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16 May 2007
In early 2007 the legislature enacted Decree-Law 8/2007 as a follow-up measure to Decree-Law 76A/2006, which was issued on March 29 2006 and came into force on June 30 2006. The earlier decree-law reformed a number of bureaucratic and administrative procedures relating to the day-to-day operation of companies (for further details please see "Changes to Companies Code Simplify Merger Procedures"). The new decree-law makes few changes to the framework established last year. Rather, it is intended to perfect it, making the procedures easier to use without jeopardizing legal certainty.
One of the main aims of the changes (as stated in the preamble to Decree-Law 76A/2006) is to make the execution of public deeds optional for certain corporate acts. However, the new framework also involves substantial changes to the legal provisions applicable to mergers and demergers (eg, spin-offs). In general, the new rules have made mergers and demergers simpler, cheaper and faster.
The completion of a merger formerly involved three registrations with the Commercial Registry, one public deed and the publication of four notices in the Official Journal and two further notices in a local newspaper. The new framework requires only two publications on a website and two registrations with the Commercial Registry.
The new procedure comprises four stages:
The general requirement to obtain a public deed has been abolished. However, there is an exception: if the transaction includes the transfer of real estate assets, the execution of a public deed remains mandatory.
The one-month period during which creditors may exercise their right to oppose the merger now starts on the date on which notice of the shareholders' meeting is published. In order to simplify the procedure, the new framework abolishes the requirement to publish an announcement addressed specifically to such creditors in order to inform them of their right to oppose the merger if they consider that it would obstruct the exercise of their rights. Previously, in certain circumstances it was also mandatory to communicate this information by registered letter and to obtain notice of receipt by the creditors.
The new rules allow for greater flexibility in mergers. The reduction in formalities makes the procedure less burdensome and reduces the transaction costs which might otherwise prevent mergers from taking place. Most significantly, the new framework reduces the timeframe for completing the procedure once the companies decide to merge.
Some critics have protested that these benefits come at the expense of legal certainty, as certain steps which have been abolished in most cases (eg, the execution of a public deed by a notary) were intended to ensure that transactions complied with the applicable legislation. However, most practitioners consider that the new procedure does not jeopardize legal certainty or compliance. Most mergers are structured with the assistance of lawyers, who must adhere to a strict code of conduct and act in accordance with the law. Moreover, the merger must still be registered with the Commercial Registry; therefore, a government official will analyze and confirm the legality of each transaction before it is registered.
For further information on this topic please contact Vasco Rodrigues or Paulo Mendonça Duarte at Rui Pena, Arnaut & Associados - Sociedade de Advogados by telephone (+351 21 382 8150) or by fax (+351 21 382 8155) or by email (email@example.com or firstname.lastname@example.org).
(1) Before the enactment of Decree-Law 76A/2006, notices had to be published in the Official Journal. If one of the companies was a joint stock company, the notices also had to be published in a newspaper located near its registered office or, if no such newspaper existed, in a newspaper with a large circulation in the area.
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Paulo Mendonça Duarte