PORTUGAL Law and Practice Contributed by: Domingos Cruz, Joana Bugia and Constança Morão, CCA Law Firm
4. Government Inducements 4.1 Subsidy Programmes Please see 2.4 Particularities . Government- sponsored VC funds are available and very active in Portugal. However, the “Consolidar” programme is the one that creates more incentives for equity financ - ings in Portugal. The programme has an overall budget of up to EUR500 million and supports the subscription of VC funds for investment in SMEs and mid caps. The main features include: • The subscription of VC funds is made by the Portuguese Recovery and Resilience Fund (FdCR). • The FdCR will have the same investment con - ditions as private investors in each VC fund. • The investment amount is between EUR10-50 million. • The FdCR can subscribe up to 70% of the VC fund. • The VC fund needs to invest an amount cor - responding to FdCR’s investment in compa - nies registered or operating in Portugal. • The VC fund can only invest through equity or quasi-equity instruments. After a period of three years, the VC fund and/or the founders can buy back FdCR participation for the amount of the investment with a certain
• The fundamental R&Ws cover the company’s legal status, authority to enter into the agree - ment and the ownership of shares, and the liability of the breaching party to these R&Ws is not limited in amount nor in time. • The operational R&Ws provide assurances to the investor regarding the current state of the company’s affairs and its ability to conduct business as usual and cover the company’s compliance with laws and regulations (includ - ing tax laws), the absence of pending litiga - tion, the accuracy of financial statements, the ownership of intellectual property rights, the validity of contracts, and the absence of material adverse changes in the company’s business. The liability arising from a breach of the operational R&Ws is usually limited to the amount of the investment – for the company – or to a multiple of the annual remuneration – for the founders, and is usually subject to a time limit that may vary between 12 to 36 months. Upon a breach of the R&Ws, investors may be entitled to compensation, which can be paid in cash or shares. Payment in cash shall be made through the delivery of a cash payment in the amount of the losses. Payment in shares shall be made through the transfer of founder’s shares in the company to be converted into shares with the exact same rights and entitlements as the shares subscribed by the relevant investor, or through a compensa - tory share capital increase, to be fully acquired at nominal value by the relevant investor (all costs to be borne by the founders or the company), taking into consideration the pre-money valua - tion of the investment round in which the inves - tor has invested in the company adjusted by the exact amount of the relevant loss.
interest rate accrued. 4.2 Tax Treatment
There are specific tax rules for VC investments, or VC funds. In Portugal, for individuals, capital gains are taxed at 28% over 100% of the capital gain, or over 50% if the company is a micro/ small company. Participation exemption exists if
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