PORTUGAL Law and Practice Contributed by: Bernardo Abreu Mota, David Oliveira Festas and Francisco Albuquerque Reis, CS’Associados
to discharge their functions appropriately. They must also act with diligence, in a judicious and organised manner. Directors are further bound by a duty of loy - alty, and must act in the best interests of the company, mindful of the long-term interests of the shareholders but also taking into consideration the interests of other stakeholders that are relevant to the company’s sus - tainability, such as employees, clients and creditors. As a general rule, directors may be held liable to the company for losses resulting from actions or omis - sions in breach of the legal and contractual duties to which they are subject. Nonetheless, such liability may be prevented in certain ways. For instance, Article 72, No 2 of the Portuguese Companies Code, which is inspired by the “business judgement rule” and may be deemed to apply to potential breaches of duty of care, sets out that the liability of directors is to be excluded if the relevant director can provide evidence that they acted: • on duly informed terms; • without having any personal interests; and • in accordance with criteria of business rationality. Directors are also not to be held liable for damages and losses that arise following an approval taken in a meeting they did not attend, or in which they voted against the decision taken. The nature of the current wording of Article 72, No 2 of the Portuguese Companies Code (in force since 2006) – combined with the general perception that judges still struggle to assess business rationality cri - teria, and added to the strong neutrality rule in force in Portugal, which significantly constrains the actions of a target company’s directors during a takeover offer in comparison to other jurisdictions – may contribute to the view that there is not yet consistent jurisprudence Business combinations usually require specialised advice to be provided to directors, so that they may further consider the multidisciplinary scope and potential implications of modern M&A transactions. Normally, mid to high-profile business combinations are accompanied by and set out with the assistance or a legal framework in this respect. 8.4 Independent Outside Advice
of investment banks, auditors, accountants, tax advis - ers, strategic consultants, etc. As a rule, directors also seek legal advice on various aspects of the transaction, including the structuring of the deal, due diligence procedures, the drafting of all transactional documentation and the management of information to be provided to regulatory authorities, the public (with a higher emphasis on listed compa - nies) and stakeholders, as well as the assessment of legal formalities and requirements to be complied with in connection with the implementation of the transac - tion. Legal advice on the structuring of the transac - tion also extends to tax matters, in conjunction with the input of accounting and auditing firms, which also usually perform dedicated due diligence exercises. Outside advice may also be required in specific fields of expertise, depending on the business or activity sector of the targeted company (eg, where applica - ble, technical opinions or due diligence may be advis - able on environmental, technological or IP matters). In high-profile transactions, communication agencies also play a role in advising directors throughout the transaction. 8.5 Conflicts of Interest Directors are prohibited from voting on any resolutions concerning matters in which they have a conflicting interest with the company, either directly or on behalf of a third party; the chair of the board of directors must be informed of any such conflict. As a rule, contracts between the company (or group-related companies) and its directors, entered into either directly or through third parties, must be approved in advance by the board of directors (without any conflicting directors’ vote) and are subject to prior validation by the relevant supervisory corporate body. In certain cases, share - holders are also prevented from voting on resolutions concerning matters where they have conflicting inter - ests, as specified in the Portuguese Companies Code. Conflicts of interest have been raised in business combinations – perhaps the most common situation before the Portuguese Securities Commission is con - flicts of interest between large and small(er) share - holders.
1048 CHAMBERS.COM
Powered by FlippingBook