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
Following the financial crisis, the Portuguese Government granted a guarantee in favour of Banco Privado Português (“BPP”). This guarantee was approved by the European Commission on 13 March 2009.
BPP is a small Portuguese financial institution providing private banking, corporate advisory and private equity services, mostly to private clients.
The purpose of the guarantee, amounting to 450 million euros, was to help BPP to get credit from other financial institutions. With this support, BPP managed to obtain a loan from six Portuguese financial institutions.
The European Commission authorized the Portuguese Government to provide the guarantee for an initial period of six months but required the submission of a plan setting out the measures that the Portuguese Government intended to implement in order to ensure the restructuring of BPP, in compliance with the European Community rules on State aids.
The adoption of this plan was a condition for accepting a guarantee fee below the level that would have been applied under the European Commission guidelines on state aid to overcome the financial crisis.
However, until now no restructuring plan was submitted to the European Commission. In addition, on 5 June 2009 the Portuguese Government extended the term of the guarantee for an additional period of six months, which it failed to notify to the European Commission.
As a result of the lack of approval of the plan and the extension of the term of the guarantee, the European Commission has now decided to open a formal investigation to assess whether the guarantee is still in accordance with the guidelines of the European Commission on State aids.
In particular, the European Commission intends to assess whether that aid is appropriate to solve the specific situation of BPP without distorting competition in the European Community market.
The European Commission also intends to determine if the restructuring of BPP is still a satisfactory measure to solve BPP’s situation and would avoid further State aids in favour of this financial institution in the future.
Although the outcome of this investigation is not predictable, if the European Commission concludes that the guarantee is an illegal aid, it is likely that the Portuguese Government will have to withdraw or change such aid, which may aggravate the situation of BPP and compromise its restructuring in the short or medium term.
Whatever decision is taken by the European Commission, the Portuguese Government will be bound to comply, as otherwise the European Commission could initiate a proceeding against the Portuguese Government before the European Court of Justice, which could imply the application of sanctions.
© 2009 Macedo Vitorino & Associados
Following several complaints filed in 2003, the Competition Authority imposed a fine of 53 million Euros to the PT Group and ZON Group for abuse of dominant position in the broadband access wholesale and retail markets.
At the time of the filing, the PT Group was the main national supplier In the wholesale and retail markets and held, through its wholly owned subsidiaries Telepac and TV Cabo, a market share of 70.7% in 2002 and 77.7% respectively.
Taking into account that PT Group’s wholesale supply – “PT ADSL Network” – was indispensable for the provision of electronic communication services, the PT Group artificially fixed tariffs’ prices, and discriminated and limited the production, distribution, technical development and investment in "SAPO ADSL.PT" wholesale service and in "SAPO ADSL.PT - Standard", "Speed On Netcabo 640", "Use Netcabo Speed RC" and "Speed On Netcabo 128”, all retail services.
According to the Competition Authority, the PT Group systematically applied different conditions for equivalent services and engaged in positive discrimination in favour of another PT Group’s undertaking by applying a discount system to the wholesale tariff offer.
It is estimated that PT’s competitors, such as Clix, Novis Telecom, Media Capital and Onitelecom, have suffered losses of approximately 11 million Euros during the period between 22 May 2002 and 30 June 2003.
The fines now applied by the Competition Authority to PT and ZON (which was span off from PT in 2007) follows two other landmark decisions against PT of 2007 and 2008 for abuse of dominant position, by refusing access to TVtel and Cabovisão to its cable networks, and for abuse of dominant position in the wholesale market for circuit leasing respectively.
This last decision confirmed that the Competition Authority wishes to create a level plain field in the electronic communications market by applying exemplary fines to the incumbent operator for breaching competition law, following the European Commission’s trend as shown by the recent the Microsoft and Intel cases.
However, in the future, the Competition Authority’s procedures should be more expedient, not only to avoid the risk of impunity of the offending undertakings that may result from the prescription of the procedures, but also to reduce the barriers to the entry of other competitors in the market, which may ultimately harm end consumers.
The decision, which may still be appealed by PT and ZON, may lead to civil claims from the operators that were harmed by PT’s conduct. In these civil actions, the operators may claim compensations against PT and ZON for the suffered damages by the abuse of dominant position.
© 2009 Macedo Vitorino & Associados
Decree-Law No. 185/2009, enacted on 12 August 2009, (i) establishes a set of measures aiming at simplifying the corporate restructuring procedures and (ii) amends the reporting obligations of Portuguese companies, implementing the provisions of Directive No. 2006/46/EC of 14 June 2006, which has established new rules with a view to enhance the comparability of financial information in the European Union and to reinforce the corporate governance policies.
With respect to the simplification measures, we would highlight the following:
(a) Simplification of the proceedings of merger and spin-off of companies by (i) making available an online draft merger or spin-off project, where the company may also request the registration of such project with the Commercial Registry Office, (ii) establishing that the publication of the call for the shareholders assembly of a company resolving on the merger or spin-off project is automatically promoted by the Commercial Registry Office simultaneously with the publication of the registration of the merger or spin-off project and without charge, (iii) establishing that the creditors may oppose the merger or spin-off by submitting a request before the Court within one month as of the publication of the registration of the merger or spin-off project (thereby eliminating the obligation to publish a special notice to that effect), and (iv) extending the simplified merger by incorporation proceeding to companies holding 90% of the share capital of the company to be incorporated (until now such proceedings would only apply to wholly-owned companies);
(b) Simplification of the tax exemption proceedings applicable to corporate restructuring operations by establishing a 10-day period for the relevant authority to issue its opinion on the proposed operation (which is considered to be favourable in case the opinion is not issued within the above-mentioned period). Also, the intervention of the Competition Authority and of the Registration and Notary Institute in such proceedings is eliminated;
(c) The costs of registration of the merger or the spin-off before the Real Estate Registry, the Vehicle Registration and the Ship Registration are included in the costs of registration of the merger or spin-off before the Commercial Registry, ceasing to be an additional cost; and
(d) Companies may adopt corporate governance models other than those established set out in the Portuguese Companies Code.
As to the reporting obligations, the companies are obligated (i) to report in their annual accounts and consolidated accounts, when applicable, the nature, purpose and financial impact of some off-balance sheet operations and (ii) to make available information on the adopted corporate governance model.
Law 10/2009, of March 10, amended the national budget for 2009 and created the budget program “Initiative for Investment and Employment” (Iniciativa para o Investimento e o Emprego), which approved the Tax Framework for Investment Support in 2009 (Regime Fiscal de Apoio ao Investimento realizado em 2009, the “RFAI 2009”).
The program has five main purposes: (i) modernisation of schools, (ii) promotion of renewable energy sources, energetic efficiency and energy transport networks, (iii) modernisation of the technological infrastructure, (iv) special support to the economic activity, exports and small and medium sized companies and (v) support to employment and social protection.
The RFAI 2009 applies to taxable persons who are active (i) in the agriculture, forest, agro-industrial, power and tourism sectors and in the extraction or manufacturing industries, except for the steel, shipbuilding and synthetic fibers sectors and (ii) in the new generation broadband networks.
The RFAI 2009 sets out a combined system of tax incentives in order to stimulate the productive investment, including the following measures:
(a) Deduction to the corporate income tax payable (up to 25%) of (i) 20% of the relevant investment, for investments up to €5,000,000 and (ii) 10% of the relevant investment, for investments up to €5,000,000;
(b) Exemption from real estate municipal tax (Imposto Municipal sobre Imóveis) for a period up to five years for buildings owned which are deemed relevant investment; and
(c) Exemption from the municipal real estate transfer tax (Imposto Municipal sobre Transmissões Onerosas de Bens Imóveis) and stamp duty (Imposto de Selo) for real estate acquisitions which are deemed relevant investments.
In addition, Law 10/2009 approved the reduction of the minimum limit for advance tax payments (pagamento especial por conta) for the account of IRC, from €1,250 to €1,000, and reduced the minimum limit of tax credit above which the reimbursement of VAT may be requested to €3,000.
The Statute of Tax Benefits was also amended. In this regard, it is important to mention (i) the extension of the SGPS special tax regime to companies whose corporate purpose is to manage shares incorporated in other Member States and (ii) the increase of tax benefits for the acquisition of computers for personal use and equipment related to new generation broadband network.
Finally, several changes were introduced in the System of Tax Incentives for Corporate Research and Development (Sistema de Incentivos Fiscais em Investigação e Desenvolvimento Empresarial, the “SIFIDE”), including the increase of the percentage of deductible costs with R&D that are deductible to 32.5%, as well as the increase of the maximum limit of the incremental rate from €750,000 to €1,500,000.
© 2009 Macedo Vitorino & Associados
Macedo Vitorino will participate in the 2nd Iberian Forum on Natural Gas, organized by IIR - Institute for International Research, that will take place on the 18th November, in Lisbon.
João Macedo Vitorino will be ther chairman of the event.
For more information
http://www.iirportugal.com/Evento/evento.asp?idConvocatoria=1732&idEvento=1780
1. The nationalisation of BPN
The Portuguese Cabinet of Ministers decided yesterday to propose to the Parliament the nationalization of Banco Português de Negócios S.A. (BPN), which had been facing difficulties since its previous board of directors discovered losses of an estimated amount of €700 million that had been ommitted in previous reports to the Bank of Portugal (BoP).
According to the Bank of Portugal, most of the unaccounted losses of BPN resulted from transactions with off-shore companies and from an undisclosed relationship with Banco Peninsular, a bank located in Cape Vert, controlled by the BPN group.
Despite the efforts of the BPN’s board appointed in July 2008 in restructuring the bank, the risks of an insolvency increased after the refusal of its shareholders to subscribe the second tranche of the share capital increase scheduled for the October 31, as well as the financial crisis which prevented BPN from selling assets to cover its losses.
The Minister of Finance justified the Government’s decision with the need to ensure the safety of BPN’s depositers and to prevent any adverse effects that a failure by the bank in meeting its obligations could have in the credibility of the Portuguese banking system.
The Minister of Finance also decided to put BPN under the control of Caixa Geral de Depósitos (the State-owned bank), and appointed two of its directors to the Board of BPN to overview the management of the bank until the nationalization is completed.
Following the nationalization, the Government could either decide to merge BPN’s operations into Caixa Geral de Depósitos and dispose of certain assets or sell of BPN as a whole to another domestic or foreign bank.
2. The re-capitalisation of Portuguese banks
The Government also announced that it would issue new legislation requiring Portuguese banks to increase their Tier 1 capital ratio and to fund banks to meet the new capital requirements if needed.
The new legislation, adopted following consultations with the BoP, will require Portuguese banks to increase their Tier 1 capital ratio from the current level of 4% to 8%, in line with the policies that are now being adopted in other EU member countries. The BoP and the Government expect that local banks will need to raise between €4,000 million and 4,500 million to meet the new captial requirements. According to the Governor of the BoP, at the end of the third quarter, BES had 6.6% of Tier 1 capital and BPI and BCP 7.4%.
In the event, banks cannot obtain new equity from their shareholders or the market, the Government pledged to subscribe preferred non-voting shares. The minimum remuneration of the Government shares was not announced.
© 2008 Macedo Vitorino & Associados
The law firm remains in the Chiado district, where it is established since 2000. The location in one of the most emblematic districts of Lisbon, the excellence of Siza Vieira project, the quality and functionality of the construction have been decisive in choosing the development “Terraços de Bragança”.
Architect Diogo Lima Mayer is responsible for the interiors architecture project which presents unique features, distinguishing it from other offices in the city and combining the tradition of the Chiado with contemporary architecture and design environments.
The new offices of Macedo Vitorino will provide an auditorium, client receptions, comfortable and functional working areas, public spaces and the most advanced information technologies.
Please consult map of our new address herewith attached.
The Portuguese Prime Minister announced the call for tenders for the construction and operation of the first section of the Portuguese high speed train network.
The construction of the section Poceirão-Caia, which is part of the link Lisbon-Madrid, represents 28% of the overall high speed rail project and will cost around €1,450 million, €250 million below the initial budget.
The concession of the section Poceirão-Caia comprises the construction and operation of 167 Km of high speed rail tracks, including the stations of Évora and Caia. The project also includes the construction and operation of a 92 Km common rail track between Caia and Évora. The rail lines will be prepared for the transportation of both passengers and freight.
According to the Government’s announcement, around 6,100 million passengers are expected to travel in the link Lisbon-Madrid per year. The number of passengers may reach 9,500 million per year in the next decades.
The tender procedure will be subject to the Public Procurement Code (PPC), which, among other things, will determine the exclusion of bids 40% below the base price and impose limitations on the value of additional works required by the contracting authority.
The PPC will also require the performance of several formalities in relation to the procurement procedure using an Internet platform, although in this first tender the bids will be submitted in paper form.
According to the tender schedule, the bidders will have four months to submit their tenders. The award of the concession is expected to occur in the third quarter of 2009 so that the link Lisbon-Madrid can enter into operation in 2013. The concession’s term will be of forty years, starting on the award date.
Based on the information provided by the Government, the political and planning risks in relation to the project will be assumed by the Portuguese State. The risks concerning the financing, construction, archaeological findings and operation of the concession will be run by the concessionaire. Finally, the risks related with safety, traffic and force majeur events will be shared between the Portuguese State and the concessionaire; when possible, force majeur risks must be covered by insurance.
The Government also pledged to compensate the losing bidders for the costs incurred with the submission of the tenders. With respect to the tenders for the construction and operation of the first section, the overall amount of the compensation will be up to €1 million, which will be distributed among the bidders based on the quality of their proposals.
More information on the project can be found at RAVE’s website at www.rave.pt.
© 2008 Macedo Vitorino & Associados