PORTUGAL Law and Practice Contributed by: Diana Ribeiro Duarte, Pedro Capitão Barbosa and Catarina Almeida Andrade, Morais Leitão, Galvão Teles, Soares da Silva & Associados
6.10 Other Protections in Acquisition Documentation
board must thoroughly assess the offer’s fairness and explore alternative options. In addition, under the provisions of the Portuguese Securities Code, the board is required to produce a report on the fairness of the consideration being offered and its views on the impact of the transaction on the company’s strategic outlook and employment conditions. Given the issues of equitable treatment of investors and market abuse rules, relationship or transaction agreements between the bidder and the target com - pany are not common. 7.2 Material Shareholding Thresholds and Disclosure in Tender Offers Under the provisions of Article 16 of the Portuguese Securities Code, any person that reaches 5%, 10%, 15%, 20%, 25%, 33%, 50%, 66% or 90% of the vot - ing rights of a company listed in a Portuguese regu - lated market (or reduces their level of voting rights below said thresholds) must, as soon as possible, and within a maximum period of four trading days after the occurrence or knowledge thereof, inform the CMVM • identify the market participant as well as the indi - vidual or legal person entitled to exercise voting rights on its behalf (where applicable); • show the entire chain of entities to which the par - ticipation is attributed (whether national or foreign); • explain the situation by which voting rights inherent to securities owned by third parties are attributable to the market participant; • detail the percentage of voting rights attributable to the holder of the participation, and the percentage of the share capital and the number of correspond - ing shares – as well as, where applicable, the par - ticipation by category of shares (when the issuer has several categories) and the title of attribution of the voting rights; and/or • show the date on which the participation reached, surpassed or was reduced to the above-mentioned thresholds. and the target company. The communication must:
Besides warranties, other protections offered by a pri - vate equity seller in an acquisition agreement include interim period obligations (including a limitation on the management of the target company outside of the ordinary course of business) as well as pre- or post- closing undertakings (idiosyncratic to the transaction). There are also mechanisms for price retention, but indemnities are rarely provided. W&I insurance is also an increasingly common fea - ture of Portuguese private equity transactions. Policy costs (which are relatively high) are usually borne by the buyer and cover a wide range of business warran - ties based on due diligence conducted by the insur - ance company (which in turn takes into account the vendor’s and the buyer’s due diligence). Fundamental warranties and “plain vanilla” tax war - ranties are increasingly being covered by W&I insur - ance as well. On the other hand, pollution liability, pen - sion underfunding, certain tax liabilities and sanctions are common exclusions. 6.11 Commonly Litigated Provisions A private equity transaction rarely ends in litigation (especially when arbitration is used as a dispute reso - lution method, where its costs act as a relevant deter - rent). The majority of pre-litigation disputes concern (alleged) breaches of warranty and the applicability of earn-out provisions (eg, whether earn-out events have been triggered). In Portugal, P2P transactions are uncommon. The only P2P transaction to have succeeded is the takeo - ver of Brisa, the highway toll operator mentioned in 5.4 Multiple Investors , by its reference shareholder and a private equity sponsor (Arcus). In a P2P transaction, the target company and its board play a critical role, since the latter has a fiduci - ary duty to act in the best interests of the company and its shareholders. When evaluating a P2P offer, the 7. Takeovers 7.1 Public-to-Private
497 CHAMBERS.COM
Powered by FlippingBook