PORTUGAL Law and Practice Contributed by: Diana Ribeiro Duarte, Pedro Capitão Barbosa and Catarina Almeida Andrade, Morais Leitão, Galvão Teles, Soares da Silva & Associados
8. Management Incentives 8.1 Equity Incentivisation and Ownership Offering managers equity incentives/ownership is a common, but not inevitable, feature of private equity transactions in Portugal. There is no standard way to attribute management shares, with equity participations ranging from residu - al (5–10%) to significant (40–49%). In certain manage - ment buyout transactions, management will hold the majority of the share capital post-transaction. Employee stock option plans (virtual or physical) are sometimes also used for management and other key company employees. 8.2 Management Participation Managers are often granted common shares with vesting provisions, and preferred instruments are not commonly used in management equity. In addition, sweet equity (equity issued at par or at a discount to managers) is not commonly linked with standard busi - ness practices or legal structures in Portugal. 8.3 Vesting/Leaver Provisions Vesting provisions for management equity have become increasingly popular in Portugal, especially among start-ups and high-growth companies backed by venture capital or private equity investors. The pri - mary aim of introducing these provisions is to incen - tivise and align the interests of management with the company’s long-term prosperity. Generally, these pro - visions hold that the rights associated with the equity shares granted to management will gradually become effective over a specified timeframe, subject to con - tinuous employment or the achievement of predeter - mined performance objectives. Good leaver/bad leaver provisions, which qualify the circumstances in which managers cease holding participation or directorships/employment positions in the target, are normally included in shareholders’ agreements regarding the target, which are entered into between management and the private equity sponsor.
results, it may – in the three subsequent months – acquire the remaining shares in cash through fair con - sideration. The consideration offered must be the highest of: • the highest price paid by the offeror, or that the offeror committed to pay (or any person whose voting rights are attributable to the offeror), during the six months prior to the announcement of the offer; or • the volume-weighted average price of the stock in the six months prior to the offer. There is no statutory threshold for a private equity- backed bidder to achieve a debt push-down into the target following a successful offer. Any offeror that intends to launch a squeeze-out pro - cedure must immediately announce it and send it to CMVM to be registered. On the order of the remaining shareholders, they must also deposit the total consid - eration in a credit institution. The acquisition of the remaining shareholders under a squeeze-out procedure is effective from the date of publication, by the offeror, of the registration before the CMVM. 7.7 Irrevocable Commitments The negotiation of irrevocable commitments in tender offers that occur prior to the announcement of the transaction is not common in Portugal. To ensure that these commitments, which must in principle be disclosed, do not result in the CMVM judging the voting rights of the committing sharehold - ers to be attributed to the offeror (which may trigger mandatory public offer thresholds), protections are sometimes provided for investors who wish to accept competing offers or exit in another manner.
499 CHAMBERS.COM
Powered by FlippingBook