On 2 March, Act no. 7/2018 (“Act 7/2018”) was published, laying down the rules for the conversion into share capital of claims held against a commercial company or a company with a commercial form having its registered office in Portugal (the “Company”).
Pursuant to Act 7/2018, the creditors, whose claims make up at least (i) 2/3 of the Company’s total liabilities and (ii) the majority of the Company’s non-subordinated debt, may submit a conversion proposal whenever, cumulatively: (a) the Company’s equity capital is lower than the share capital; and (b) 10% or more of total non-subordinated debt (or, in the case of partial repayments of principal or interest, when related to 25% or more of total non-subordinated debt) is in default for more than 90 days.
The conversion proposal must be submitted together with a (i) description of the transaction, containing, notably, the grounds for the prior share capital decrease (if applicable) and the share capital increase (including the grounds for the conversion ratio); (ii) report prepared by a chartered accountant; and (iii) proposed amendment to the articles of association. After the share capital increase, in which the shareholders have a pre-emption right, the Company’s equity capital must be greater than the share capital at the date of the proposal.
Once the proposal is received, a call for a general meeting of shareholders must be immediately made to resolve on the conversion. The meeting must take place within 60 days from receipt of the proposal.
If (a) the proposal is rejected, (b) the general meeting does not take place, or (c) the resolutions are not passed or implemented within 90 days from the date of receipt, the proposing creditors may apply for court approval.
The shareholders may proceed with a subsequent acquisition of capital (by themselves or by way of a third party designated by them) within 30 days from the court approval, for the respective nominal amount, provided that they acquire or settle in full the remaining claims held by the proposing creditors against the Company.
Outside the scope of Act 7/2008 are claims (a) held against insurance companies, credit institutions, financial companies, investment companies, non-closely held companies and public corporations; (b) held by State entities, other than for public corporations; (c) held against companies whose turnover, according to the last approved accounts, is below EUR 1,000,000.00.