In Portugal, mergers of two or more companies are governed by the Companies Code.
There are two methods:
merger by acquisition: the assets of one or more companies are transferred to another company referred to as the acquiring company; or merger by consolidation: a new company is created, and the assets of the merging companies are transferred to the new company. The Institute for Support to Small and Medium-Sized Enterprises and Innovation (IAPMEI) summarises the merger methods on its website.
The managements of those companies interested in a merger must prepare a merger plan. The information to be included in the merger plan is indicated in the Companies Code, and includes the method, reasons, conditions and aims of the merger.
When the merger has been approved by the general meeting of each company and the period allowed for creditors to object to the merger has ended, the merger must be registered with the Trade Registry.
It should be noted that, where a certain market share or turnover is reached, mergers must be notified to the Competition Authority.
The Competition Authority’s website includes a section on Frequently Asked Questions, which explain the controls on mergers, particularly the notification process.
Under the Competition Legislation, notification is compulsory where a market share in excess of 30% is created or reinforced on the national market (or a substantial part of this) for a certain good or service, or where the companies participating in the merger have together achieved, in the last financial year in Portugal, a turnover in excess of EUR 150 million net of turnover taxes, provided that the turnover made individually in Portugal by at least two of these companies was in excess of EUR 2 million. Those mergers undertaken outside the national territory must also be notified where they meet any one of the above conditions.
Buying an existing company, with an already established structure, can be a good way of expanding your business.
Mergers subject to prior notification cannot be undertaken until they have been notified and an express or tacit decision indicating that there is no objection to the merger has been given. They must be notified to the Competition Authority within seven working days after the agreement is concluded or, where applicable, before the date of publication of the notice announcing a takeover bid, public exchange offer or offer to purchase a majority holding.
The notification form template appended to Regulation No 120/2009 of the Competition Authority must be used.
Under the Competition Legislation, the form to be used for notifying mergers must be sent to the Competition Authority by e-mail to: email@example.com.
However, notification by e-mail does not replace the requirement to submit a paper copy of the form, which must be submitted to the Competition Authority within three days of the electronic submission. This protects the legitimate interests of the various participants (notifiers and interested third parties).
The notification form must be accompanied by: approved reports and accounts, for the last three financial years, for each company participating in the merger; a copy of the agreements setting out the terms of the merger; and a copy of any shareholders’ agreements where needed to determine the form and methods of control. The notifier can voluntarily submit any relevant studies on the assessment of the merger (e.g. on consumers’ preference for certain products or makes of products or on consumption habits, which demonstrate the importance of the merger to the international competitiveness of the national economy).
Any entity participating in a merger must identify the information that it regards as confidential (e.g. trade secrets).
Notification of mergers is subject to payment of a fee.
Notification will only take effect on the date when the fee is paid. As a result, the respective document proving payment must be submitted to the Competition Authority as soon as payment has been made or with the notification, if payment is made in advance.
If a decision is made to investigate the merger in more depth, an additional fee must be paid, as laid down in the above-mentioned Regulation.
In order to remove any doubts about what to include in the notification, it is useful if the notifier contacts the Competition Authority in advance.
Mergers can give entitlement to tax benefits granted by the Directorate-General for Economic Activities (DGAE). The Business Gateway provides information on this subject, including the application form.