, any minority shareholder can require the dominant shareholder to present him a proposal for the acquisition of his shares. If the dominant shareholder does make an offer, the minority shareholder can involve the CMCV to make it compulsory for the dominant shareholder to buy the minority shareholder's shares.
Both compulsory acquisitions and compulsory sales are supervised by the CMVM.
A company may utilize two different procedures to change its status as an open
company to some other form. These procedures are provided for by Articles 27
and 194 of the Securities Code.
Article 27 allows for a change in status by the following methods:
The CMVM decides whether or not to change the status of an opened company.
The compulsory acquisition mechanism provided by Article 194 will also lead to the loss of opened-company status.
The approval of the new Securities Code required corresponding amendments to Portugal's Companies Code. For example, the compulsory acquisition provisions of Article 490 of the Companies Code apply only to non-opened companies since the Securities Code reserves to opened companies the application of the compulsory acquisition mechanism provided by its Article 194. Amendments to provisions in the Companies Code dealing with trading of shares were also required.
For further information on this topic please contact Anabela Gonçalves Ferreira at AM Pereira, Sáragga Leal, Oliveira Martins, Júdice e Associados by telephone (+351 21 319 7300) or by fax (+351 21 3197400) or by e-mail (AF@PLMJ.PT).
The materials contained on this web site are for general information purposes only and are subject to the disclaimer.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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Anabela Goncalves Ferreira