In a leveraged buy-out the acquisition is typically financed with debt collateralised (directly or indirectly) by the target's own assets. Although still highly restricted by the Portuguese legal framework's stringent rules on financial assistance, a leveraged buy-out may be structured in such way that there is no direct assistance from the target, thus avoiding the general prohibition rule.
Step-in rights are common contractual arrangements in finance deals, stemming from step-in clauses that grant lenders the right to intervene or 'step in' to ensure that key contracts are completed successfully. If a step-in clause is excessively burdensome for one of the parties, it is challengeable in court on the basis of breach of good faith and public order.
A new decree-law awaiting official publication introduces more flexible rules for the operation of venture capital funds and companies and creates a new class of investor: the venture capital investor or 'business angel'. Other regulatory changes remove the restriction which limits syndicated funds for venture capital to financing small and medium-sized enterprises.
A new decree-law continues the reform of a number of bureaucratic and administrative procedures relating to the day-to-day operation of companies. The new framework involves substantial changes to the legal provisions applicable to mergers and demergers; in general, such operations are now simpler, cheaper and faster.
Decree-Law 219/2006 has implemented the EU Takeover Directive and, in part, the EU Transparency Directive. Despite the fact that only part of the Transparency Directive was transposed, the legislative amendments have had a considerable impact on the market.
Despite the fact that the government originally announced that the EU Takeover Directive would be transposed into Portuguese law before May 20 2006, Parliament has yet to implement the necessary legislative changes. However, the final draft of the bill gives an indication of what to expect.
The Portuguese M&A market has been buoyant in recent months. The intervention of the securities regulator in two bids - in the telecommunications and media and banking sectors - sheds light on the use of 'poison pills', the defensive measures at the disposal of target companies in hostile takeovers.
The Portuguese government is in the final stages of approving a number of amendments to the Portuguese Companies Code, which has not been significantly revised since it was enacted in 1986. The proposed amendments are intended to simplify merger procedures and reduce state influence in key markets, which has long been regarded as an obstacle to takeover bids.
The Portuguese government has decided to revoke Decree-Law 380/93, which requires the authorization of the minister of finance for the acquisition of stakes of over 10% in companies undergoing reprivatization. The government has thus brought the legislation into line with European law and prevented the commencement of infringement proceedings by the European Commission.
The squeeze-out right included in the Companies Code has proved controversial since its introduction in 1986. The Portuguese ombudsman recently challenged the legality of this provision before the Constitutional Court, but the court ruled that it is valid since it breaches no constitutional rights, liberties or guarantees.
Including: Private Acquisitions; Public Takeovers; Mergers; Divisions; Recent Developments.
Recent legislative reforms relating to major investment projects have created a favourable environment for both national and foreign investors to contemplate M&A transactions, joint ventures, takeovers and similar deals. The creation of the new Investment Agency is central to this policy.
Including: Scope of the New Code; Opened Companies; Mandatory Takeovers; Director for Minority Shareholders; Directors' Obligations; Disclosure of Information; Increases in Capital; Squeeze-Out Mechanism; Change of Status; Companies Code Amendments