CMVM removes the 2% reference threshold for qualifying holdings

Changes to the Portuguese Securities Code will come into force at the end of January 2022, according to a law published this Friday in Official Gazette. These changes were proposed by the government, in coordination with the Securities Market Commission (CMVM), approved by Parliament and recently promulgated by the president of the Republic. The goal is to dynamise the capital market, making it more accessible to companies and lowering intermediation costs.

One of the changes foreseen is the alteration of the level of qualified participations, eliminating the 2% reference threshold for qualifying holdings, which will now be 5%.

“The national legal framework was aligned with that of the European Union, eliminating additional requirements and national specificities that are likely to drive away international investors – the elimination of the public company status (exclusively regulating the “listed” company form), and the removal of the 2% reference threshold for qualifying holdings bring ours closer to the European reality, facilitating greater investment interest in national listed companies and, with it, an increase in the liquidity of the respective securities,” explains the CMVM in a statement published this Friday.

The Securities Code’s proposed revision also foresees the introduction of so-called plurality voting, allowing the clarification between voting rights and economic rights. According to the CMVM, the issue at stake was the “fear of control loss, invoked by national entrepreneurs of not resorting to the capital market – on the one hand, because it is now accepted that future listed companies may issue plural-voting shares, facilitating the maintenance of shareholder control by the founders or key investors (who retain shares with increased voting power).”

“On the other hand, because in the context of successive transfers of control positions within the same family circle, it is acceptable that the successor takes on the pre-existing control position without being confronted with the alternative of launching a Public Takeover Bid (TOB) or reducing the participation in a position that does not confer control,” adds the regulator, also noting that, “in the same way of facilitating the entry of new companies into the market, a clear framework is foreseen for market exit via opting-out from trading.”

At last, CMVM explained that “the possibility of market funding is also fostered by providing a clearer framework for the review of public offers – giving greater flexibility to the issuer that launched an offer to react to variations in market conditions – by increasing the threshold below which the publication of prospectuses is not required – from €5m to €8m –, as well as through the possibility that prospectuses can be written in English, with summaries in Portuguese.”