Decree-Law no. 63/2021, of 28 July, which creates the Capitalisation and Resilience Fund

Legal alert no. 157

Decree-Law no. 63/2021, of 28 July

Following the approval of Decree-Law no. 10-J/2020, of 26 March, which establishes exceptional measures to support and protect families, companies and other institutions, due to the significant liquidity constraints caused by the COVID-19 pandemic, the Decree-Law no. 63/2021 was published in the Portuguese Official Gazette, on 28 July 2021, in order to  create the Capitalisation and Resilience Fund (hereinafter the "Fund"), whose legal framework is included in the annex of the decree-law.

The Capitalisation and Resilience Fund is an autonomous fund, without legal personality but judicially capable, held by IAPMEI - Agência para a Competitividade e Inovação, I. P. (hereinafter "IAPMEI"), which aims to:

a)       provide temporary public support to strengthen the solvency of commercial companies that carry out activities in the national territory and that have been affected by the impact of the COVID-19 pandemic; and

b)      support the reinforcement of equity of commercial companies in the initial phase of activity or in the process of growth and consolidation.

The Fund was created with an initial allocation of €320,000,000 and may have an allocation of €1,300,000,000, through IAPMEI, with sums granted by the Portuguese State under the Recovery and Resilience Plan, and additionally from other sources of European funds.

The management and legal representation of the Fund are exercised by Banco Português de Fomento, S.A. (hereinafter "BPF"), designated in the Fund´s Legal Framework as a management company.

In addition to the management company, the Fund´s organic structure includes a technical investment committee, composed of three to five suitable, independent personalities, with experience in the management and investment in companies, to be appointed by BPF shareholders, and  a statutory auditor, to be appointed by the management company, on behalf of the Fund.

The Fund's investment policy is approved by an order of the member of the Government responsible for the area of economy, based on a proposal from the fund management company, after hearing the technical investment committee, and includes, namely:

(a)    the criteria of strategic interest, profitability, risk and impact on sustainable development used by the Fund to take investment decisions; and

(b)    the eligibility criteria of commercial companies, namely the contribution to business innovation, stimulation and internalization of the business fabric, decarbonisation of the economy in accordance with national obligations associated with ecological and digital transformation, or other attributes relevant to the economy, whose specific eligibility criteria must be regulated by order of the Government member responsible for the economy area.

The Fund investments are carried out through:

(a)    Equity instruments, namely through ordinary or preferred shares;

(b)    Quasi-equity instruments, through convertible bonds or another hybrid instruments;

(c)     Debt instruments, including subordinated debt; or

(d)    A combination of the instruments refereed in the preceding paragraphs.

With regard to investments through equity and quasi-equity instruments, it is expressly provided that the acquisition of majority shareholdings by the Fund may only occur in exceptional cases and provided that it proves to be essential in the case of temporary interventions, in accordance with the rules resulting from the temporary framework for state aid measures.

Personal guarantees may also be granted by the Fund, to equity and quasi-equity instruments, when subscribed by other public or private entities, if authorised by order of the members of the Government responsible for the areas of economy and finance, by means of a reasoned Fund management company’s proposal, which demonstrates adequate provisioning for such granting by the Fund.

In terms of investment, the Fund may invest:

(a)     directly in the beneficiary commercial companies, subscribing instruments issued by them, autonomously or in co-investment with private investors, including investment through collaborative financing platforms; or

(b)      In funds or through other collective investment undertakings, namely specialised alternative credit investment undertakings, venture capital companies or funds, social entrepreneurship funds or credit securitisation companies or funds, as provided for in the applicable national and European Union legislation, which subscribe or invest in the mentioned financial instruments.

Whenever the Fund invests directly in companies, the management company must organise an open and transparent application process that establishes the eligibility criteria for the investment and selection criteria for beneficiary commercial companies.

Under no circumstances may the Fund invest in commercial companies that do not respect the provisions of European regulations on state aid, namely those that on 31 December 2019 did not have positive equity, or in commercial companies that are considered unviable in the future.

The Fund shall be extinguished 10 years after its creation, unless its duration is extended for consecutive periods of 5 years up to a total maximum of 10 years, by decision of the members of the Government responsible for the areas of economy and finance, upon proposal of the management company.

Decree-Law no. 63/2021 of 28 July came into force on the first working day following its publication in the Portuguese Official Gazette.

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