I RESOLUTION OF THE COUNCIL OF MINISTERS NO.40/2016 - DIÁRIO DA REPÚBLICA NO. 158/2016, SERIES I OF 2016-08-18
The programme of the 21st Constitutional Government adopted, as one of its core objectives, in order to relaunch the Portuguese economy and create jobs, a reduction in the high level of debt and an improvement in investment conditions for companies, notably through elimination or mitigation of the restrictions that they face in access to equity financing or borrowing.
Underlying the definition of these objectives was the assumption that business investment must play a predominant role to ensure strong and sustained recovery of economic growth, in a context in which, in particular, i) micro, small and medium-sized enterprises represent nearly 99% of the total number of companies, 80% of total employment and around 60% of the total turnover of financial companies, ii) the private sector and, in particular, nonfinancial companies continue to present excessive levels of debt and significant dependence on bank credit, above all short-term loans, iii) the financial deleveraging measures taken by financial institutions and the restrictions on access to credit, namely through increasingly inflexible risk assessment processes, stricter guarantee requirements and lower ceilings, jeopardise the recovery of business investment and consequently, the recovery of the Portuguese economy and of economic growth.
In this context, according to this Resolution, the Government’s strategy involves adopting measures that, on the one hand, facilitate access to financing for micro, small and mediumsized companies and the segment of companies known as mid cap and, on the other hand, promote their capitalisation. The Government also intends to create corporate reorganisation and regeneration movements, that allow the survival of economically viable companies, reviewing the instruments currently available for both judicial and out-of-court reorganisation proceedings for these companies.
In order to mobilise all the social partners and economic agents involved, the Government created a Mission Structure for the Capitalisation of Companies (EMCE) 1 , the objective of which is to promote greater capitalisation of companies, through consolidation of their equity and the consequent reduction of their level of debt. The EMCE analysed and identified five strategic areas of action/intervention: Administrative Simplification and Systemic Framing, Taxation, Corporate Restructuring, Leverage of Financing and Investment and Regeneration of the Capital Markets.
Based on these strategic areas, the Government approved “Programa Capitalizar” as a strategic programme to support the capitalisation of companies, the revival of investment and the recovery of the economy, with the aim of promoting more balanced financial structures, reducing the liabilities of companies that are economically viable but have excessive levels of debt, as well as improving conditions for access to financing by small and medium-sized companies.
This Programme includes strategic areas of intervention and objectives, as well as a series of measures that contribute to compliance with the objectives established, described, respectively, in Annexes I and II to the Resolution in question, and which include the following in particular: A) Areas of Strategic Intervention and Objectives: i. Administrative Simplification and Systemic Framing: Increase the efficiency at companies, by reducing context-specific costs; Improve the existing regulatory framework in order to optimise the recapitalisation solutions available to companies and create the regulatory framework necessary to leverage new resources based on the current installed capacity; ii. Taxation: Improve the tax framework of business restructuring processes, particularly those undertaken through out-of-court proceedings; Alleviate tax pressure on companies’ cash flow, particularly when this can be done without revenue loss; Improve the existing tax framework in order to reinforce equity financing incentives for Portuguese companies and to strengthen the balance sheet structure of undercapitalised companies, ensuring greater tax neutrality with regard to the handling of borrowing and equity financing; iii. Corporate Restructuring: Facilitate existing restructuring and balance sheet mechanisms for economically viable companies and debt recovery mechanisms; Boost the efficacy of company restructuring procedures, by reviewing aspects that experience has shown to create constraints; Encourage voluntary business restructuring mechanisms; Strengthen the financial instruments available for capitalisation of viable companies in ongoing restructuring processes or completing successful processes, particularly in terms of the tax framework, with the aim of rapid restructuring of companies’ balance sheets; WWW.CUATRECASAS.COM NEWSLETTER SOCIETÁRIO | CORPORATE LAW 4/8 iv. Leveraging of Financing and Investment: Stimulate the diversification of financing sources other than bank credit; Create and strengthen capitalisation and financing instruments and vehicles for small and medium-sized enterprises and Mid Cap; Improve the efficacy and efficiency of existing capitalisation instruments; v. Regeneration of the Capital Market: Enable Portuguese companies to diversify their financing sources, particularly through instruments that promote direct access to investors; Revitalise access to the capital market for SMEs and Mid Cap, especially through equity instruments, specialised corporate debt funds or hybrid instruments; B) Programa Revitalizar Measures: Schedule II to the Resolution lists measures to be implemented in the context of each strategic area, in order to achieve the objectives described above. These measures include the following: i. Administrative Simplification and Systemic Framing: Simplification of the legal and regulatory procedures necessary for capital increases (time for implementation – 3rd quarter of 2017); Elimination of information redundancies in the reporting required with regard to the hiring of employees and concentration of statement obligations regarding remuneration in the Payroll Statement sent to the Social Security (time for implementation – Stage 1: 4th quarter of 2017 / Stage 2: 4th quarter of 2018); ii. Taxation: Change in legislation in force in order to ensure that the guarantee provided in the context of a tax foreclosure procedure effectively expires as soon as a favourable decision is obtained in the first instance court (time for implementation – 3rd quarter of 2017); Creation of equity financing incentives, particularly through the conversion of shareholder loans into equity or quasi-equity, expanding the scope of regime for conventional remuneration of the share capital, moving towards greater neutrality in the tax treatment of the two forms of financing (time for implementation - 1st quarter of 2017); Review of the Investment Support Tax Regime, namely extension of tax credit to investments of over €5 million and simplification of administrative procedures for granting automatic tax credit (time for implementation – 1st quarter of 2017); WWW.CUATRECASAS.COM NEWSLETTER SOCIETÁRIO | CORPORATE LAW 5/8 iii. Corporate Restructuring: Promotion of initiatives with training content to raise awareness and increase knowledge of mechanisms warning of insufficient equity, as well as of existing financing and business restructuring instruments (time for implementation – 4th quarter of 2017); Assessment of the creation of a public credit line for companies that have gone through business restructuring processes, so that they can have access to the liquidity necessary to run their business (time for implementation – 1st quarter of 2017); iv. Leveraging of Financing and Investment: Setting up of new financial instruments or vehicles, including a mutual guarantee credit line, venture capital funds and Business Angels, reversible capital funds and raising of financing through the European Fund for Strategic Investment (time for implementation – in progress); Raising of financing available in Portugal under the COSME and Horizonte 2020 programmes (time for implementation – 2nd quarter of 2017); v. Regeneration of the Capital Markets: Launch of a company training programme that encourages interaction between companies and new communities of stakeholders, inspired by international experiences (time for implementation – 3rd quarter of 2017); Incentives for the introduction of new financing instruments for investment in smaller companies (time for implementation – 1st quarter of 2017). II NATIONAL LEGISLATION Law 15/2016 – Diário da República No. 115/2016, Series I of 2016-07-17 Makes the twelfth amendment to Law No. 5/2004, of 10 February, establishing the legal regime applicable to electronic communications networks and services and related resources and services and defines the powers of the national regulatory authority in this area. Regulation no. 829/2016 – Diário da República No. 161/2016, Series II of 2016-08-23 ANACOM approved a consolidated system of pre-contractual and contractual information to be provided to end users by companies that offer public communication networks or electronic communications services to which the public has access. This regulation determines the requirements applicable to the pre contractual and contractual information to be provided by the companies that offer public communication networks or electronic communications services to which the public has access, and WWW.CUATRECASAS.COM NEWSLETTER SOCIETÁRIO | CORPORATE LAW 6/8 approves the glossary of common terminology to be used in the pre-contractual and contractual information to be provided by the companies, under the terms provided for therein. III EUROPEAN LEGISLATION Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation or “MAR”) “MAR” is a directly applicable European regulation, for which reason the targets of the obligations provided for in the MAR and market undertakings, namely issuers of securities traded on a regulated market or on multilateral trading facilities, entities managing such markets, financial brokers and analysts, must comply with these obligations provided from 3 July 2016. IV CASE LAW Judgment of the Supreme Court of 2016-06-23 Bank Guarantee - Independent Guarantee - First Demand Clause - Assignment of a Contract – Extinction - Breach of Contract – Interpretation – Maturity - Consent - Rejection I – The bank guarantee agreement, while not provided for in our legislation, is that by which the bank providing the guarantee undertakes to pay the beneficiary a certain amount of money, in the event of non-performance or bad performance of a certain contract (the primary contract), without being able to invoke to its advantage any means of defence related to that contract. II - An independent guarantee is a triangular concept, supposing three orders of legal relationships: (i) the relationship between the applicant (party giving the order) and the beneficiary (main creditor); (ii) the relationship between the applicant (party giving the order) and the guarantor (bank); (iii) the relationship between the guarantor (bank) and the beneficiary (main creditor). III - It involves three legal transactions: (i) the primary contract, in which the parties are the party giving the order, the guarantee principal, and the beneficiary; (ii) the contract classifiable as a mandate, by which the principal entrusts the bank with providing a guarantee to the beneficiary and (iii), finally, the guarantee agreement, entered into between the bank and the beneficiary, by which the bank undertakes to pay the sum agreed as soon as the beneficiary informs it that the guaranteed obligation is due and was not paid and requests the payment, without benefit of discussion or relying on the impossibility of the beneficiary’s obligation. IV - Among the forms of independent guarantee is the first demand guarantee, which is a promise of payment on first notification or first demand, in which compliance with or breach WWW.CUATRECASAS.COM NEWSLETTER SOCIETÁRIO | CORPORATE LAW 7/8 of the contract cannot be discussed, notification by the beneficiary of the guarantee being sufficient, thus distinguishing it from a “fiança” (third-party or personal guarantee). V - The guarantee at first demand is valid only for the primary transaction referred to therein and if the contract is assigned by the party giving the order to a third party, with the express consent of the beneficiary and without informing the guarantor, the guarantee is extinguished and rejection by the guarantor is legitimate. Judgment of the Court of Appeal of Lisbon of 2016-07-13 General Meeting – Notice of Meeting - Burden of Proof 1. In an action for the annulment or cancellation of corporate resolutions, it is for the plaintiff to rely upon and prove the constitutive requirements of its right to pass resolutions, in other words, its partner status and the existence of a resolution on which it did not vote, the defendant being required to prove that the resolution was valid, properly convened, and that if the plaintiff did not vote it was for a reason which cannot be attributed to the defendant. 2. The notice for the general meeting of a private limited company cannot be considered correctly issued, pursuant to Article 248.3 of the Commercial Companies Code, nor in good faith, if it was addressed to the residence of a partner who informed the company in advance that she would be absent, during the period between 3 and 30 August 2014, the meeting having been called for 24 August 2014, in other words, six days before the shareholder’s return, the partner not having received this notice of meeting. 3. Given this disregard of the personal interest of the partner who did not receive the notice for the general meeting, having been prevented from attending, the exceptional regime set out in Article 56.1(a) of the Commercial Companies Code shall apply, giving rise to the annulment of the resolution of the general meeting. WWW.CUATRECASAS.COM NEWSLETTER SOCIETÁRIO | CORPORATE LAW 8/8 CONTACT CUATRECASAS, GONÇALVES PEREIRA & ASSOCIADOS, RL Sociedade de Advogados de Responsabilidade Limitada LISBOA Praça Marquês de Pombal, 2 (e 1-8º) I 1250-160 Lisboa I Portugal Tel. (351) 21 355 3800 I Fax (351) 21 353 2362 email@example.com I www.cuatrecasas.com PORTO Avenida da Boavista, 3265 - 5.1 I 4100-137 Porto I Portugal Tel. (351) 22 616 6920 I Fax (351) 22 616 6949 firstname.lastname@example.org I www.cuatrecasas.com This Newsletter was prepared by Cuatrecasas, Gonçalves Pereira & Associados, RL for information purposes only and should not be understood as a form of advertising. 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