PORTUGAL Law and Practice Contributed by: Bernardo Abreu Mota, David Oliveira Festas and Francisco Albuquerque Reis, CS’Associados
9. Defensive Measures 9.1 Hostile Tender Offers
• super-qualified majority requirements; • cross-shareholding arrangements; • dual-class shares (ie, multiple voting shares up to a limit of five votes per share are admitted); and • pyramidal structures. Although many of these CEMs are not strictly for - bidden under Portuguese corporate law, their use is strongly discouraged from a corporate governance perspective, and listed companies are required to disclose the existence of any such arrangements and to explain their non-compliance with corporate gov - ernance rules limiting their use. 9.4 Directors’ Duties Despite the limited room for defensive measures provided under Portuguese law, the management of the target company must exercise its duties without impairing the company’s financial condition or hin - dering the offeror’s goals, as disclosed in the offering documents. 9.5 Directors’ Ability to “Just Say No” The directors of the target company should prepare a report on the offer, to be disclosed to the market, stating their opinion on the merits of the offer, although their opinion is not binding on the target. The report contains information on the direction of the votes cast in the resolution of the board that approved the report, and mentions the existence or absence of potential conflicts of interest between directors and the offer recipients. Litigation is not common in Portugal in connection with M&A deals. If the parties involved in a transaction are unable to settle a dispute amicably, they tend to resort to arbitration to avoid the lengthier decision tim - ings of common courts, and to some extent to ensure the confidentiality of the proceedings. However, due to rising arbitration costs, underlying transactional documents in smaller transactions are increasingly stipulating that any related disputes should be set - tled by the competent common courts. 10. Litigation 10.1 Frequency of Litigation
Hostile tender offers are permitted and have taken place in Portugal, especially in areas deemed more vulnerable, as has occurred in the banking sector. 9.2 Directors’ Use of Defensive Measures In accordance with the Portuguese Securities Code, during the period of the offer, and in respect of any offers for at least one third of the company’s share capital, the target company’s board of directors is required not to engage in the adoption of defensive measures that may impair the company’s financial condition or hinder the offeror’s goals, as disclosed in the offering documents. However, certain measures may be allowed if they are adopted for the purpose of performing previously assumed obligations or attracting competing offers, or if such measures are approved by the target compa - ny’s general meeting of shareholders held specifically for that purpose. The transposition of the Takeover Directive in Portugal included the adoption of a reci - procity provision, under which board neutrality is not required if the offeror is not a company that is subject to the same board neutrality rules or is not held by a company that is subject to such rules. Some defensive measures may assume the form of control enhancement mechanisms (CEMs) designed to reduce contestability, and are enshrined in the com - pany’s articles of association and enacted prior to the launching of a takeover offer. It should be noted that the Portuguese Securities Code caters for the optional adoption of a breakthrough rule. 9.3 Common Defensive Measures As discussed in 9.2 Directors’ Use of Defensive Measures , virtually no defensive measures are adopt - ed during the offer period. CEMs in existence prior to the launching of a takeover offer are usually enshrined in the target company’s articles of association, and typically include: • voting ceilings; • deviations from the “one share, one vote” principle;
1049 CHAMBERS.COM
Powered by FlippingBook