PORTUGAL Law and Practice Contributed by: Domingos Cruz, Joana Bugia and Constança Morão, CCA Law Firm
5.4 Implementation Usually, when a new investor comes in, it requires the creation or the increase of unallo - cated pools of stock options between 7-10% of the company’s share capital for future allocation to key employees. In terms of dilution, the pre-money valuation given by those VC investors usually includes the increased/created pool, which means that such VC investor will not be diluted by that creation/ increase in the pool. However, in future rounds, if the new investor requires another increase of the pool, every shareholder – including the VC investor – shall be diluted. Shareholders’ rights in relation to a sale or any other type of liquidity event are governed by the shareholders’ agreement. The shareholders’ agreement includes drag- along rights, tag-along rights and a mandate to sell. The lack of liquidity events led to the inclu - sion of new exit mechanisms (to be used as a last resort, since they mean less return than a liquidity event) like the possibility to sell the investor’s stake without any tag-along rights and priority in secondary sales. Drag-Along Rights A drag-along right is the right to force other shareholders to sell their shares in the event of an offer for a certain percentage of the share capital of the company. It is very common to anticipate that a certain offer to acquire the share capital of the company needs to meet certain objective requirements for the VC investors to be dragged to sell their shares. Multiples on the investment, 6. Exits 6.1 Investor Exit Rights
• The exercise of the options is subject to a vesting period – usually of 48 months with a one-year cliff period – and leaver provisions aligning with the company’s and the employ - ee’s long-terms objectives. • Upon occurrence of a trade sale, an IPO or liquidity event, the employee will have the right to sell phantom shares. 5.3 Taxation of Instruments In May 2023, a new stock options taxation regime that aims at ensuring that taxation is competitive and occurs only when the gains are effectively obtained was created. Under that new regime: • a 50% exemption on the gains resulting from a stock options plan was created; • the actual taxation rate on those gains can be reduced up to 14% if securities and underly - ing rights are held for a minimum one-year holding period; • the beneficiaries shall be issued securities or equivalent rights; and • the taxation only occurs upon “alienation” and includes exchange of shares. However, this new taxation regime disregards: • the absence of liquidity in exchange of shares; and • cash settlements, which were the market standard up to that date. It is very important to keep in mind that the exemption created by this regime is not appli - cable to stakeholders with more than 20% of the share capital or voting rights of the entity issuing the stock options plan.
463 CHAMBERS.COM
Powered by FlippingBook