Portugal agrees three-year bail-out programme
The Portuguese Government announced that the IMF, the ECB and the European Commission reached an agreement with Portugal regarding the bail-out programme for the next three years (2011-2014).
The draft MoU disclosed today details the general economic policy conditions for the granting of financial assistance to Portugal leaving open the amount of the bail-out facility, which is expected to be around €80,000 million.
The draft MoU includes the following measures, among others:
Tax measures. The MoU sets out targets for the reduction and limitation of tax allowances and benefits for income tax purposes, the movement of certain goods and services from the reduced and intermediate VAT rates to higher ones, the increase of taxes on property, cars and tobacco and the introduction of electricity excise taxes.
Financial Sector. The Bank of Portugal (BdP) will direct all banking groups to reach a core Tier 1 capital ratio of 9% by end-2011 and 10% at the latest by end-2012. In the event that banks cannot reach the targets on time, the Government may inject equity, by using resources provided under the programme (up to EUR 12,000 million).
SOEs. To reduce costs further than the 15% reduction in operational costs, the Government will review the scope of the services, apply tighter debt ceilings from 2012 onwards and prepare a comprehensive assessment of a tariff structure to reduce the levels of subsidisation.
Public-private partnerships. The Government will perform an assessment of at least the 20 most significant PPP contracts, which should review the possibility of renegotiating these contracts, and avoid engaging in new PPPs projects.
Privatisations. The privatisation programme will be reviewed until March 2012. During 2011, the Government will pursue a rapid divestment in public sector companies, EDP and REN, subject only to market conditions, and privatise TAP.
Labour market. In addition to the changes to the unemployment insurance benefits, the Government will implement a reform in the severance payments in open-ended contracts, which will be aligned with those of fixed-term contracts, and introduce adjustments to cases for fair individual dismissals.
Energy and gas markets. The draft MoU contemplates a full liberalisation or the markets by January 2013. For new contracts in renewables and co-generation, the feed-in tariff should be reduced. For existing contracts, the Government will assess the possibility of renegotiating the feed-in tariff.
Housing sector. The Government will broaden the conditions for renegotiating open-ended residential leases and provide for an extrajudicial eviction procedure for breach of contract.
Competition. The Government will eliminate the special rights of the State in private companies (golden shares) by July 2011.
© 2011 Macedo Vitorino & Associados
This information is provided for general purposes only and does not constitute professional advice. If you have any question on a matter of Portuguese law you should contact a lawyer licensed to practice law in Portugal. If you are a client of Macedo Vitorino & Associados please contact your usual contact partner or any of the lawyers listed in the contacts section.
In November 2010, the Court of Justice of the European Union has decided the "golden share" of the Portuguese State in Energias de Portugal SGPS SA ("EDP") contravenes the European Union ("EU") rules.
This ruling was not, however, novel, as the Court of Justice had already decided in a similar sense regarding the "golden share" of Portugal Telecom SGPS SA ("PT").
The "golden share" grants the Portuguese State voting rights on key matters on the managing and controlling of EDP, including mergers, divestitures or relevant changes in shareholders' powers.
Repeating the merits of the PT case, the Court of Justice held that the exercise of those special rights arising from the "golden share" by the Portuguese State constitutes an unjustified restraint on the free movement of capital and the right of establishment under the Treaty on Functioning of the EU.
According to the Court of Justice, the influence of the Portuguese State in the management and control of EDP may discourage direct investments from operators of another Member States, which are abstained from participating in the management and control of the company.
In 2008, the European Commission had decided in the same sense.
Further to the ruling of the Court of Justice, the European Commission has announced that it will ask the Portuguese Government on the status of this matter, including the measures adopted by the Portuguese State in order to comply with the EU rules, as stated in the case law of the Court of Justice.
The Portuguese State had an indicative deadline of two months from the publication of the ruling of the Court of Justice to make known the adopted measures, which did not occur or the European Commission has considered the proposed measures were not satisfactory taking into account the content of its latest announcement.
The Portuguese Government has already reacted to the announcement of the European Commission and forwarded the resolution of the current situation to the shareholders of EDP.
However, in case the Portuguese Government does not take the necessary measures to eliminate the "golden share" in EDP, the European Commission may decide to begin other infringement proceedings against the Portuguese State.
Given the fact that there is a previous ruling of the Court of Justice on this matter, it is likely that the time resolution of new proceedings could be faster.
In case the Portuguese Government reiterates not to accept the decision of the Court of Justice, it may be subject to pay copious fines for each day of failure to comply with the ruling of the Court of Justice.
© 2011 Macedo Vitorino & Associados
Ordinance No. 142/2011 of 6 April approves the National Natural Gas Transportation Regulation ("Rules"), amending the previous legislation, approved by Decree No. 390/94 of 17 June.
The Regulation establishes the technical and safety conditions to be met in the design, construction, operation, infrastructure maintenance and placement out of service of the National Natural Gas Transportation Network ("RNTGN"), with the aim of ensuring adequate flow of natural gas, interoperability with networks to which they relate and safety of people and property.
The RNTGN has application in:
(a) Pipeline transportation of natural gas in diameter equal or superior to 100 mm and whose operating pressures are higher than 20 bar; and
(b) Pressure regulating stations belonging to the national gas transmission network.
The gas transported must be non toxic and non corrosive, in compliance with ISO 13686, or a technically equivalent standard. Natural gas should be transported at a temperature compatible with the infrastructures of transport and can never exceed the temperature of 120ºC.
The quality management system of pipelines to transport natural gas must be based on the specifications of EN ISO 9000 or a technically equivalent standard.
A classification system for local implementation of the pipes takes into account: (i) the population density, (ii) the nature, extent and purpose of the buildings, constructions and works of art therein, (iii) the intensity of rail traffic, road transport and (iv) the future allocations provided in the various planning instruments.
As part of security measures and protection of pipelines, stand out, among others, the establishment of the control area of activities of third parties, reliance on the authorization of the RNTGN responsible technician to perform works ranging from the bondage of the pipeline, a minimum distance of 35 m from any inhabited building (75 m in case of buildings open to the public or that present particular risks) and comply with a minimum depth of 0.8 m.
Technical requirements are also set for the pressure regulation points, the pipes, the materials of the various components of the pipeline and the conditions of operation and maintenance, including mandatory periodic inspections ranging between six months to two years, according to the type of inspection and the area of the location of the infrastructure.
© 2011 Macedo Vitorino & Associados
1. Amount of share capital
Under the Portuguese Companies' Code, private limited liability companies (sociedades por quotas) are required to have a minimum share capital of €5,000 (five thousand euro). Each share (quota) must have a nominal amount of at least €100 (one hundred euro).
Pursuant to the provisions of Decree law no. 33/2011, of 7 March 2011, which shall enter into force on 6 April 2011, the amount of share capital of private limited liability companies, including single shareholder limited liability companies, may be established by the shareholders in the incorporation documents without any limitation, i.e. it will be equal to the sum of the shares (quotas) of the shareholders. In addition, the minimum nominal amount of each share (quota) is reduced to €1 (one euro).
These provisions shall, however, not apply to companies subject to specific regulations, such as holding companies, to companies which incorporation is subject to specific government authorisation nor to public limited liability companies (sociedades anónimas).
2. Subscription and payment
Also as of 6 April 2011, the share capital of private limited liability companies may be subscribed and paid up by the shareholders at the date of incorporation or until the end of the company's first financial year.
The financial year of a company shall, in principle, begin on 1 January and expire on 31 December of each year, unless the articles of association establish otherwise.
Each shareholder shall, nevertheless, be required to subscribe and pay within the above mentioned period at least an amount equal to the minimum nominal amount of the share (€1 (one euro)) and to state in the incorporation documents whether the such amount has been subscribed and paid up at the date of incorporation or will such payment occur until the end of the financial year. In this case, the shareholders will be required to state that they have already subscribed and paid up the above mentioned amount in the first shareholders' assembly taking place after the first financial year has expired.
It should be noted that in companies where the shares exceed the minimum nominal amount of €1 (one euro), shareholders may defer payment of the remainder of the share capital for a period of 5 years.
3. Conclusion
Upon the entering into force of these new regulations, which shall occur on 6 April 2011, it will be possible to incorporate a two shareholder private limited liability company with a share capital of €2 (two euro), which may be subscribed and paid up until the end of the financial year. The traditional perspective of the share capital as creditors' guarantee is changing and companies will probably seek to obtain reliable information on the counterpart's assets as well as additional security before entering into a contract with such a company.
© 2011 Macedo Vitorino & Associados
On October 28, 2010, the Council of Ministers has approved the accession of Portuguese State to the London Agreement relating to the European Patent Convention. The London Agreement establishes simplifying rules on the procedure for translation of European patents granted under the European Patent Convention dated 5 October 1973.
European patents granted by the European Patent Office (“EPO”) entitle their holders to the same rights as the rights of a national patent granted by local authorities. Notwithstanding this, a European patent must be validated in each State where it should be made effective.
In Portugal, the validation of European patents is held by the Portuguese Institute of Industrial Property (“INPI”). Currently, the completion of this validation process requires that the holder of patent submits a Portuguese translation of the descriptions, claims and abstracts of the European patent.
With the accession of Portuguese State to the London Agreement, the holder of the European patent will be only obliged to translate into Portuguese the claims of the patent. The remaining elements can be now submitted in English. These elements are mainly of technical nature, such as descriptions, abstracts and drawings, and represent between 70% and 90% of patent documentation.
This translation scheme exemption is not still extended to all patents granted by the EPO. The English patents granted in English are exempted from translation; however, this does not apply to the patents issued in German or French.
Furthermore, the European patents will continue to be fully translated into Portuguese to the extent they may be subject to legal proceedings in Portugal, which is explained by facilitating the understanding of the matters in dispute between the parties.
This translation scheme is mainly aimed at reducing the high costs of translation incurred by citizens and companies, thus increasing foreign investment in Portugal.
Nevertheless, some critics point out that this new scheme may undermine the protection of the Portuguese language.
The INPI and the European Patent Organization are therefore developing a software tool that enables an automatic and free of charge translation of the technical elements of the patents into Portuguese. This translation tool is expected to be available in 2011, providing consultation to all the elements of the patent in Portuguese.
Portuguese State has joined a group of 16 countries that are already signatories of the London Agreement, which was originally signed in 2000 by the EPO.
The Portuguese Government issued this week Resolution 79/2010 which approved the main terms and conditions of the eighth phase of the re-privatisation of EDP – Electricidade de Portugal, S.A. (“EDP”).
EDP is the Portuguese producer and distributor of electricity. It holds investments in the USA, Brasil, Spain, France, Belgium, Poland and Romania.
Presently, EDP is the third largest renewable energy operator in the Iberian market and the third largest player in wind energy world-wide. It was recently recognised as number one in the utilities sector of the Dow Jones Sustainability Indexes.
The re-privatisation of EDP started in June 1997, with the sale of 30% of EDP’s share capital. The others phases took place in May and June 1998, October 2000, October 2004, December 2005 and November 2007.
The new phase of EDP’s re-privatisation was included in the Portuguese Stability and Grow Programme with a view to reducing the public debt and the debt charges. The 2010 State Budget approved the re-privatisation programme of certain public companies and public owned shareholdings, including Galp Energia and EDP. The target is to obtain 1,200 million Euros, corresponding to 0.73 % of the gross domestic product.
Before EDP’s re-privatisation, the Portuguese Government launched the fifth phase of re-privatisation of Galp Energia, through the issuance of convertible bonds corresponding to 7% of Galp Energia’s share capital, worth 885 million Euros.
Decree-Law 105/2010, of 1 October 2010, approved the eighth phase of the re-privatisation of EDP. Under this Decree-Law, the re-privatisation of EDP will also be carried out through the issuance of convertible bonds by Parpública corresponding up to 10% of capital stock of EDP.
Resolution 79/2010, of 12 October, set out the re-privatisation of a maximum of 365 million shares of EDP. The convertible bonds will be distributed by a restrict group of national and international institutions, including, among others, Caixa Geral de Depósitos, Bank of America – Merryl Linch, BNP Paribas, Citigoup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Royal Bank of Scotland and UBS.
Each convertible bond will give its holder the rights to earn interest, the repayment of principal or the delivery of certain EDP’s shares. The maturity of the bonds will be 7 years. The reference price will be determined based on the average stock prices in the previous 5 days of the begining of the subscription period. These bonds may, at Parpública’s option be listed at Euronext or other markets.
If any of the shares that are being re-privatised are not used by Parpública to repay the bonds to the investors, Parpública must sell those shares in the national or international stock exchanges.
After this eight phase of re-privatisation, the Portuguese State will keep a shareholding of, approximately, 12.55% of EDP’s share capital.
© 2010 Macedo Vitorino & Associados
1. No par value shares
As of the entrance into force of the new corporate rules, public limited liability companies may issue no par value shares, which are expressed by the quantity of issued shares and their issue value. It is important to refer that a public limited liability company is forbiden to have par value shares and no par value shares at the same time. Moreover, the issue value of no par value shares cannot be lower than 1 cent and they must represent the same part of the share capital.
The permission to issue no par value shares aims to facilitate companies’ capital raising where those raising were not permited as they would involve the issue of shares below par, which is not allowed, or the previous reduction of the capital’s face value in order to adjust it to the corporate assets (the so-called “harmonium operations”). Therefore, a public limited liability company may issue no par value shares at a price similar to their real value and, as a result, more attractive to investors than other shares.
2. The strengthening of shareholders’ rights
The Decree-Law sets out new rules on shareholders’ rights of listed companies, transposing to the Portuguese legal framework Directive 2007/36/CE of the European Parliament and the Council, of 11 June, which eliminates significant barriers to the exercise of shareholders’ full voting rights at listed companies.
Thus, it should be highlighted the following aspects (i) the new attorneyship rules at shareholders’ meetings, according to which the articles of association cannot forbid any shareholder to be represented by another person during shareholders’ meetings, which applies not only to listed companies but also to public limited liability companies, (ii) the possibility of appoint a different attorney for each share account owned by the shareholder, (iii) the possibility for financial intermediaries to vote in different ways according to the interest of each of their clients and (iv) the strengthening of the rights of shareholders on the information to be included on the notice of shareholders’ meetings and on the clarification of the aspects to be included, particularly, on the agenda of those meetings.
3. Entry into force
Decree-Law 49/2010 entered into force on 24 May 2010.
The Portuguese government has endorsed strategic guidelines for the energy sector by defining the National Energy Strategy for the next ten years (“ENE 2020”). Recently approved by the Cabinet Resolution no. 29/2010, it implements the "New Energy Plan ("Plan”) proposed by the government.
1. The National Energy Efficiency Fund
The Fund will be the financial instrument of the National Action Plan for Energy Efficiency. It is endowed with 1.5 million euros and aims to achieve three goals, (i) encouraging energy efficiency, (ii) supporting new energy efficiency projects and (iii) promoting behaviour change.
The Fund will finance the purchase of equipment with high energy performance by citizens and companies and will grant facilities to support the investment in renewables, including the solar thermal energy through the National Reference Strategic Framework – QREN.
2. Strengthening renewable energies
The Plan includes the consolidation of the already scheduled investments on hydroelectric dams currently under construction. There is also margin for expansion in small hydro power facilities of 250 MW, helping to achieve a total of 8600 MW of hydro power. The implementation of projects of reversible capacity with integrated wind energy is also contemplated enabling the reuse and storage of hydropower energy based on wind.
By 2020, public tenders for wind farms licensing up to 3000 MW must have been launched. Several solar programmes will increase the installed capacity to 1500 MW. The government has a target of 250 MW for wave power plants and 250 MW for geo thermal energy.
3. Other investments
A system of planning and monitoring of demand and supply will be implemented in the first semester of 2010. And by 2012, a pilot project, the smart city of Évora, will contribute to give the majority of Portuguese consumers access, by 2020, to intelligent networks, as well as to the creation of a fund of balance tariffs.
The Plan confirms the evolution of MOBI.E, ensuring the creation of a nation wide network of charging electric vehicles, in order to substitute, approximately, 10% of fossil fuel consumption.
On 8 October 2009, the Portuguese Competition Authority ("AdC") was notified of an acquisition proposal of joint control of Grupo Media Capital, SGPS, S.A. by Ongoing Media, SGPS, S.A. and Vertix, SGPS, S.A..
To be approved, this transaction would consist in the acquisition by Ongoing of 35% of share capital of Media Capital in line with a shareholders' agreement to be executed between Ongoing and Vertix.
Ongoing Media is a holding company of Ongoing Group, which operates in several areas, such as online financial publications, owning the daily newspaper “Diário Económico” and 23% of Impresa. Impresa is, in turn, owner of the newspaper “Expresso” and the magazine “Visão” and the television channel “SIC”.
Vertix is a holding company, wholly owned by Prisa, and operates in the sector of written press and publishing and distributing books in Portugal.
Media Capital is a holding company owned 95% by Prisa, which operates mainly in the television and radio sectors.
The assessment of this merger required two binding opinions of the regulatory authorities for the media ("ERC") and the electronic communications (“ANACOM”).
ANACOM considered that the merger would not enhance the market share of Ongoing on the electronic communications market. Unlike, ERC opposed the transaction.
According to ERC, its positive opinion would be unable to get by without the sale of Ongoing’s share capital in Imprensa so that it has become less than 1%.
Moreover, Ongoing, as shareholder of Media Capital, would not be allowed to (i) increase its equity participation on Impresa beyond 1% and (ii) interfere in internal affairs, social, editorial or otherwise in Impresa.
After hearing and reviewing the comments submitted by the stakeholders, AdC has decided to oppose the merger on the basis of the negative binding opinion issued by ERC.
Despite the competition assessment of this transaction, AdC considered that the public interest in safeguarding the diversity and pluralism in media, as stated in ERC’s opinion, would justify the refusal of this merger.
This negative decision evidences that, rather than a competition assessment, AdC especially took into account ERC’s opinion to refuse the merger.
In this context, it would be interesting to verify whether AdC could not be subjected the clearance of this transaction to the remedies, as stated in the ERC's opinion, including the sale of almost all of Ongoing’s equity capital in Impresa.
One year after the nationalisation of Banco Português de Negócios (BPN), during which BPN was managed by the State bank Caixa Geral de Depósitos, the Portuguese Government has approved the guidelines for the re-privatisation of BPN.
The decision to nationalise BPN was announced in November 2008, following the assessment of €700 million of losses. The nationalisation was aimed at avoiding the systemic effect that could result from the insolvency of an institution of the size of BPN.
In the announcement of the Council of Ministers, the Government justified the re-privatisation of BPN taking into account that the worst phase of the financial crisis had been overcome.
According to the Government’s announcement, the re-privatisation will be carried out by way of an invitation for tenders for the acquisition of 95% of the share capital of BPN. The remaining 5% will be privatised in a public offering reserved to the employees as required by law.
The only entities allowed to submit tenders for the acquisition of the 95% of BPN will be:
(a) Credit institutions;
(b) Insurance companies; and
(c) Holding companies owned by credit institutions or insurance companies or holding companies that own 100% of credit institutions or insurance companies.
The bids may be submitted by any of these institutions, individually or in consortia.
In order to ensure the stability of the shareholder structure, the Government will impose a five-year lock-up period of 51% of the shares acquired in the re-privatisation.
Notwithstanding, this limitation will not prevent the restructuring, merger or the incorporation of BPN into the winning bidder.
The employees that acquire shares under the public offering will be subject to a one month lock-up period.
For the purposes of the assessment of the minimum bidding price, the board of directors of BPN will submit a proposal to the Minister of Finance after obtaining two independent valuations.
Over the last year, it was publicised that there were various local and international banks, including Montepio, Banco Popular, BBVA and Barclays, which could be interested in acquiring some of BPN’s assets, in particular in its 218 branches which is one of the largest retail networks in Portugal. However, the appetite of potential bidders for BPN will depend on the actual terms and conditions of the tender, in particular the manner how the Government proposes to deal with the disclosed and undisclosed liabilities of BPN and its Cape Vert bank, Banco Insular.
© 2009 Macedo Vitorino & Associados