DECREE-LAW 123/2017 OF 25 SEPTEMBER
Law 15/2017 of 3 May (i) introduced a prohibition on the issuance of bearer securities, which is in force since 4 May of this year, and (ii) imposed the conversion of any bearer securities in circulation into nominative securities, setting out in its article 3 that the regulation of that conversion would be the object of subsequent regulation.
Decree-Law 123/2017, published in the official Portuguese journal, Diário da República, on 25 September, now regulates the process of conversion of any bearer securities in circulation into nominative securities. This conversion must be implemented within 6 months of the entry into force of Law 15/2017, in other words, by 4 November 2017 ("Transitional Period").
THE RESPONSIBILITY OF THE ISSUERS TO IMPLEMENT THE CONVERSION PROCESS
Besides the abovementioned prohibition of issuing new bearer securities, applicable since 4 May, article 2(2) of the new Decree- Law requires issuers of bearer securities to implement, at their own expense and by the end of the Transitional Period, the process of converting any bearer securities in circulation into nominative securities, to permit the clear identification of the securities' holder.
The responsibility to carry out this conversion therefore lies with the issuers and does not depend on any prior request from the holders of the bearer securities.
THE CONVERSION PROCESS
The conversion process will begin with a corporate resolution that approves the conversion of any bearer securities into nominative securities, which may be passed by the company's board of directors without the need for the approval of the shareholders or bondholders convened in a general meeting. This resolution must also approve the amendment to the articles of association of the issuing company, which must include a reference to the nominative nature of the shares or of other securities in circulation - as per articles 272(d) and 299 of the Portuguese Companies Code, as amended by Law 15/2017 of 3 May.
Under the new Decree-Law, the amendment to the articles of association does not formally depend on the prior conclusion of the process to convert the bearer securities. Therefore, it may happen that the articles of association of the issuing company state that all the securities are nominative when, in fact, bearer securities remain in circulation (which is, at best, inconsistent).
Although the rule referred to above empowers the board of directors to...