The notion of a SGPS – part 2

What is the true share limit of a SGPS given the ex-ante publication (10% limit)? Legislation reveals:

  • 30% amount of total shares value equal or greater than 10% of the voting capital within subsidiary companies;
  • If acquisition value of each holding is not less than 5 million EUR considering the latest approved balance sheet;
  • Shares acquisition resulting from a subsidiary merge or split;
  • The SGPS participation defines a subordination contract.

Bullet d) does not resume difficulties, ie, whether or not exist a contract. Option c) enhances issues depending on the strategic choice upon a subsidiary merge or split; and, b) similarly, because valuing equity shares stems from their nominal value, business value and future earnings (subjective analysis).

It is further prohibited to SGPS´s:

  • Acquire or maintain real estate ownership, except from those related own installation or affiliated companies (do not forget the legal limits);
  • Acquire, sell or increase shareholding within a timespan less than a year except on reinvestment upon to six months in other companies or subsidiaries;
  • Grant credit, except to controlled or non-controlled companies under Article 486º of Código das Sociedades Comerciais (upon the amount registered into the lastest approved balance sheet, except for capital return contract).

SGPS´s have a commitment regarding Tax Authorities to: i) nominate an auditor from day one (like an certified accountant); (ii) submit annually, until June 30th, an inventory with all approved shareholder investments documented into the latest balance sheet.

And, despite the obligations, SGPS´s can provide management services to affiliated companies; although, such benefit requires a written contract that identifies a fee.