Key Benefits:
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Proposed Law No. 229 /X
PL 635/2008
2008.11.02
The present proposed law falls within the framework of the initiative to strengthen stability
financial, which integrates measures of deepening the duties of information and
transparency, of aggravation of the sanctionatory regime in the financial and augmentation sector
of the amount of coverage of the deposit protection schemes with institutions
of credit.
More recently, this initiative was developed with the approval of a scheme
extraordinary granting of personal guarantees of the State, with a view to creating the
conditions necessary for the restoration of liquidity in financial markets and, in that
measure, to ensure the smooth financing of the economy.
It is on this line, and in the context of a concerted effort within the European Union to
strengthen national financial systems in the face of the current financial crisis situation
international, which adopt measures to strengthen the financial soundness of the institutions of
credit with registered office in Portugal.
The similarity of measures adopted in other countries of the European Union, the present
proposed law creates conditions for credit institutions to strengthen their funds
own, allowing them to maintain support for the financing of the economy.
The constant regime of this Law has been defined having by reference the recommendations of the
European Commission on the matter, specifically the observance: i) of the character
temporary in public support; ii) of nature subsidiary vis-a-vis the strengthening of capital by the
shareholders; iii) of the commitment by the credit institutions supported in their effort
of capitalization with recovery plans; and iv) of the distinction of treatment between
structurally sound credit institutions of those that present problems of
solvency.
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This measure covers, as noted, solvent and solid credit institutions in light
of the applicable law and supervisory criteria, with the aim of making available to these
institutions public support that will allow them to be able to put them in a situation equitably to their
european counterparts, who benefit from similar measures, by conditions and
balanced counterparts.
On the other hand, the present measure has as its object to create a specific legal framework for
a direct public intervention in the processes of recovery and sanitation of institutions
of credit with levels of own funds lower than the legal minimums.
In both strands, the resource to public investment is carried out in accordance with
principles of proportionality, remuneration and guarantee of the capitals invested and of
minimization of the risks of distortion of competition.
The monitoring and enforcement of the implementation of the proposed measures competes with the Bank
of Portugal that elaborates, with maximum monthly periodicity, individual reports on
each of the credit institutions covered, referring them to the member of the Government
responsible for the area of finance.
Semestrally, the member of the Government responsible for the area of finance gives
knowledge to the Assembly of the Republic of the capitalization operations carried out and its
execution.
Thus:
Under the terms of the paragraph d) of Article 197 (1) of the Constitution, the Government presents to the
Assembly of the Republic the following proposal for a law:
Chapter I
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General Provisions
Article 1.
Subject
This Law sets out measures to strengthen the financial soundness of the institutions of
credit within the framework of the initiative for the enhancement of financial stability and
provision of liquidity in financial markets.
Article 2.
Modalities of reinforcement
1-The strengthening of financial soundness of credit institutions is carried out through
capitalization operations with recourse to public investment and can be carried out by:
a) The enhancement of the levels of own funds of the credit institutions that they meet
proper conditions of soundness and awound solvency according to the legislation
applicable;
b) The participation in the recovery plan and sanitation of credit institution that,
in accordance with Article 141 of the General Regime of Credit Institutions and
Financial Societies, present, or show risk of presenting, a level of
own funds, solvability or liquidity lower than the legal minimum.
2-The appeal to public investment is carried out in accordance, inter alia, with
principles of proportionality, remuneration and guarantee of the capitals invested and of
minimization of the risks of distortion of competition.
3-The modalities provided for in paragraph 1 have a subsidiary and temporary nature,
applicable to operations of capitalization of credit institutions to be carried out up to 31 of
December 2009.
Article 3.
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Subjective scope
They may benefit from capitalization operations provided for in this Law, the institutions of
credit that have registered office in Portugal.
Article 4.
Modes of capitalization
1-A capitalization may be carried out with recourse to any instruments or means
financial that allow the funds made available to the credit institution to be
eligible for own basic funds ( tier 1).
2-A The capitalization operation can be carried out, specifically, by:
a) Acquisition of own shares of the credit institution;
b) Increase in the social capital of the credit institution;
c) Other values, legal or statutorily admitted, representative of capital;
d) Contract of association in participation or contract of similar effects.
3-The increase in the social capital provided for in the b) from the previous number can be carried out
upon issuance of:
a) Preferred shares without vote and shares confering special rights;
b) Ordinary shares.
4-In the case of the capitalization operation being carried out through the issuance of shares
preferred without a vote, the right to the priority dividend referred to in Article 341 of the
Code of Commercial Societies is fixed by porterie of the member of the Government
responsible for the area of finance.
5-A The capitalization operation can, as yet, be carried out through the issuance of the
financial instruments referred to in the preceding paragraphs intended for the shareholders of the
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credit institution, the public or both, with firm outlet or warranty of placement,
in whole or in part, by the state.
6-It shall be the State authorized to take firm or to ensure the placing of the issuance of
financial instruments in the terms referred to in the preceding paragraph, without prejudice to the
possibility of resorting to a financial intermediary for the purpose.
7-On a proposal of the Bank of Portugal, duly substantiated, the operation of
capitalization can, still, be carried out by issuing bonds or other values
of debt, on the part of the credit institution, without subjection to the limit laid down in Article 349.
of the Code of Commercial Societies.
8-The obligations or other debt values to be issued under the preceding paragraph
may be convertible into shares, ordinary or preferred, or exchangeable by these,
on the initiative of the holders.
Article 5.
Advance on account of entries
The advance of financial means to the credit institution considers itself to be charged to the
realization of the obligation of entry in the event of an increase in capital and liberates the State from that
obligation to the applicable extent.
Article 6.
Right of preference in underwriting
Without prejudice to the provisions of the Code of Commercial Societies as to the possibility of
limitation or deletion of the right of preference, the time limit for its exercise in the framework of
increases in the capital of credit institutions carried out, within the framework of this Law, not
may be more than five days, counted from the publication of the advertisement in daily newspaper of
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major national circulation, the sending of the e-mail or the dispatch of the letter
registered to the holders of nominative shares.
Article 7.
Derogation from the duty to launch public takeover bid
1-The voting rights acquired by the State under this Act are not
considered for the purpose of the duty to launch general public takeover offer.
2-Do not be relevant to the effects of imputation of voting rights, nor to the duty of
launch of general public takeover offer, the agreements for the exercise of the right of
voting that have for purpose the binding of the society for the purpose of the realization of the
capitalization operations under this Act.
3-To the shares subscribed by the State, and as long as these remain in their title,
the provisions of Article 227 (5) of the Securities Code shall not apply,
initiating the deadline there on the date of the transmission of the shares to third parties.
Article 8.
Public disinvestment
1-Showing assured, by the credit institution, the maintenance of appropriate levels
of own funds, may the same acquire the participation of the State or reimburse the
debt values issued under this Act, in whole or in part, with observance
of the provisions of paragraph 3.
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2-The State may, likewise, without prejudice to any rights of preference, give in to
third parties, at all times, their participation in the social capital of the credit institution, or
to divest the debt securities issued under this Act, in whole or in part.
3-Public disinvestment is carried out, inter alia, in accordance with the conditions of
market and in such a way as to ensure the appropriate remuneration and guarantee of the invested capitals,
taking into account the objectives of financial stability.
Chapter II
Strengthening of Own Funds
Article 9.
Access and deliberations of society
1-Access to public investment for reinforcement of own funds depends on
request from the body of administration, with the consent of the supervisory body.
2-The body of administration can always make its access initiative conditional on
public investment of tenure conferred by the general meeting and will do so,
necessarily, if the measures to be taken depend, in whole or in part, on deliberation
of the general assembly.
3-The mandate given by the general meeting involves the allocation to the organ of
administration of the competence to, with the concordance of the supervisory body, take
all measures provided for in this Law, including increases in capital, without dependence
of statutory limits that may perhaps find themselves established.
4-The deliberations of raising capital in the framework of strengthening own funds are not
applicable the provisions of Article 87 (3) of the Code of Commercial Societies.
5-The deliberations provided for in the preceding paragraph shall produce immediate effect, without prejudice
of the need to come up with the record and to be entered in the commercial register.
Article 10.
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Form and scope of the deliberations of the society
1-A General assembly is convened specifically for the purpose provided for in paragraph 2 of the
previous article, with a minimum one-day notice, per advertisement published in newspaper
journal of major national circulation or by e-mail addressed to all the
shareholders.
2-A General assembly deliberates, for all the purposes set out in this Law, by a majority
simple of the votes present and without a requirement of a constitutive quorum.
3-The present article prevails over any legal or statutory provisions in
Otherwise.
Article 11.
Challenge of social deliberations
1-The social deliberations relating to matters covered by this Chapter are not
applicable the provisions of Article 397 (3) of the Code of Civil Procedure and presumed
always that of your suspension results very serious damage to the society.
2-A suspension of social deliberations of credit institutions adopted in the framework of the
reinforcement of own funds may only be required by shareholders who hold shares
corresponding to at least 5% of the social capital of the credit institution.
Article 12.
Application
1-Access to public investment for reinforcement of own funds depends on
application submitted by the credit institution interested in the Bank of Portugal,
duly substantiated and instructed with a plan to strengthen own funds.
2-The plan referred to in the preceding paragraph shall contain, in particular, the following
elements:
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a) Own fund enhancement objectives, with indication of evolution, composition
and structure of these own funds over the duration of the plan, as well as the
nature of the operations planned for it to be carried out;
b) Updated information about the heritage situation, as well as the ratios and
prudential indicators on liquidity, quality of assets and coverage of
risks;
c) Strategic programming of activities over the duration of the plan, including
possible changes in the structure of the group in which the institution falls, thus
as in the shareholdings, namely, not financial, held by the same, and
projections on the evolution of profitability, position of liquidity and suitability of
own funds;
d) Possible adjustments to be made to the system of socieage-government and the
risk management and control mechanisms, with a view to the pursuit of the
objectives of the plan.
3-Compete to the Bank of Portugal to carry out the analysis of the application, and shall refer, in the
maximum term of 10 working days, the respective proposal for a decision, duly
substantiated, to the member of the Government responsible for the area of finance.
4-In the proposal for a decision, the Bank of Portugal pronounces itself, specifically, on the
equity adequacy of the lending institution concerned and on the guarantees that the
same offers to pursue a sound and prudent business policy.
5-The Bank of Portugal may ask the interested credit institution for the elements and
additional information that is required to be necessary for the assessment of the application.
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6-The time limit referred to in paragraph 3 may be extended by equal period if the complexity of the
operation to justify it.
Article 13.
Decision
1-Compete to the member of the Government responsible for the area of finance, upon
dispatch, decide on the realization of the capitalization operation, its terms, conditions and
charges to be taken up by the interested credit institution.
2-In the weighting of the decision, the member of the Government responsible for the area of finance
takes into account, inter alia, the contribution of the interested credit institution
for the financing of the economy and the need for reinforcement of own funds.
3-A The decision referred to in paragraph 1 may also lay down the terms and conditions of the
public disinvestment, once the objectives of reinforcement of own funds are met.
4-A The decision referred to in paragraph 1 shall be taken within five working days,
extended by equal period if the complexity of the operation justifies it, without prejudice to the
faculty of devolution of application to the Bank of Portugal for clarification, in which case
the deadline is suspending.
5-The dispatching referred to in paragraph 1 may be modified in the light of the circumstances,
in particular in the event of a serious or systematic default of the charges assumed
by the credit institution.
Article 14.
Obligations of the credit institution
1-As long as the credit institution is covered by the public investment
for reinforcement of own funds shall be subject to the terms, conditions and charges laid down in the
dispatching provided for in paragraph 1 of the preceding Article, specifically, as regards:
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a) To the use of the means provided under the reinforcement of own funds, in
particular with regard to the contribution of the credit institution to the
financing of the economy, particularly households and small and medium-sized
companies;
b) To the adoption of principles of good societarium government, which may include reinforcement
of the number of independent administrators;
c) To the policy of distribution of dividends and remuneration of the holders of the organs
of administration and surveillance, as well as the possibility of introduction of
limitations to other compensations of which they benefit such holders,
regardless of the nature they review;
d) To the adoption of measures designed to prevent distortions of competition;
e) To the possibility of the further strengthening of the contributions to the funds of
guarantee of deposits;
f) To the adoption of mechanisms that allow to realize public disinvestment in
market conditions that guarantee adequate remuneration of the capital
vested, thereby ensuring the protection of the interest of taxpayers.
2-As long as the credit institution is covered by the public investment
for reinforcement of own funds, may, in the order provided for in paragraph 1 of the preceding Article,
be determined the non-application of Article 294 (1) of the Code of Societies
Commercials.
3-Are void the deliberations of the bodies of the credit institution that counteract the
commitments by this assumed in the terms of this article.
Article 15.
Responsibility
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The responsibility of the members of the administration and supervisory bodies for the
society, to with the partners and to the creditors by the practice of any acts to the
shelter of the provisions of this Chapter only exists in the case of dolo or serious fault of the
agent.
Chapter III
Public intervention in Recovery and Sanitation
Article 16.
Scope of the intervention
1-When a credit institution finds itself in a situation of financial imbalance,
by virtue of presenting a level of own funds, creditworthiness or lower liquidity than
legal minimum, the recovery and sanitation scheme provided for in Articles 139 and 139
following of the General Regime of Credit Institutions and Financial Societies.
2-Within the framework of the intervention programme provided for in Article 142 of the General Regime of the
Credit Institutions and Financial Societies, can the Bank of Portugal propose to
state cooperation in the sanitation of the credit institution, through the viabilization of
appropriate monetary or financial support, with recourse to the modes of capitalization
provided for in Article 4.
3-A concretization of the capitalization operation and the definition of its terms, conditions
and charges compete for the member of the Government responsible for the area of finance, upon
dispatch.
4-The dispatcher referred to in the preceding paragraph has on the subjects provided for in the article
14., and may, still, the State designate one or more members for the organs of
administration or oversight of the credit institution, with no need for compliance
of the statutory limit on the composition of those organs, applying to the scheme provided for in the
article 15 para.
Chapter IV
Final provisions
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Article 17.
Funding
Measures to strengthen the financial soundness provided for in this Law dispose of resources
obtained by appropriations from the State Budget and issuance of public debt to the limit of
four billion euros, which is in addition to the maximum amount provided for in Article 109 of the
Law No. 67-A/2007 of December 31 approving the State Budget Act to
2008.
Article 18.
Monitoring and surveillance
1-Without prejudice to the competence of the remaining entities endowed with inspective functions,
compete for the Bank of Portugal to monitor and scrutinise compliance with the obligations of the
credit institution established in the dispatches provided for in Articles 14 and 16.
2-A The implementation of the measures provided for in this Law shall be the subject of evaluation with
maximum monthly periodicity and includes the elaboration of individual reports on each
of the credit institutions covered, to refer to the member of the Government responsible for
area of finance.
3-Semestrally, the member of the Government responsible for the area of finance gives
knowledge to the Assembly of the Republic of the capitalization operations carried out in the
scope of this Law and its implementation.
Article 19.
Public interest
There being challenge under the Code of Procedure in the Administrative Courts
of any standards issued in implementation of this Law or of any acts carried out
in its scope, it is assumed that the adoption of cautionary measures concerning such standards
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or acts seriously damages the public interest, dismising the reasoned resolution
provided for in Article 128 (1) of the said Code.
Article 20.
Competition
1-Without prejudice to the international obligations of the Portuguese State it is not considered
concentration of companies the acquisition by the State of social or active participations
in credit institutions under this Act.
2-As long as the public intervention held under this Act is maintained, always
that the weighting susceptibility of relevant economic interests is planned,
for the purposes of the legislation applicable to the restrictive practices of the competition and the operations of
concentration of companies, they are compulsorily considered, for protection of interest
public, the urgency inherent in acting in the financial sector, the circumstances concerning the
risk and the patrimonial situation of credit institutions, namely, in respect of
creditworthiness and liquidity, and its implications on the stability of the financial system
Portuguese.
3-If the public intervention in the recovery and sanitation, provided for in Chapter III,
course an operation of concentration in which any of the conditions are met
provided for in Article 9 (1) of Law No 18/2003 of June 11, this transaction may
carry out before it has been the subject of a non-opposition decision by the
Competition Authority, not depending on the validity of the legal business carried out
within the scope of such an authorization, express or tacit operation, of that Authority.
Article 21.
Review
1-A This Law may be reviewed at all times, in particular if the conditions of
financial markets to justify it or if this is necessary for reasons of coordination to the
level of the Eurozone and the European Union.
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2-Without prejudice to the provisions of the preceding paragraph, the present law is reappraised on the deadline
maximum of six months.
Article 22.
References to the State
The references made in this Law to the State cover the companies whose capital is
fully owned, directly or indirectly, by the state.
Article 23.
Regulation
The member of the Government responsible for the area of finance defines, by portaria, the
procedures necessary for the implementation of this Law, namely:
a) The definition of the level of own funds of credit institutions to be reached with the
execution of the capitalization operations;
b) The setting of a minimum threshold for the priority dividend higher than that provided for in the
Article 341 (2) Code of Commercial Societies, in line with the value of
reference adopted at the European level;
c) The terms and possible additional elements of the own fund enhancement plan
provided for in Article 12 (2)
Article 24.
Extinguishing
The measures to strengthen the financial soundness of credit institutions extinguish themselves
when the public disinvestment is completed, within the maximum period of three years, that
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may, exceptionally and in the case of market conditions warrant it, go up to five
years, from the date of entry into force of this Law.
Article 25.
Articulation with the regime of guarantees
1-Access to public investment in the context of this Law is independent of the appeal
by the institution of credit to personal guarantees of the State pursuant to the Act No. 60-A/2008,
of October 20.
2-In the case of actuation of the guarantees in the terms provided for in the porterie that
regulates the law referred to in the preceding paragraph, the conversion of credit into social capital of the
credit institution is carried out in accordance with the provisions of the a) of paragraph 3 and in paragraph 4
of Article 4, and may the institution concerned shall be subject, in particular, to the obligations
of the points b) and c) of Art. 14 (1) and the designation of one or more administrators
provisional in the terms and with the powers provided for in Article 143 of the General Regime of the
Credit Institutions and Financial Societies, considering themselves to be assigned to the member of
Government responsible for the area of finance the competences assigned there to the Bank of
Portugal.
3-The provisions of this Law in matters of jurisdiction of the organs, of convocation
of general assemblies and social deliberations are applicable in the framework of the actuation
of the guarantees granted under the Act No 60-A/2008 of October 20 and respective
regulation, being the capital increase by credit conversion of the State
considered as an increase in cash capital.
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Article 26.
Entry into force
This Law shall come into force on the day following that of its publication.
Seen and approved in council of ministers of November 2, 2008
The Prime Minister
The Minister of the Presidency
The Minister of Parliamentary Affairs