CONTRACT ETD/2008/IM/H1/53

CONTRACT ETD/2008/IM/H1/53 IMPLEMENTED BY FOR DBB LAW COMMISSION EUROPEENNE Study on the feasibility of reducing obstacles to the transfer of assets within a cross border banking group during a financial crisis National Report PORTUGAL By Luis Nobres Guedes Page 1 of 124

Recent Developments In view of the recent highlights concerning the international financial crisis, the Portuguese Government has determined, last October 12, the following: - Create a State Security up to the maximum amount of 20.000.000.000,00 in order to ensure that credit institutions can fulfil its financing or refinancing operations; - This State Security shall be valid until December 31, 2009 and shall be valid only if the market conditions justify its maintenance; - This security can be enforced by all credit institutions having its head office in Portugal; Please be advised that this security is currently a Law proposal, which must be approved by the competent legislative organ in order to be implemented: the Assembly of the Republic. Page 2 of 124

Part I - National regulation... 5 1. Summary... 7 2. Scope... 8 3. Conditions and sanctions... 16 a) Authorisation... 16 c) Counterpart for the asset transfer... 20 a) Compulsory counterparts and guarantees... 22 b) Financial capacities of the transferor and the transferee... 22 c) Information and transparency... 23 d) Sanctions... 27 e) Third parties... 34 Supervisory authorities... 34 Minority shareholders... 36 Creditors... 36 Employees... 37 Deposit holders... 37 Member State... 39 f) Private international law... 39 Part II -Evaluation of potential solutions... 41 1. Transfers from the parent company to the subsidiary or from the subsidiary to the parent at arm s length:... 41 Proposal n 1... 41 2. Transfers from the subsidiary to the parent company (in preferential conditions)... 46 a) Prior and overall agreements... 46 Proposal n 2:... 46 b) Strong guarantees covering the risk of outstanding payment... 51 Page 3 of 124

Proposal n 3... 51 c) Liability of the parent company for the subsidiary s debts... 53 Proposal 4... 54 d) Improving transferability transfer through the introduction of a new concept of "banking group"... 59 Proposal n 5... 59 Proposal n 6... 63 e) Other solutions... 63 ANNEX A National regulations relevant in assets transfers between banks part of a same banking group... 66 B) Notice 12/92 of the Bank of Portugal... 77 ANNEX B Examples of transfer of assets agreements... 124 Page 4 of 124

Part I - National regulation In order to submit a brief report on the Portuguese regulation, in the following pages it shall be made a description of the main aspects relating with the transfer of assets within a cross border banking group during a financial crisis 1. We will try to explain the general rules concerning company groups and, at the same time, we will also describe related aspects, namely the specific rules governing Banks and credit institutions on this subject. First of all, please be advised that the Portuguese Banking System has a Legal Framework for the Credit Institutions ( Regime Geral das Instituições de Crédito e das Sociedades Financeiras, hereinafter RGICSF ), which mostly deals with the institutional issues of the banking activity, namely solvency ratios, supervisory powers and norms relating with specific corporate issues of banks and credit institutions. In general, we can say that this legal framework foresees the supervisory powers of the Bank of Portugal and the duties of institutions subject to that supervision. This Framework does not foresee rules concerning the material activity of banks and credit institutions, namely contracts. In fact, Portuguese Banking System is a complex sum of several legal frameworks, namely, but not limited to: - The Portuguese civil code ( Código Civil ), which contains the basic rules governing contracts in general (and, therefore, banking contracts, such as loans); 1 Throughout this report we shall a consider crisis situation a situation where a bank subject to the supervisory authority of the Bank of Portugal is subject to recovery measures determined by the Bank of Portugal in order to avoid bankruptcy and to recover the bank s solvency ratios. Page 5 of 124

- The Commercial Companies Code ( Código das Sociedades Comerciais, hereinafter), which contains the basic aspects and rules concerning commercial companies 2. - The Securities Code ( Código dos Valores Mobiliários ), which is applicable when a Bank or Credit Institution is a Public Company, i.e., in general terms, a company open to public investment and listed in a regulated market (stock exchange). - Insolvency Code ( Código da Insolvência, which contains and sets forth the rules governing insolvency procedures; - Corporate Income Tax Code ( Código do Imposto sobre o Rendimento Colectivo ), which contains the rules governing corporate tax. Finally, please be also advised that besides this task of harmonizing the several rules applicable to the material activity of Banks and Credit Institutions in Portugal, these institutions must also comply with norms contained in extravagant Decree- Laws. Among these rules, it must be emphasized the Instructions and Notices issued by the Bank of Portugal under its supervisory powers. These instructions develop and complete the norms set forth in RGICSF. In order to make easier reading this report, please find attached in Annex A the translation of the relevant rules of the Portuguese Legislation. Please be advised that in Portugal, with exception to cases involving consumers, namely in what concerns credit operations to acquire real estates 3, it is not very common to enforce judicial proceedings against a Bank. Usually, its shareholders or its qualifying shareholders (i.e. shareholders holding a qualifying holding) prefer to file proceedings in arbitral courts due to the fact that these courts may be bound by confidentiality agreements and, especially, due to the fact that its decisions can be obtained swiftly. 2 Please be advised that is mandatory that a Bank, under Portuguese Law, must be a company limited by shares ( sociedade anónima ), a type of commercial company foreseen in the Commercial Companies Code. 3 Usually these operations consist in a loan agreement secured with a mortgage over the real estate to be bought. Page 6 of 124

1. Summary Generally speaking, the transfer of assets is allowed in crisis situation: - from parent to subsidiary - from subsidiary to parent - from subsidiary to another subsidiary Nevertheless, in what concerns Banking Law, the transfer of assets may be subject to a mandatory previous authorisation from the Bank of Portugal if recovery measurements are taken concerning a credit institution and that credit institution is one of the parties of the transfer of assets agreement. Similar rules apply in Insolvency Law. In fact, when an Insolvency proceeding is commenced, the sale of assets must be authorised by the judicial liquidator, who is the person in charge of the management of the insolvent mass further to an insolvency declaration. In what concerns this particular aspect of Insolvency Law, please find attached in annex A the rules regarding the effect in insolvency in transactions being carried out during an Insolvency proceeding. In going concern situations, transfers within a group are allowed. Therefore, it is possible to perform transfer of assets: - from parent to subsidiary - from subsidiary to parent - from subsidiary to another subsidiary In Insolvency Law there is a general principle stating that a company s manager must avoid transactions creating the possibility of an Insolvency situation. This is a development of the general duties foreseen in the Commercial Companies Code. In what concerns Banking Law, the transfer is subject to the rules relating to solvency rations and qualified holdings, if one of the parties of the transfer of assets is subject to the supervision of the Bank of Portugal (and the Securities Commission Page 7 of 124

if one of the parties is a Public Company subject to the supervisory authority of the aforesaid Commission). Nevertheless, these transfers are always subject to rules concerning solvency ratios and qualified holdings and, in extreme cases, can originate sanctions to the transferor or the transferee, namely from supervisory authorities if they are subject to its supervision, as well as civil liability before the company s shareholders, company s workers, company s creditors and/or third parties. There are no specific regulations for cross-border transfer of assets. Besides the rules relating to solvency ratios and qualified holdings there are no specific rules in Banking Law in relation to transfer of assets. When the bank/group is in crisisthe only rules are those relating to the recovery measures imposed by the Bank of Portugal. 2. Scope The notion of company groups - The Portuguese Companies Code does not contain a definition of company group. In fact, under the category of colligated companies ( sociedades coligadas ) there are four different situations: a) Companies in a simple participation relationship, i.e. when a company owns 10% or more of the quotas or shares of another company (article 483, number 1 of the Commercial Companies Code); b) Companies in reciprocal participation relationships, i.e., when two companies simultaneously own 10% or more of the quotas or shares of the other company (article 485, number 1 of the Commercial Companies Code); c) Dominion relationship, i.e., when a company directly or indirectly can perform a dominant influence. According to the Portuguese law, one must assume that there is a dominant influence when (article 486, number 2 of the Commercial Companies Code): Page 8 of 124

i) A company owns the majority of the share capital; ii) A company owns the majority of the voting rights of another company; iii) A company has the possibility to appoint the majority of the members of the executive or supervision corporate bodies of another company; d) Group relationships, which include three different situations: i) Full dominion, which may occur upon the incorporation of a company (usually a company limited by shares ( sociedade anónima ) is the sole shareholder of the company which incorporates. This company must be a company limited by shares ( sociedade anónima ). The full dominion relationship may occur also as result of the acquisition of more than 90% of the share capital of the company (articles 488 and 489 of the Commercial Companies Code); ii) Joint-group agreement ( grupo paritário ), i.e., an agreement that foresees that two companies without a relation may execute an agreement in order to submit themselves to a joint and sole direction (article 492 of the Commercial Companies Code); iii) Subordination agreement, i.e. an agreement subordinating the management of a company to another company (article 493 of the Commercial Companies Code). e) We must emphasize that these four situations are considered group relations. Nevertheless, only the relations described in paragraph d) may be defined as group relations stricto sensu. This happens due to the fact that, in these circumstances, it is created a corporate structure under the direction of a sole company. f) Group relations only verify when the concerned companies are limited liability companies ( sociedades por quotas ), limited company by shares ( sociedades anónimas ) and limited partnership with share capital ( sociedades em comandita por acções ) article 481.º, number 1 of the Commercial Companies Code. Page 9 of 124

- In what concerns Banking law, the legal framework of credit institutions remits to the general rules of companies law in order to define companies groups. - However, it gives a broader definition of dominion relationship than the one foreseen in the Commercial Companies Code. - In fact under this framework, there is a dominion relationship when an individual or a legal entity (article 13, number 2, item a) of RGICSF): a) Owns the majority of the company s voting rights; b) Is a partner of the company and has the right to appoint or to remove more than half of the company s board of directors or supervisory bodies: c) Can implement a preponderant influence over the company, as a result of contract or clauses of the company s by-laws, d) Is partner of the company and control, per se, the majority of the voting rights as a result of entering into an agreement with the other companies partners; e) Owns a participation not lesser than 20% of the company s share capital, since it has not effectively performing a dominant influence or both of them are under the sole management. - Portuguese law does not foresee a definition of group interest. Nevertheless, in what concerns commercial companies capacities, Portuguese legislation foresees that it is contrary to the company s social object to act as a guarantor unless there is a justified interest of the guarantor company or if there is a dominion or group relation between the guarantor and the beneficiary of the guarantee (article 6, number 3 of the Commercial Companies Code). - However, in what concerns banking law the rules governing financial assistance are developed. Therefore, it is forbidden to credit institutions to grant credit in any form, including acting as guarantor, directly or indirectly to companies or other legal entities directly or indirectly dominated. Page 10 of 124

- - The previous paragraph summarises the basic principle in this matter. The sole exceptions foreseen in RGICSF are as follows (Articles 85, no 5 to 7): - This rule shall not apply to non-executive members of the board of credit institutions and to companies or other collective bodies controlled by them. - The Bank of Portugal may provide for the application of the provisions of Article 109 of RGICSF to the entities referred to in the foregoing paragraph, to the members of other bodies, which are deemed by the Bank of Portugal to perform equivalent functions and to companies or other collective bodies controlled by them. - This rule shall not apply to credit granting operations, the beneficiaries of which are credit institutions, financial companies or holding companies included in the perimeter of supervision on a consolidated basis to which the credit institution in question is subject, nor to pension fund management companies, insurance undertakings, brokers and insurance mediating companies controlling or being controlled by any entity included in the same perimeter of supervision. - This rule does not apply to operations where the companies involved are in the supervision perimeter in which the relevant credit institution is included. - The supervision perimeter refers to all companies subject to the supervision of the Bank of Portugal. According article 117.º, number 1 of RGICSF holding companies shall be subject to the supervision of Banco de Portugal when their holdings, either directly or indirectly, confer on them a majority of the voting rights in one or more credit institutions or financial companies. Moreover, article 117.º, number 2 of RGICSF states that the Bank of Portugal may also subject to its supervision the holding companies which, albeit not covered by the provisions envisaged in the foregoing paragraph, hold a qualifying holding in a credit institution or financial company; - Please be advised that that article 117-A, number 1 foresees that the Bank of Portugal may subject to its supervision the entities that have Page 11 of 124

as their purpose to carry on, or that actually carry on, activities especially relevant for the operation of the payment systems, specifying the rules and duties applicable to them, from amongst those envisaged in this Decree-Law for financial companies. Moreover, article 117.º, number 2 of RGICSF also foresees that the entities carrying on any activity within the scope of the payment systems shall communicate that fact to the Bank of Portugal and supply all and any information required by the latter. - In general, the rules governing the transfer of assets are foreseen in the Portuguese Civil Code, which contains the rules relating to sale and purchase, credit assignment, et cetera. Commercial Companies Code foresees the corporate issues concerning the transfer, namely resolutions to be taken4. - RGICSF does not contain rules concerning the transfer of assets. In fact, it only foresees the acquisition of shares creating qualified holdings and the solvency ratios that credit institutions must respect while carrying out their business. - Credit institutions cannot have a qualified participation5 whose amount exceeds 15% of own funds of the participating institution. Nevertheless, this limitation does not apply to holdings in other credit institutions, in financial companies, in management companies of pension funds, in insurance and in reinsurance companies (article 100.º, numbers 1 and 6 of RGICSF). - In any case, if a company wishes to acquire a qualified holding in a credit institution it must previously communicate to the Bank of Portugal its acquisition project (article 102, number 1 of RGISCF). 4 These aspects shall be developed in section 3 below. 5 According to the legal Framework of the credit institutions, qualifying holding means a holding, directly or indirectly, isolated or joint, which by any means gives the possibility to its owner to have a significant influence in the management of the participated entity. One must assume that there is a relevant influence in all cases where the participant has, at leat, 5% of the share capital or voting rights of participated company. The Bank of Portugal can overrule this assumption having in mind all data submitted by the interested if the participation does not exceed 10%. Page 12 of 124

- Please be advised that under the term guarantee 6, Portuguese Law comprehends personal securities as well as real securities like mortgages or pledges. Portuguese law does not expressly foresee guarantees like guarantees on first demand or comfort letters, but it is very common to see comfort letters issued by holding companies and guarantees on first demand are very common in corporate transactions. - In what concerns Banking Law, the amount of credits granted (including securities) to an entity holding, directly or indirectly, a qualified holding in a credit institution and to the company that the aforesaid entity directly or indirectly holds or which is in a group relationship, cannot exceed, in any moment, 10% of the own funds of the institution. - These operations must be approved by a qualified majority of, at least, two thirds, of the members of the management body of the company and must also obtain a favourable appraisal report of the supervisory body of the credit institution. - There is no definition of group interest that specifically allows or facilitates intra-group transfer of assets. In Portuguese Law, the definition of corporate interest or group interest is not defined in Commercial Companies Code. This implies that Jurisprudence and some case Law tends to construct some definitions of group interest or corporate interest - In what concerns Tax Law, intra-group transfers must comply with the rules regarding price transfers. - The Coroporate Tax Code foresees that in commercial operations, including, but not limited to, operations or a set of operations concerning assets, rights or services as well in financial operations made between a taxable person and any other entity with which the 6 The Portuguese Civil Code does not contain a definition of the term guarantee. In general terms, guarantee means an act through which the fulfilment of obligations is reinforced, whether by the intervention of a third party (personal security), whether through the preferential allocation of an asset which, in preferential terms, shall respond for the debts of the party granting the security. The regulated real securities are pledges, mortgages and liens. Page 13 of 124

taxable person is in a special relation, must be made in the same terms and conditions that would normally be agreed and practiced between independent parties in comparable operations (article 58, number 1). - In order to do so, the taxable person must adopt a method or methods capable of ensure the highest degree of comparability between the operations or group of operations, according to the arm s length principle, i.e. the market normal conditions and the absence of special relations between the parties. - According to the Corporate Income Tax, it is deemed that special relations between two entities occur when one of such entities has the power to directly or indirectly exercise a significative influence in the management decision. It is considered that such influence occurs between (Article 58, number 4): a) an entity and the owners of the respective capital stock owners, its spouses, ascendants or descendants, which hold, directly or indirectly, a holding not inferior to 10% of the capital stock or the voting rights; b) entities in which the same owners of the capital stock, its spouses, ascendants or descendants, which hold, directly or indirectly, a holding not inferior to 10% of the capital stock or the voting rights; c) an entity and the members of its corporate bodies, or the members of any management or audit bodies and the respective spouses, ascendants and descendants; d) entities in which the majority of the members of the corporate bodies or the members of any management or audit bodies are the same persons or, if they are different persons, they are linked by marriage, companionate marriage judicially acknowledged or if they relatives in a direct line; e) entities connect by means of a subordination agreement, a group contract or any other equivalent effect; Page 14 of 124

f) companies in a dominion relationship in the terms set forth in the applicable laws determining the obligation to supply consolidated financial statements; g) entities where as a result of commercial, financial, professional or juridical relationships, directly or indirectly foreseen or practised, occurs dependency situation, namely when any of the following occurs: 1) the exercise of one s activity substantially depends of the assignment of industrial rights or copyright or know-how owned by the counterparty; 2) the supply of commodities or the access to the products distribution channels, commodities or services substantially depends of the counterparty; 3) a substantial part of one s activity can only be performed or depends of the counterparty decision; 4) the right to determine prices, or equivalent economical effect, concerning the assets or services sold, performed or acquired are in the counterparty s ownership, as a result of a provision foreseen in a contract; 5) by the terms and conditions of its commercial or juridical relationship, which allows imposing conditions to the management decisions of the counterparty, as a result of facts and circumstances not related with such commercial or professional relation; h) a domiciled entity or a non-domiciled entity with a fixed establishment in the Portuguese territory and an entity subject to a favourable tax regime domiciled in a country, territory or region referred in the list approved in an ordinance ( Portaria ) of the Minister of State and Finances - In what concerns banking groups, Decree-law no. 145/2006 of July 31, which has transposed for the Portuguese jurisdiction Directive 87/2002/EC contains some rules relating allffinance groups ( Bancassurance ). There is no specific regulation for cross border transfer of assets. The only rules regarding banking groups refer usually to financial statements and consolidated supervision. Page 15 of 124

3. Conditions and sanctions a) Authorisation Unless otherwise specified in the company by-laws, the Board of Directors has the competence to decide all issues concerning the company s management, namely acquisition, selling or encumber the company s real estates, as well as to approve resolutions in order to make the company guarantor of any contract (article 406 of the Commercial Companies Code). Nevertheless, please be advised that, according to Portuguese law, the Directors can bind the company, signing a document referring that they act as administrators (article 409, number 1 of the Commercial Companies Code). "act as administrators" means that the Directors must expressly refer that they act as the company directors, id est that they have powers to bind the company and that they act on its [the company s] behalf. In fact, Directors can bind the company, signing a document referring that they act as administrators. If this situation happens and the By-laws are breached, the Directors are subject to civil liability before the Company and its shareholders. If the counterpart of the transfer of assets is a company, the transfer must be approved by its Board of Directors, unless otherwise specified by the bylaws. In what concerns supervisory authorities, some aspects must be emphasized. If a credit institution having its head office in Portugal wishes to purchase, directly or indirectly, holdings in credit institutions having its head office abroad or in financial institutions which represent 10% or more of the share Page 16 of 124

capital of the participated entity or 2% or more of the share capital of the participant institution, the acquisition projects must be previously communicated to the Bank of Portugal (article 43 A of RGICSF). Similarly, all acts aiming the increase of a qualifying holding must be previously communicated when they can give origin to holdings over 5%, 10%, 20%, 33% or 50% of the voting rights of the participated institution, or when the latter would became an affiliated of the acquiring entity (Article 102, number 2 of RGICSF). Notwithstanding with the previous paragraph, the acts or facts creating a qualifying holding of, at least, 2% of the company stock capital or its voting rights must be communicated in the 15 days following the occurrence of that act or fact (Article 102, number 4 of RGICSF). First of all, please be advised that, due to the fact that the legal framework of credit institutions does not foresee general rules on the transfer of assets except the sale and purchase of shares which may create qualifying holdings. Therefore, under this particular legal framework, the transferor and the transferee will only have information duties when the asset to be transferred is a share. In fact, in all other cases, for instance a credit assignment, the transferor and the transferee will only have to comply with the solvency ratios set forth by the legal framework of credit institutions. Please be also advised that the transfer of assets may be subject to certain conditions. In fact, when a credit institution subject to the supervisory powers of the bank of Portugal is in a crisis situation and there are recovery measures to be implemented, the Bank of Portugal may determine that the transfer must be previously authorised by him (Article 141 of RGICSF). Under Portuguese Law there is a Fund to Guarantee Deposits ( Fundo de Garantia de Depósitos ), which aims to ensure the reimbursement of deposits made in the credit institutions which adhere to this fund. Nevertheless, deposits owned by companies in a dominion or group Page 17 of 124

relationship with the participant credit institution are not covered by this Fund. If the credit institution or the counterpart in the transfer of assets is open to public investment ("public company ) the transfer of assets, i.e., shares or other securities, must be communicated to the Securities Commission ( Comissão do Mercado dos Valores Mobiliários ) in accordance with article 16 of the Securities Code). In fact, any entity reaching or exceeding a holding of 10%, 20%, a third, a half, two thirds and 90% of the voting rights in the capital of a public company subject to Portuguese law or reducing its holding to a value lower than any of the above thresholds, should, within 4 trading days of the occurrence of said fact or the knowledge thereof shall a) Inform the CMVM and the company holding the participating interest of said fact and b) Inform the entities described in the previous paragraph of those situations that determine the granting to the participant of voting rights inherent in securities belonging to third parties. The following is also likewise subject to the duties referred to in the preceding paragraph: a) any entity reaching or exceeding a holding of 5%, 15% and 25% of the voting rights in the capital or reducing its holding to a value lower than any of the above thresholds with regard to: i) A public company, subject to Portuguese Law, that issues shares or other securities granting the right to its subscription or acquisition, listed on regulated markets situated or operating in a EU Member State; ii) A company, with registered office in another Member State, that issues shares or other securities granting the right to its subscription or acquisition, listed exclusively on regulated markets situated or operating in Portugal; iii) A company, with head-office outside the European Union, that issues shares or other securities granting the right to its subscription or acquisition, listed on regulated markets situated or operating in Portugal, regarding which the CMVM is the competent authority pursuant to Article 244-A of the Securities Code; and Page 18 of 124

b) Any entity reaching or exceeding a holding of 2% and reducing its holding to a value lower than said percentage of the voting rights in the capital of a public company envisaged in i) of the preceding subparagraph. Besides these information duties, and depending of the nature of the assets to be transferred, some acts must be notified and/or published to become effective against third parties. In fact, if the asset is a real estate, it is advisable to register the transfer of property as well as the constitution and/or termination of any other property rights, Under Portuguese law, the register of real estate is not mandatory. Nevertheless, until the transfer of property of a real estate is not registered the transferor may sell again the asset and the new transferee can obtain its register. If the assets transferred are shares, the transfer must be registered with the book entries of the transferee, unless the shares are bearer securities. There is no need to incorporate the terms and conditions of the transfer between transferor and transferee and to execute it by their authorised representative, unless the agreement concerning the transfer of assets is going to be signed by an attorney of the company. In this case, the power of attorney must clearly refer the powers granted to the representative. In what concerns a power of attorney granting powers to make a transfer of assets, it is advisable that the power of attorney makes reference to the main aspects of the transfer, namely the counterparty identification, assets to be transferred and transfer price, in order to avoid granting broad powers to the attorney. There is a general duty for the managers to perform its duties, i.e., to act in accordance with the company s interest. This implies that they must take all measures to avoid the creation of going concern situations and, consequently, crisis situations also. Page 19 of 124

In what concerns Banks, when a crisis situation occurs, the Bank of Portugal may impose that some operations (namely transfer of assets within a banking group) must be previously authorised (Article 141 of RGICSF). c) Counterpart for the asset transfer In what concerns the treatment given to the transfer of assets, we shall consider the following situations: a) arm s length principle/normal market conditions dealing Besides the rules governing transfer prices (article 58 of the Corporate Income Tax Code), Portuguese law does not contain a definition of the arm s length principle/normal markets conditions dealing. Nevertheless, according to the terms and conditions set forth in the agreement some sanctions could apply. Please see paragraph b) below. b) agreement under preferential conditions or disadvantageous to the transferee but advantageous to transferor and the group as a whole In this situation, one must interpret the agreement in order to see if the agreement is usurious, due to the fact that Portuguese law considers null all agreement where a party explores the situation of its counterpart obtains the promise or the granting of excessive or unjustified benefits. In what concerns Tax Law, intra-group transfers must foresee a real price, i.e., a price that would be foreseen in an equivalent operation, in order to ensure that no fictitious values are referred or expresses in the accountancy documentation of the company and, as a consequence, avoid the artificial decrease or increase of value of the relevant companies. c) no counterpart/compensation for the transfer Page 20 of 124

If no compensation for the transfer is agreed, one must try to interpret the contract in order to qualify it. This happens because the sale and purchase agreement has qualifying conditions in order to its rules be applicable. In fact, it s qualifying condition the foreseeing a price. If this does not happen, as a principle, we shall be before a donation agreement. However, this does not imply a different treatment under Portuguese Civil Law. Notwithstanding with this general regime foreseen in the Portuguese Civil Code, in what concerns Tax Law, intra-group transfers must foresee a effective price, i.e., a price that would be foreseen in an equivalent operation, in order to ensure the exactness of the transfer price, which must be reflected in the company s accountancy documents. In other words, the Portuguese tax regime has adopted the arm s length principle in issues relating price transfers. d) the transfer is included in a loan or credit agreement between transferor and transferee. In this situation it must be analyzed if the circumstance that, in abstract, this loan or credit agreement can configure a financial assistance between a company and its shareholders. In fact, it is mandatory to determine the scope of the credit or loan in order to determine if the operation aims that the beneficiary acquires shares of the company. This rule does not apply to the current banking operations nor the operation made with the scope of the workers of the company to acquire shares. However, as result of these operations, the net assets of the company cannot become lower than the amount of the capital subscribed, accrued with the reserves that the law (i.e., the Commercial Companies Code) or the company s by-laws do not allow to distribute. Page 21 of 124

There is a general duty for the managers to perform its management duties. This implies that they must take all measures to avoid the creation of going concern situations and, consequently, crisis situations also. In what concerns Banks, when a crisis situation occurs, the Bank of Portugal may impose that some operations (namely transfer of assets within a banking group) must be previously authorised by it in order to avoid the bankruptcy of the concerned bank. a) Compulsory counterparts and guarantees There is no compulsory counterpart or guarantee that transferee should provide to transferor, unless specifically agreed by the parties. b) Financial capacities of the transferor and the transferee The decision to transfer must comply with conditions relating to the financial capacities/health of the transferor/transferee. In fact, the transfer of assets must comply with the requirements set forth in the legal framework for the credit institutions.. In this context, the general rule states that the own funds of the credit institutions cannot be inferior to the minimum amount of share capital required by law: 1.250.000. If these conditions are not met and the own fund go below the minimum thresholds, the Bank of Portugal may grant to the relevant institution a limited time period in order to regularize this situation. If this does not happen, recovery measures may be imposed by the Bank of Portugal in order to avoi the concerned bank s bankruptcy. According to Portuguese law, unless the transferor is secured with a special guarantee, i.e. a personal security or a real security (mortgage, pledge or lien), it is considered a common creditor. In Insolvency Law, it shall be made a graduation of the credits, in order to settle the ranks of the secured and unsecured creditors. Besides special Page 22 of 124

securities, Portuguese law foresees several creditor s preferential claims 7, namely credits related to taxes and credits related to employees wages. Please be advised that the Insolvency Code foresees the concept of subordinated credits, which shall be graduated after all the remaining insolvency credits. These are the foreseen subordinated credits (Article 48 of the Insolvency Code ): a) credits held by persons especially connected with the debtor, if the special connection already existed in the moment of the acquisition, and by those to which they have been transferred in the 2 previous years before the commencement of the Insolvency Proceeding; b) non subordinated credit interests created after the insolvency declaration, except for credits secured by a real security and general preferred credits until the value of the respective assets; c) credits whose subordination has been agreed by the parties; d) credits having as an object free obligations from the debtor; e) credits over the insolvency that go for a third party not acting in good faith, as a consequence of the resolution in favour of the Insolvency assets; f) interests of subordinated credits created after the insolvency declaration; g) credits over shareholders loans. There is a general duty for the managers to perform its duties. This imply that they must take all measures to avoid the creation of going concern situations and, consequently, crisis situations also. In what concerns Banks, when a crisis situation occurs the Bank of Portugal may impose that some operations (namely transfer of assets within a banking group) must be previously authorised in order to try to avoid the Bankruptcy of the relevant credit institution. c) Information and transparency 7 Please be advised that these creditor s preferential claims are not compiled in a code. By the contrary, they are scattered through several Decree-Laws. Page 23 of 124

In what concerns the information duties, these are as follows: - supervisors i) Bank of Portugal - As a general rule, credit institutions cannot own a qualified participation whose amount is higher that 15% of the participating institution. Nevertheless, these amounts do not apply to participations in other credit institutions, in financial companies, in financial institutions, in fund pensions management companies and in insurance and reinsurance companies. - As a general rule, credit institution cannot own, directly or indirectly a for a continuous or interpolated period of more than 3 years participation granting 25% of the voting rights, corresponding to the capital of participated company; this limit shall be of five years it the participation is held by venture capital companies (article 101, number 1 and 4 of RGICSF); - This limit shall not apply to holdings in a credit institution in other credit institutions, financial companies, auxiliary services companies, securitization companies, insurance companies, affiliates of insurance companies held in accordance with the applicable law, insurance and brokers and insurance intermediaries, management companies of pension funds, venture capital companies and holding companies that only hold parts of the share capital of the referred companies (article 101, number 3 of RGICSF). - When an individual or a legal entity wishes to acquire a qualified holding in a credit institution they must communicate the project to the Bank of Portugal. - The Bank of Portugal may oppose to that project in the following three months if he considers that the entity or its project do not guarantee the conditions necessary to a sound a prudent Page 24 of 124

management of the credit institution (article 103, number 1 of RGICSF). - If this communication requirement is not met, there are sanctions. In fact the voting rights can be suspended. Moreover, the resolutions of the relevant credit institution can be annulled and the Bank of Portugal may refuse to register the corporate bodies of the credit institution (Article 105 of RGICSF). - Please be also advised that the Bank of Portugal may, ex officio, declare the qualified nature of any participation in the share capital or in the voting rights of a credit institution, if he determines that some acts concerning the qualification have not been communicated or have been erroneously made. This also applies when the Bank of Portugal considers that were practiced acts which may alter the influence made by the holder of a participation in the management of the participated institution (article 102-A of RGICSF). - Finally, after the completion of the acquisition of the qualified participation, it is mandatory to communicate the acquisition in the 15 days following its completion (Article 104 of RGICSF). - In what concerns the decrease of the qualifying holding amount, it is also mandatory to communicate to the Bank of Portugal the decrease project as well as its completion in the 15 days following the completion Article 107 and 104 of RGICSF). - If a decrease below a participation of 5% of the share capital or the voting rights occurs, the Bank of Portugal, in a period of 30 days, shall communicate it considers that the participation is qualified (Article 107 of RGICSF). - This communication duties impend also on the relevant credit institutions. ii) Securities Commission Page 25 of 124

- According to article 16 of the Securities Code, if one of the credit institutions are public companies and the transfer of assets of the intervenients reaches or exceeds a holding of 10%, 20%, a third, a half, two thirds and 90% of the voting rights in the capital of a public company subject to Portuguese law or reducing its holding to a value lower than any of the above thresholds, should, within 4 trading days of the occurrence of said fact or the knowledge thereof shall a) Inform the CMVM and the company holding the participating interest of said fact and b) Inform the entities described in the previous paragraph of those situations that determine the granting to the participant of voting rights inherent in securities belonging to third parties. - If the communication duties are not met, some sanctions can be applied. Fines can be applied, as well as accessory sanctions. In any case, the infringer is not released from fulfilling the obligation, if this is still possible. - Shareholders Shareholders with holding of 10% or more of the share capital may demand, upon writing, information concerning issues relating to the company. The information cannot be refused if, in the requirement, the shareholder states that the information envisages to determine the responsibility of the company s corporate bodies (Article 291 of the Commercial Companies Code). - employees - Not applicable - third parties The information concerning the transfer of assets may acceded by the legal and financial consultants of the relevant company s. Usually, they enter into a confidentiality agreement to enforce the nondisclosure of confidential information. Page 26 of 124

As a summary of the duties described above we have the following: - supervisors Bank of Portugal: Before the acquisition occurs and in the 15 days following the acquisition of the qualified participation. Securities Commission: After (if one of the parties is a Public Company) - shareholders Before or after, depending the moment when the information is required to the company. - third parties Before or after, depending the moment where the services are to be rendered. d) Sanctions When a transfer of assets has occurred, some sanctions may be incurred. Please find a brief description of the possible sanctions foreseen in the Portuguese legal system. - under Insolvency Law - Please be advised that Decree-Law no 199/2006 has transposed Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions. - According to this Decree-Law the winding up of a credit institution may be compulsory or voluntary. Page 27 of 124

- Where a voluntary winding up occurs, Any project of a voluntary winding-up of a credit institution shall be communicated to the Bank of Portugal with at least 90 days. Notice from the date of its effectiveness (article 5.º, number 2 of Decree-Law 199/2006 and article 35-A, number 1 of RGICSF). - A compulsory winding up occurs only where the authorization of the concerned bank is revoked (article 5.º, number 2 of Decree-Law 199/2006). In these cases the rules contained in the Insolvency Code shall apply (article 8.º, number 1 of Decree-Law 199/2006). - The cancellation of the authorization has the force of an insolvency declaration (article 8.º, number 2 of Decree-Law 199/2006), but it has to be homologated by a judge in order to determine its legality (article 9.º, number 1 of Decree-Law 199/2006). - After this occurs, the judge, upon proposal of the Bank of Portugal, shall appoint a legal liquidator or a liquidation commission (article 10.º, number 1 of Decree-Law 199/2006) According to Insolvency Law, when a company cannot fulfil its due obligations it must present herself before Court in order to file an Insolvency Procedure (Article 3, number one of the Insolvency Code). It must be emphasized that the Insolvency Code, in article 16, number 2 determines that the provision set forth in such code do not hinder the framework set forth in special legislation concerning financial collateral agreements. The framework concerning financial collateral agreements is the result of the transposition of Directive 2002/47/EC, which was made by Decree-Law no. 105/2004, of May 8. According to the current legislation, an insolvency is wilful when the debtor or its directors, as consequence of its conduct, have created or augmented the consequences of the insolvency in the previous 3 years before the insolvency procedure is filed. Page 28 of 124

Moreover, all acts performed in the four previous years to an insolvency procedure can be terminated in order to allow that the assets subject to those acts can be affected to the assets belonging to the bankruptcy assets ( massa insolvente ) article 120, number 1 of the Insolvency Code. Additionally, please be advised that the Portuguese Insolvency Law foresees that the parties of an agreement, namely transfer of assets, cannot foresee that an insolvency is (i) a condition subsequent attributed to the one of the parties or (ii) grant to that counterparty a indemnification right. If this happens, the clause shall be considered null and void. (article 119 of the Insolvency Code) - under Civil Law As a result of an illegal insolvency, that is, (i) an insolvency unduly required or (ii) an insolvency occurred as a result of wilful or negligent acts performed by the company s directors, civil liability rules may apply. In fact, persons considering to be entitled to an indemnity must prove that the following conditions are met (article 483, number 1 of the Portuguese Civil Code): i) act performed by the companies mangers; ii) the act must be unlawful, that is, it must breach an right or a legal interest granted to the claimant. iii) Existence of a damage; iv) Existence of a causal link between the damage and the conduct of the company s director. The rules relating to civil liability are developed under Company Law, namely in what concerns the procedures required to enforce the company and/or its manager s liability. Page 29 of 124

These general rules apply in what concerns the liability of a company manager and/or director in what concerns its liability before a company s shareholder or third parties. - under Company Law i) liability before the company In what concerns companies groups, the members of the corporate bodies must adopt, in what concerns the group, the diligence required in what concerns the management of its own company (article 72 of the Commercial Companies Code). The managers or the directors of a company are liable before the company for the acts or omissions performed in a manner the legal and contractual duties that the managers and/or directors are obliged to, except if they can prove that have not acted with negligence when practiced such acts. Nevertheless, the liability is excluded if the manager and/or director prove that has acted in an informed way, free of any personal interest and according to criteria of corporate rationality. We can define this criteria as business judgment rule, that is an actuation according to the regular business criteria governing similar companies. Moreover, the managers and/or directors shall not be considered liable for the damages emerging of a corporate resolution in which they voted against the approved resolution. In this case, the manager and/or director may attach to the minute its voting declaration in the five days following the approval of the resolution. This right can also be exercised by a writing addressed to the company s supervisory bodies, whether before a public notary or the Commercial Registrar. Page 30 of 124

When a manager and/or director does not exercise this opposition right, it shall be considered jointly liable in what concerns the acts he could oppose. In any case, the liability of a manager and/or director to the company does not apply in what concerns resolutions approved by the company s shareholders, namely in shareholder s meetings. ii) Liability before the company s shareholders Independently of the damages individually suffered, the company shareholders may enforce the directors liability. In order to do so, the shareholders, jointly or grouped with other company s shareholders, must represent at least 1% of the company s share capital or 2% of the company s share capital if the company is a public company (article 77 of the Commercial Companies Code). iii) Liability before the company s creditors The managers and/or directors of a company are liable before their creditors when, as a result of the negligent breach of their contractual and legal duties the company s assets become insufficient to satisfy the company s creditors (article 78 of the Commercial Companies Code). This liability cannot be excluded even if the act or omission is based in a corporate resolution approved by the company s shareholder general meeting. If an insolvency occurs, these rights can be exercised by the administrator of the insolvency proceeding. iv) Liability before the company s employees If the conditions set forth in ii) and iii) above, the company s managers shall be jointly liable with the company and the company s which are in a group or dominion relationship, in what concerns Page 31 of 124

credits arising from employment contracts due for more than 3 months (article 378 and 379 of the Labour Code). - under Banking Law As a complement to the previous rules, the legal framework foresees that the credit institutions must ensure, in all the activities that they perform, high levels of technical competence, ensuring that its corporate organisation works with the human means and materials adequate to guarantee its quality and efficiency (article 73 of RGICSF). Moreover, the managers must: a) Act with diligence, neutrality, loyalty and discretion and with a conscious respect of the interests which they manage. These duties apply to the relationships between its clients as well as between other institutions (article 74 of RGICSF); b) act in its functions with the diligence required to a diligent manager, acting according with the principle of risks distribution and the security of the applications, having also in consideration the interest of the depositors, the investors and all the creditors and clients of the credit institution in general (Article 75 of RGICSF). These general rules must be coordinated with the specific dispositions concerning insolvency contained in the legal framework for the credit institutions. In fact, whenever a credit institution cannot fulfil its obligations or is exposed of the risk of not fulfilling its obligations, them members of its management or supervisory bodies must communicate immediately that situation to the Bank of Portugal. If the corporate bodies do not make the aforesaid communication, there is a personal duty impending over its members in order to communicate the insolvency risk. Page 32 of 124

This financial imbalance usually implies the fall of the own funds to a level inferior to the minimum mandatory level or the failure to accomplish with the liquidity or solvency ratios. In these cases, the Bank of Portugal can determine the following recovery measures (article 141 of RGICSF): a) Submission, by the relevant institution, of a recovery plan; b) Restraints to the rendering of certain activities; c) Restraints to granting of credit and the application of funds in certain assets, namely in operations involving its affiliates or the holding company of those affiliates; d) Restraints to reception of deposits, attending to its types and its remuneration interest rate; e) Imposition of the implementation of special provisions; f) Forbiddance or limitation to dividends distribution; g) Subjection to previous authorisation of the Bank of Portugal relating to certain operations or acts; Please be advised that the implementation of the aforesaid measures does not prevent the application of fines to the relevant credit institutions neither the commencement of judicial proceedings against the credit/institution and/or the members of its corporate bodies. - under Criminal Law Portuguese Criminal Law foresees some crimes relating to facts concerning insolvency. Among all, it assumes a major position the crime of fraudulent insolvency. In fact, according to the Portuguese Criminal Code, the debtor that with intention to harm its creditors (article 227 of the Criminal Code): a) destroys, damages, makes useless or disappears part ot its assets; b) fictitiously diminishes its assets, concealing materials, claiming fictitious debts, recognizing fictitious credits, prompting third parties to present such credits or by any means simulates a patrimonial situation inferior to reality, namely through inexact accountancy, fake balance sheets, destroying or concealing Page 33 of 124

accountancy documents or trough the non-organisation of its accountancy; c) artificiously creates or aggravates losses or diminishes profits; or d) buys, in order to postpone the bankruptcy, assets through credit facilities aiming its sale or its use as a payment with a lower price comparing with the current one [for such assets] shall be punished with an imprisonment penalty or with a fine not exceeding 600 days if the insolvency situation occurs and its recognized in a judicial proceeding. e) Third parties Supervisory authorities RGICSF foresees, mainly, the role of Portuguese supervisory authorities ( Home Supervisory Authority ) due to the fact that applies, mainly, to the activity of credit institutions in Portugal. Nevertheless, in what concerns consolidated supervision, the Bank of Portugal shall be competent to perform its supervision if a financial company has its head office in Portugal and if the holding company of credit institutions with head offices in Portugal and other member states of the European Union. The credit institutions having its head office in Portugal, but whose holding company has its head office in another member state of the European Union shall be under the supervision of the host supervisory authority. If a credit institution whose holding company is a credit institution or a financial company having an head office located outside the European Union, it must determined if the holding company is subject to a supervision similar to that made by the Bank of Portugal. If this does not occur, the rules concerning the consolidated supervision made by the Home Supervisory Authority apply. Page 34 of 124

In what concerns the transfer of assets, the supervisory authorities shall act according to the rules referred in paragraph C above. In what concerns the solvency ratios, Directive 2006/48/EC and Directive 2006/49 EC were transposed to the internal legal framework. Therefore, credit institutions must comply with the general rules described in the Legal Framework for the Credit Institutions and with the framework foreseen in the Decree-Laws that transposed the Directives. The requirements and solvency ratios, as well the calculation of the credit institutions own funds are developed by the notices of the Bank of Portugal, namely Notice 12/92, that you may find attached as Annex A to this report. Please be advised that according to the general principles of Companies Law directors of a company must a avoid transfers that may create an Insolvency proceeding. Nevertheless, if this happens, the Bank of Portugal may impose recovery measures in order to avoid the bankruptcy of a credit institution. In these exceptional circumstances transfer of assets may be subject to previous authorisation by the Bank of Portugal. Please be advised that if branch of a foreign institution is operating in Portugal and if the solvency ratios are not met or the requirements concerning qualifying holdings are not met, the Bank of Portugal shall inform the Home Supervisory Authority in order to take the appropriate measures concerning the branch operating in Portugal (article 53 of RGICSF). If appropriate measures are not taken, Bank of Portugal, after informing the Home Supervisory Authority, may implement all measures considered adequate in order to prevent all irregularities. Moreover, it shall also inform the European Commission of the measures taken. Page 35 of 124

Notwithstanding the measures referred in the previous paragraphs, the Bank of Portugal, if urgency occurs, may, ex officio, implement urgency measures, and, as soon as possible, it shall inform the Home Supervisory Authority and the European Commission. Minority shareholders Shareholders with a holding of 10% or more of the share capital may demand, upon writing, information concerning issues relating to the company. The information cannot be refused if, in the requirement, the shareholder states that the information envisages determining the responsibility of the company s corporate bodies. This information can be required before or after the transfer of assets. If this information is not disclosed or if the disclosed information is presumably false, the shareholder is entitled to obtain a judicial enquiry. Minority shareholder may try to obtain the annulment of the resolutions taken. Except as otherwise foreseen in the company s bylaws, resolutions concerning transfer of assets are taken by the Board of Directors. The board of directors resolutions are null in the following cases (article 411, number 1 of the Commercial Companies Code): a) they were taken in a non-convoked Board of Directors, unless all directors where present or have voted by correspondence, if that s allowed by the company s by-laws; b) the resolution s content is not subject to a Board of Directors resolution; c) the resolution s content goes against mandatory legal rules or the public policy; Minority shareholders can enforce a judicial proceeding enforcing the Director s liability, as well as the Company s liability; Creditors Page 36 of 124

In what concerns creditors, there must be made a distinction, whether there is an Insolvency Proceeding ongoing or not. If there is no Insolvency Proceeding filed, the transferor and the transferee must analyse the transfer of assets in order to evaluate if it can create an Insolvency situation, i.e., a situation where a company cannot fulfil its obligations. If an Insolvency Proceeding is already filed, the transfer of assets is subject to authorisation by the legal liquidator. Moreover, if we are dealing with a Bank and there are recovery measures being implemented, the transfer of assets may be subject to the previous authorisation of the Bank of Portugal. Employees Employees can enforce judicial proceeding in order enforce the liability of the company and its managers in what concerns credits arising employment contracts due for more than 3 months. Company s which are in a group or dominion relationship are also jointly liable for these credits (articles 378 and 379 of the Labour Code). Deposit holders Directive 94/19/EC was transposed to Portuguese legal system through amendments to Legal Framework of the Credit Institutions. Under Portuguese Law there is a Fund to Guarantee Deposits ( Fundo de Garantia de Depósitos ), which aims to ensure the reimbursement of deposits made in the credit institutions which adhere to this fund. Nevertheless, deposits owned by companies in a dominion or group relationship with the participant credit institution are not covered by this Fund (article 165, item f) of RGICSF). Page 37 of 124

The Fund is mandatorily participated by the following institutions (Article 156, number 1 of RGICSF): a) Credit institutions with its head office in Portugal, duly authorised to receive deposits, b) Credit institutions with its head office in a country not located in a Member State of the European Union, in what concerns the deposits received via its affiliates in Portugal, except if those deposits are covered by a guarantee system in its home country considered equivalent by the Bank of Portugal, and without prejudice to eventual agreements in this issue; c) Until December 31, 1999, the credit institutions referred in Annex III of Directive 94/19/EC, in what concerns the deposits received via its affiliates in Portugal. The Fund guarantees, for each deposit holder, the reimbursement of deposits until the limit of 25.000 (article 166, number 1 of RGICSF). Besides the Deposit Fund Guarantee, there is also an Investor Indemnification Fund in order to indemnify investors acting with certain securities and financial instruments, which cannot be satisfied by the financial intermediary. This System guarantees credits until the maximum amount of 25.000. Besides these Guarantee institutions, there is no specific regulation concerning the deposit guarantee in case of a transfer of assets in another Member State. If a transfer of assets including deposited funds occurs, the deposit insurer or guarantor does not have to be notified. The Fund only acts when the deposits in a credit institution are unavailable, i.e., the credit institution goes into a crisis situation. Deposit holders (including deposit holders of the transferor) can enforce a judicial proceeding enforcing the Director s liability, as well Page 38 of 124

as the Company s liability if the Company does not reimburse the deposit. Member State According to Portuguese law, Member States do not have any right or obligation concerning assets located in another Member State, unless they are the owners of such assets or unless they have a right impending over such assets. f) Private international law In what concerns the applicable law, it must be stressed out that Portugal has adhered to the Convention on the Law Applicable to contractual obligations opened for signature in Rome on 19 June 1980 ( Rome Convention ), which states that any law specified by this Convention shall be applied whether or not it is the law of a Contracting State. In fact, Rome Convention has a universal aim, once it applies even if the applicable law despite that law belongs or not to a contracting state. Moreover, this Convention shall apply in Portugal to contracts made after the date on which this Convention has entered into force with respect to that State. As a general principle, a contract shall be governed by the law chosen by the parties. To the extent that the law applicable to the contract has not been chosen by the parties, the contract shall be governed by the law of the country with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with another country may by way of exception be governed by the law of that other country. If the subject matter of the contract is a right in immovable property or a right to use immovable property it shall be presumed that the contract is Page 39 of 124

most closely connected with the country where the immovable property is situated. It is the classic lex rei sitae criteria. Please be advised that the Rome Convention shall not apply to: a) questions involving the status or legal capacity of natural persons; b) contractual obligations relating to the personal status c) obligations arising under bills of exchange, cheques and promissory notes and other negotiable instruments to the extent that the obligations under such other negotiable instruments arise out of their negotiable character; d) arbitration agreements and agreements on the choice of court; e) questions governed by the law of companies and other bodies corporate or unincorporate such as the creation, by registration or otherwise, legal capacity, internal organization or winding up of companies and other bodies corporate or unincorporate and the personal liability of officers and members as such for the obligations of the company or body; f) the question whether an agent is able to bind a principal, or an organ to bind a company or body corporate or unincorporate, to a third party; g) the constitution of trusts and the relationship between settlors, trustees and beneficiaries; h) evidence and procedure In what concerns Insolvency Law, please be advised that the current legal framework does not contain a rule regulating issues concerning applicable Law. In fact, the Insolvency Code only foresees the competent Court to decide the Insolvency procedure. It shall be competent the court of the head Office of the company or the court of the place where the company has the center of its mains interests. In the latter case, one must assume that the aforesaid center is the place where the company is normally managed in a public way, i.e. in a manner where third parties can know the existence of that center of interests. Page 40 of 124

Part II -Evaluation of potential solutions The purpose of this second part is to analyze potential solutions to remove obstacles to asset transferability. Different categories of solutions will be proposed. We first would like to know which parts of your legislation would need to be amended in order to implement the solution. Second, we would like to have your personal opinion about the feasibility of the solutions regarding the legislation in your Member State. After that, we would like know if you consider that this solution is satisfactory and we would like you to explain why. Lastly, we would like to know what legal obstacles still remain in your Member State. Regarding those proposals, please consider that a transfer of assets from the subsidiary to the parent company in a crisis situation should not be considered as a transfer at arm s length. 1. Transfers from the parent company to the subsidiary or from the subsidiary to the parent at arm s length: Proposal n 1 Community legislation allows: - any kind of transfer from the parent company to the subsidiary and - transfers from the subsidiary to the parent at arm s length. Possible consequences or conditions: - Any restriction to those transfers have to be removed by Members States - After the transfer, specific information about the transfer have to be communicated to supervisors and shareholders Questions Page 41 of 124

i) The first measure to be taken consists in the adoption of the arm s length principle in general terms, broadening its application from Tax to Companies Law in general and, eventually, in Banking Law. Furthermore, it should be also necessary to foresee several information duties to the concerned parties, in order to make possible for its shareholders and also the supervisory authorities to be able to determine the validity of such transfer of assets, namely in what concerns the amounts involved. ii) The broadening of the scope of application of the arm s length principle may create some disruptions in the Portuguese system, due to the fact that creates a material condition to the validity of the transfer of assets. In fact, according to the current framework of Companies Law, only the granting of securities by companies in a group relation and the financial assistance regime are foreseen. Therefore, some rules must be foreseen in order to determine the validity of a transfer according to the arm s length principle. In fact, it is advisable to create a group of rules on the chapter of Companies in Group Relations of the Commercial Companies Code to set forth the validity conditions of these operations made in accordance with the arm s length principle. These rules must establish the accounting methods to be adopted when entering into the agreement and determining the transfer price. Furthermore, those rules should be also foreseen in RGICSF in order to adapt these operations to the banking reality, especially in what concerns the supervision on a consolidated basis. In any case, please be advised that if the transfer of assets to be allowed involves the transfer of a qualifying holding, some rules of the RGICSF may have to be amended or suppressed. Considering that the transfer of assets in these cases must not endanger nor the deposit holder, nor the shareholders of the Banking Institution, it is advisable to foresee that, in Page 42 of 124

these cases, the previous authorization of the Bank of Portugal, as well the further notice of completion of the operation, is necessary. Nevertheless, once the present proposal only foresees information duties after the completion of the transfer, this can create disruptions, once it is contrary to the rule foreseeing the previous approval of the acquisition or sale of a qualifying holding in a credit institution. In other cases, the introduction of this proposal would create the necessity to foresee additional information duties when a transfer of assets within a banking group occurs. In addition, please be advised that the holders of qualifying holdings are subject to an analysis of the suitability of the owners of a qualifying holding. Therefore, if the asset to be transferred is a qualifying holding in Portuguese bank this transfer must comply with national rules. If same rules do not apply to transfer of assets within a banking group, there will be an obvious breach of the equality principle. If the transfer of assets involves real estate, same objections apply, once the current legal framework foresees Credit institutions shall not, except with the authorisation of the Bank of Portugal, acquire real estate other than that required for their setting-up and operation or for the pursuance of their business purpose. Therefore, if only ex post information duties are foreseen, this creates a disruption with the current framework. In any case, please be advised that these transfer of assets should be avoided or, if the proposal goes forward, subject to eventual authorizations if the company subject to Portuguese Law is under an Insolvency proceeding or under recovery measures applied by the Bank of Portugal. In fact, if a transfer of assets is possible under these conditions, a major principle of Insolvency Law is revoked, due to the fact that no authorization from the legal liquidator would be necessary. iii) This solution is not satisfactory for the following reasons: Page 43 of 124

a) by creating only ex post duties of information, the national regulators (namely Banco de Portugal ) are deprived of an efficient way to evaluate the scope of a transfer of assets, especially when such transfers involve a qualifying holding; b) Excepting the issues involving concerns transfer of assets having as an object qualifying holdings, Bank of Portugal determines the financial situation of a credit institution through (a) the disclosure of quarterly balance sheets and financial data, (ii) the disclosure of an annual balance sheets and financial data and (iii) periodical enquiries to credit institutions. Therefore, in order to complement this powers, it should be advisable to foresee a mandatory communication in all cases of transfer of assets, namely when the amount of the transfer exceeds, for instance, 1.000.000,00; c) A transfer of assets normally involves monetary compensation. Therefore, in order to ensure and protect the creditors of the transferor, it would be advisable to foresee that a percentage of the amount involved in a transfer should be affected to a mandatory reserve (5% or 10% of the amount involved in the transfer of assets); d) Please be advised that the measure foreseen in item c) above involves, under Portuguese Law, an amendment whether to Companies Law or Banking Law, in order to create a new type of legal reserve to be created for credit institutions. e) In order to minimize the eventual disruptions or even the invalidity of the transfer of assets, it should be advisable to complement the ex post information duties with the granting of additional powers to the supervisory authority, foreseeing, for instance, that transfers of assets should only be valid after the supervisory authority examines them and does not oppose to it. iv) According to article 114 of RGISCF the limits envisaged in Articles 100 and 101 (acquisition of qualifying holdings) may be exceeded and the restriction imposed under Article 112 (acquisition of real estate) may be disregarded as a result of acquisitions in repayment of the institution s own credit. Moreover, the resulting situations shall be remedied within a period of two years, which may, when duly warranted, be extended by Bank of Portugal, under the conditions established by this Bank. Page 44 of 124

In order to complement this rule, it should be advisable to foresee rules concerning the setting-off of credits, namely in what concerns banking groups subject to supervision on a consolidated basis. In fact, once the situations foreseen in article 114 of RGICSF can be created when, before a default of its counterparty, a credit institution minimizes that default by making a set-off declaration, it should be advisable to foresee the situation where that set-off may occur and, eventually, if some additional requirements must be observed. Page 45 of 124

2. Transfers from the subsidiary to the parent company (in preferential conditions) a) Prior and overall agreements Proposal n 2: Similar EU instrument: Art. 234 - Solvency II: Amended Proposal for a Directive on the taking-up and pursuit of the business of Insurance and Reinsurance http://eurlex.europa.eu/lexuriserv/lexuriserv.do?uri=com:2008:0119:fin:en:pdf Proposal: For this proposal, please consider that an EU instrument has been adopted, which provides that a group agreement under which the parent company and some of the entities of the group can mutually commit themselves to transfer assets in a crisis situation has to be allowed by the Member States. This agreement is endorsed by each legal entity being a party to the agreement. This agreement guarantees financial support from the parent to the subsidiary and from the subsidiary to the parent. This agreement could only be voluntary because of the freedom of contracts, the limited liabilities of companies and minority shareholder rights. This agreement is submitted to the supervisory authorities. A group-wide view of solvency and liquidity would be a useful part of the supervisory assessment of an intra-group transfer. This group-wide approach will be required as part of the review of the CRD on 'colleges'. The agreement may already be submitted when the subsidiary asks for authorisation to take up and pursuit the business of credit institutions. This agreement may also be submitted when the subsidiary asks for authorisation and will be considered as a modification to the conditions of the authorisation to take up and pursuit the business of credit institutions. Possible consequences or conditions: Page 46 of 124

-The capital adequacy rules is still respected after the transfer -The transfer does not endanger the transferor s solvency -The amount of the transfer is to be reimbursed by the transferee to the transferor. In case of insolvency, the creditors of the transferor will be reimbursed before the creditors of the transferor up to the amount of transfers that occurred; -After each transfer, the transferor informs supervisors and the shareholders during the ordinary General Assembly meeting following the transfer; - If the good faith, competence and prudence of the transferor's management is not in question and if the transfer fulfils all the conditions specified above, then the transfer cannot be challenged under Insolvency Law. Questions Please be advised that the answer to this question is made assuming that the there is a dominion relationship between the parent company and the subsidiary. In fact, as far as we understand its scope, these financial support agreements can only be made where a bank is included in a group where a holding company has such dominion. i) According to Portuguese Insolvency Law, all acts not favourable to the insolvent mass made in the four previous years before the Insolvency declaration can be terminated and, as a consequence, assets involved in the terminated act return to the insolvent mass. Moreover, when a crisis situation occurs, id est, when a company faces an insolvency (or the Bank of Portugal implements recovery measures on a credit institution subject to its supervisory authority), a legal liquidator is appointed and one of its competences is to determine if some acts can be effectively carried out. Therefore, rules relating to acts performed during a crisis situation or being conditioned to a crisis situation must be amended. Most notably, the principles referred in the previous paragraphs have to be suppressed or, at least, its appliance to credit institutions must be excepted. Nevertheless, it should also be advisable to foresee that these financial supports provided by Page 47 of 124

the subsidiary should qualify as subordinated loans (for the purposes of Banking Law) or as subordinated credits (for the purposes of Insolvency Law). In fact, if these transfers qualify as subordinate loans or subordinated credits under Portuguese Law and the borrower is subject to Portuguese Law, they can (i) increase the own capital ratio of the Borrower (for the purposes of Banking Law) and (ii) they are the last debt to be reimbursed and, therefore, they cannot affect other creditors of the borrower (for the purposes of Insolvency Law). ii) Foreseeing an agreement allowing financial support between the subsidiary and its parent company may create a disruption with some Insolvency Law principles, due to fact that if the agreement cannot be challenged under Insolvency Law, rules regarding the 4 years period previous to the insolvency declaration where acts performed can be terminated, must not apply to banking groups. In order to act according to the equality principle this different treatment conceded to credit institutions must have a strong justification, once it creates an inequality between banking groups and other companies in group relation during a crisis situation. In what concerns Companies Law, the Board of Directors, unless otherwise foreseen in the company s bylaws, has the competence do determine the sale or acquisition of assets. Therefore, the Companies Code foresees an information right of the shareholders. Nevertheless, only shareholders owning at least 10% of the company s capital stock have the right to be informed of specific transactions carried out by the company. Consequently, foreseeing that after each transfer, the transferor must inform the shareholders during the ordinary General Assembly meeting following the transfer is only a mere amendment to the Companies Code. Please be advised that, in these circumstances, the financial support between the companies is commonly materialized in loan agreements. Under Portuguese Law, only holdings management companies [ sociedades Page 48 of 124

gestoras de participações sociais ] can grant credit to companies in a dominion relationship or to companies where they have a holding of, at least 10% of the capital stock. The legal framework that foresees the possibility of this loan agreements states that these loans shall not qualify as granting of credit for the purposes of the RGICSF. Therefore, if we are dealing with credit facilities, no objection to the financial support shall be made, once a bank has as a primary activity to receive deposits and to grant credit. Nevertheless, the fact that this financial support is made by companies in a group relation, recte, a banking group, justifies the adoption of specific rules regarding this financial supports between the concerned companies of the banking group. In this particular, it seems advisable to foresee specific limits to such credits. To this extent, rules similar to bonds issuance could apply. Under Portuguese Law, a company cannot issue bonds in a amount exceeding the double of its own capital, having in consideration the amount of the subscription price of all issued but not written off bonds (Article 349.º, number 1 of the Commercial Companies Code). Moreover, even if there is a crisis situation, an in order to ensure that the concerned credit institution maintains it funds, these financial supports cannot go below the solvency ratio and own funds requirements made by the RGICSF and the relevant Instructions and Notices issued by the Bank of Portugal. In general terms, this is not a disruption to the current legal framework. By the contrary, it is a development to the rules regarding financial support, id est, loans between companies in a group relation. iii) The main advantage of this solution resides in the fact that the capital adequacy rules is still respected after the transfer and that the transfer does not endanger the transferor s solvency. Nevertheless, it should be foreseen that all financial support agreements entered into by the concerned companies should: (i) previously to entering the financial support agreement inform the regulatory authorities in order to obtain its approval; Page 49 of 124

(ii) (iii) after entering the financial support agreement inform the regulatory authorities in order to determine if such agreement complies with its previous authorisation; maintain its solvency ratios and own funds levels after the completion of a transfer of assets foreseen in the financial support agreement. Only if these conditions are observed the financial health of the concerned companies is not endangered. In fact, any amendment to rules regarding prudential supervision like this one must have in mind that supervision power granted to the Bank of Portugal aim to: (i) protect the concerned credit institution, with everything that it represents, that is: depositors, shareholders and employees; (ii) protect the banking system globally considered, with everything that this represents: population wealth, investments, future perspectives; (iii) protect the market, with the inherent values to that way of structuring an economy. This solution is efficient in these 3 prudential objectives: it protects the credit institution, due to the fact that not endangering its financial health is a condition precedent to entering into this agreement, protects the banking system, once the concerned institutions remains solvent and, by complying with the solvency ratios and own fund requirements, protects the market. iv) Once this financial support agreement is foreseen as a condition precedent to the authorisation to take up and pursuit the business of credit institutions, it should be advisable to take two additional measures: a) in the rules concerning the authorization to take up and pursuit the business of credit, foresee the necessity to require such authorization submitting the main terms and conditions of these financial agreements; b) foresee that all authorized credit institutions under Portuguese law should submit such agreement in the following year to the entry on force of the Decree-Law or EU Regulation foreseeing the financial support agreement; Page 50 of 124

b) Strong guarantees covering the risk of outstanding payment Proposal n 3 Similar EU instrument: Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (http://eurlex.europa.eu/lexuriserv/lexuriserv.do?uri=celex:32002l0047:en:htm L ) Proposal: For this proposal, please consider that an EU instrument has been adopted, which provides that a group agreement under which the parent company and some of the entities of the group can mutually commit themselves to transfer assets in a crisis situation has to be allowed by the Member States. This agreement is endorsed by each legal entity being a party to the agreement. This agreement guarantees financial support from the parent to the subsidiary and from the subsidiary to the parent. This agreement could only be voluntary because of the freedom of contracts, the limited liabilities of companies and minority shareholder rights. This agreement is submitted to the supervisory authorities. A group-wide view of solvency and liquidity would be a useful part of the supervisory assessment of an intra-group transfer. This group-wide approach will be required as part of the review of the CRD on 'colleges'. The agreement may already be submitted when the subsidiary asks for authorization to take up and pursuit the business of credit institutions. This agreement may also be submitted when the subsidiary asks for authorization and will be considered as a modification to the conditions of the authorization to take up and pursuit the business of credit institutions. Possible consequences or conditions: -The capital adequacy rules is still respected after the transfer -The transfer does not endanger the transferor s solvency -The amount of the transfer is to be reimbursed by the transferee to the transferor. In case of insolvency, the creditors of the transferor will be reimbursed before the creditors of the transferor up to the amount of transfers that occurred Page 51 of 124

-After each transfer, the transferor informs supervisors and the shareholders during the ordinary General Assembly meeting following the transfer - If the good faith, competence and prudence of the transferor's management is not in question and if the transfer fulfils all the conditions specified above, then the transfer cannot be challenged under Insolvency Law. Questions In order to respond this question, please be advised that the transposition of Directive 2002/47/EC was made by Decree-Law no. 105/2004, of May 8. This Decree-Law foresees in article 17.º the following: 1. Financial collateral arrangement, as well as the provision of financial collateral under such arrangement, may not be declared invalid or void or be reversed on the sole basis that the financial collateral arrangement has come into existence, or the financial collateral has been provided: a. on the day of the commencement of winding-up proceedings or reorganisation measures, but prior to the order or decree making that commencement; or b. in a prescribed period prior to, and defined by reference to, the commencement of such proceedings or measures or defined by reference to: i. the making of any order or decree or the taking of any other action or ii. occurrence of any other event in the course of such proceedings or measures. 2. The following acts cannot be declared null or be annulled when practiced in period referred in the previous number: a. the constitution of a new collateral when a variation in the amount of the secured financial obligations or the constitution of a new additional financial collateral when a variation of the financial collateral occurs; b. the substitution of the financial collateral by an equivalent object; Article 19 states that acts referred in article 17 and 18 cannot be challenged under Insolvency Law, unless they were practiced fraudulently in order to prejudice other creditors. Page 52 of 124

i) As far as we understand the present proposal, the current legal framework already foresees materially this result, once the Insolvency Code, in article 16, number 2 determines that the provision set forth in such code do not hinder the framework set forth in special legislation concerning financial collateral agreements. ii) Once this solution can be materially obtained according to the current Portuguese Law due to the fact that Directive 2002/47/EC was already transposed in Portugal. Nevertheless, it should be advisable to complement this transposition, foreseeing that when a credit institution subject to the supervisory powers of the Bank of Portugal grants or is the beneficiary of a financial collateral agreement executed with a parent or subsidiary company, it should either previously or either immediately upon entering into such financial collateral agreement inform the Bank of Portugal about the terms and conditions regarding such agreement. Moreover, in order to avoid multiple communications, it should be stipulated a trigger amount, that is, such communications should only exist when that amount is exceeded. iii) Due to the fact that the compulsory ratios are not endangered, and once the capital adequacy rules are respected after the transfer and that the transfer does not endanger the transferor s solvency, interests involved in this transfer of assets are protected. iv) Please precise whether legal obstacles remain and how they could be removed in banking, insolvency and company law ) c) Liability of the parent company for the subsidiary s debts Prior question According to Portuguese Law, liabilities of the parent company are as follows: Page 53 of 124

I. The parent company is liable for the subsidiary s obligations, whether that obligations were created before or after the dominion relationship. Nevertheless, that liability cannot be demanded before 30 days over the dominated company default occurs (article 501.º, numbers 1 and 2 of the Companies Code applicable ex vi article 491 of the Companies Code); II. The dominated company has the right to demand that the dominant company sets-off the annual losses that, for any reason, occur while the dominion relationship exists, in all cases where those losses are not compensated by the reserves created during such period. This liability is demandable if the dominated company is subject of an insolvency declaration (article 502.º, numbers 1 and 2 of the Companies Code applicable ex vi article 491 of the Companies Code); III. These liabilities also exist in these terms where a subordination agreement is entered into. The Companies Code foresees liabilities of the Director company before the directed (id est, dominated ) company. IV. We must emphasize that group relations only verify when the concerned companies are limited liability companies ( sociedades por quotas ), limited company by shares ( sociedades anónimas ) and limited partnership with share capital ( sociedades em comandita por acções ) article 481.º, number 1 of the Commercial Companies Code. V. Moreover, according to Portuguese Law, only limited companies by shares can qualify as credit institutions (article 14.º, number 1, item b) of RGICSF). Proposal 4 Then, for this proposal, please consider that a EU instrument has been adopted and creates an automatic liability: Page 54 of 124

- by means of a specific type of company where the shareholders are systematically liable for all decisions that are disadvantageous for the company - or by means of a preferred shares under which the shareholder is systematically liable for some or all decisions of the company Questions i) In order to reach this result, RGICSF should be modified in order to foresee that not only limited companies by shares can qualify as credit institutions. This situation would be a complete innovation under Banking Law, once only limited companies by shares, until this moment, where the only types of company who could qualify as credit institutions and carry out this specific activity. Moreover, rules regarding the company s liability should be revised in order to foresee, that not only mangers or directors are jointly liable with the company. In fact, the sole liability rule regarding the shareholder is the rule contained in article 83.º number 1 of the Commercial Companies Code, which foresees shareholder s liability in specified cases, namely when such shareholder, using powers granted by the company bylaws or by a shareholders agreements, appoint a person to the company corporate bodies and such person is liable under the terms set forth in the Companies Code. In addition, that shareholder shall only be liable if there was guilt or wilful misconduct in the appointment of such person. Therefore, foreseeing a direct liability of the shareholder would be a major innovation in Portuguese Companies Law, especially in what concerns directors liability. In fact, please be advised that this situation is very similar with situations of liability resulting of disregarding the corporate veil [or, in German, Durchgriff der Personlichkeit ] of the legal entity and Portuguese Case Law, despite not ignoring this dogmatic construction, is not favourable to this solution. Page 55 of 124

Nevertheless, please have in mind that a major principle of Companies Law is that when recurring to a limited company by shares ( sociedade anónima ), shareholder s liability has as a limit the nominal amount of the shareholding of the concerned shareholder. Therefore, some basic rules would have to be amended in the Companies Code. Moreover, if a new type of company is created, there is a need to foresee specific rules concerning its management, once according to Portuguese Law, the competent corporate body to decide the majority of the corporate transactions is the Board of Directors and not the General Meeting of Shareholders. This is the reason why the Companies Code has specific rules regarding the Director s liability: generally speaking, in capital companies, namely companies limited by shares, the shareholders trust the management to a Board of Directors, which is liable before them and before third parties to all acts performed or executed by them during its management activity. In other words, as per rule, in these companies shareholders only control the Board of Directors activity with information requests and in regular Shareholder Meetings, such as those concerning the company s accounts approval. ii) As previously referred, the implementation of this solution would be a major innovation in Portuguese Law, once it foresees a situation very similar from that arising from liability resulting from the disregard of the corporate veil of legal entities. In fact, this solution would also go against a regular Case Law where such disregard of the corporate veil is systematically not accepted. In addition, it should be also necessary to foresee that other entities beside limited companies by shares can qualify as credit institutions under Portuguese Law. This would be an innovation in what concerns the history of Portuguese Banking Law, but it would only be a minor amendment to some articles of RGICSF. In what concerns this specific type of company, it must be emphasized that its regulation should be made in an extravagant Decree-Law or by making amendments to the Commercial Companies Code. In the latter case, those Page 56 of 124

amendments to the Commercial Companies Code shall not occur if such company has a specific social object, due to the fact that the Commercial Companies Code sets forth the basic and general terms of conditions for commercial companies. In any case, if this proposal goes forward, rules concerning Directors liability should be amended as well as rules regarding the shareholders liability, once such liability is limited by the amount of the shareholding of such company. In what concerns the latter aspect, please be advised that we have in mind limited companies by shares which are, according with the current framework, the sole companies which can qualify and carry out their activity as credit institutions. iii) The possibility to disregard the corporate veil and, by that way, foresee the direct liability of the shareholder has as its main advantage the possibility to call new assets to respond, instead of only the company s assets. Nevertheless, the results of this solution are not satisfying, due to the fact that this proposal do not take in account the incorporation of a company has a main objective: separate the assets that shall respond for some debts. In any case, foreseeing that in circumstances where some acts where practiced with wilful misconduct by the concerned shareholder, besides being an innovation in Portuguese Law, would be a way for the partner to be more demanding when taking some resolutions during a shareholder s meetings. Foreseeing a systematic liability of the shareholders for all decisions that are disadvantageous for the company corresponds to the disregard the corporate veil, ignoring that the shareholder and the company are two different entities and that both entities are subject to different duties and liabilities. Furthermore, in order to carry on with this proposal, it should be advisable to broaden the shareholders duties concerning the company and expressly give a definition of social interest, scilicet a resolution which is not disadvantageous to the company. In fact, despite the Commercial Companies Code refers the social interest [ interesse da sociedade ; interesse social ], it never gives a definition for this concept, leaving this Page 57 of 124

task for both Jurisprudence and case law, creating, therefore, a margin for discussion and, maybe, erratic case law, once it is not completely consolidated a definition of social interest. iv) Nonetheless, it should be advisable to review all provisions set forth in RGCISF in order to adapt them to such new type of company that can qualify as a credit institution, once the current framework is drafted for companies adopting the form of limited company by shares. Page 58 of 124

d) Improving transferability transfer through the introduction of a new concept of "banking group" Proposal n 5 Similar EU instrument: Draft of the Ninth Company Law Directive for the conduct of groups containing a public limited company as a subsidiary Company Law Action Plan dated May 2003 : framework agreement for group companies Under the "Company Law Action Plan" dated May 2003, the European Commission recommended specific rules on the enforcement of the group policy, for which Member States are required to draft a "frame agreement" for group companies that allows them to adopt a coordinated group company policy, as long as the interests of the companies' creditors are protected. This initiative has not been pursued. There might be merit in further investigating whether the definition of banking groups might remove obstacles in terms of banking law. In that respect, a draft Ninth Company Law Directive on the conduct of groups containing a public limited company as a subsidiary was presented in December 1984 for consultation. The Commission did not pursue this work. The Directive was intended to provide a framework in which groups are managed on a sound basis whilst ensuring that interests affected by group operations are adequately protected. Particular reference was made to the possibility to transfer assets while protecting the interests of different parties. Under the 9th Directive project, the legal recognition of the 'group' went hand in hand with specific steps to protect minority shareholders and creditors. It must be noted that a banking group would be a contract freely entered into. As contemplated in 1984 under the 9th Directive on company law, if a banking group does not wish to submit to a group regime, it will have to respect the economic interests of the subsidiary. Proposal: For this proposal, please consider that the idea of group company has been adopted by an EU instrument,. Page 59 of 124

The managers of the subsidiaries will be obliged to follow instructions even if the subsidiaries will thereby incur financial losses. These managers must therefore not be held liable vis-à-vis their own companies. This power of management is accompanied by the right to use the financial resources of the subsidiary, since the economic advantage of the group can be maximized only where there is a complete integration of the two entities. Once the agreement is concluded, transfers of assets are allowed between the members of the group. Possible consequences or conditions: - The constitution of the group is submitted to the supervisory authorities. - In case of insolvency, there is a possibility for creditors to file their claims with any of the companies of the group - In case of Insolvency, the creditors of the transferor will be reimbursed before creditors of the transferor up to the amount of transfers that occurred and the possibility for creditors to file their claims to any of the companies concerned by the transfer Questions i) In order to allow the possible constitution to be submitted by the supervisory authorities, some specific rules in Banking Law regarding qualifying holdings and, especially rules regarding the constitution of credit institutions. Article 493 of the Commercial Companies Code foresees the subordination agreement, i.e. an agreement subordinating the management of a company to another company. This also an agreement freely entered. Therefore, this definition could be used in order to also foreseen some aspects of this regime, namely the conduct of the parties entering the group agreement. Please be advised that it derives from the regime of the subordination agreement that the manager of the director company can give orders to the subordinated company. In any case, it seems advisably to expressly foresee that the directors of the subordinated companies should not be liable vis-àvis their own companies. Page 60 of 124

In what concerns the integration of both entities, it shall be necessary to foresee the right to use the financial resources of both companies, especially of the subordinated company. In what concerns Insolvency or going concern situations, please be advised that the Portuguese current legal framework foresees in article 502.º, number 1 of the Commercial Companies Code that the subordinated company has the right to demand that the director company sets-off the annual losses verified during the execution of the subordination agreement, when those losses are not compensated by the reserves constituted during that period. Moreover, article 502.º, number 2 of the Commercial Companies foresees that this obligation is demandable if the subordinated company is declared insolvent. Therefore, developing some aspects of this regime in order to foresee that once the agreement is concluded, transfers of assets are allowed between the members of the group. Nevertheless, it is advisable to foresee the terms and conditions in which such assets can be used ii) As far as we understand the scope of this proposal, its implementation would constitute a development of some aspects already foreseen in Portuguese Law, namely in the rules governing the subordination agreement contained in the Commercial Companies Code. Nevertheless, it must be emphasized that this right to use the assets of the concerned companies must respect the solvency ratio requirements. In fact, it should be foreseen that one of the requirements of the contents of this agreement should be the use of own funds by the concerned companies, establishing as a threshold the solvency ratio. Furthermore, in order to ensure the coherence of the Portuguese Banking system, it must be foreseen that entering this agreement depends of the previous authorization of the regulatory entities. In addition, in order to have a sound management of the concerned companies, it is advisable to foresee additional information duties. For instance, it should be foreseen Page 61 of 124

monthly information concerning the transfer of assets of the concerned companies, in order for the supervisory authorities to be able to determine the solvency of such companies. iii) Despite being an agile solution, once it allows transfers of assets are allowed between the members of the group once the agreement is concluded, this solution, in order to be implemented, must foresee additional measures, namely in what concerns the solvency ratio requirements of the concerned companies. In fact, the right to transfer assets must not be unconditioned, due to fact that it is possible to transfer the most valuable assets of one of the concerned companies to its counterparty. Therefore, in order to protect both creditors and deposit holders, supervisory powers must be intensified in these circumstances. Please be advised that, due to the fact that the power of management granted to the director company is accompanied by the right to use the financial resources of the subsidiary, this is materially a disregard of the corporate veil, and therefore, it can bring additional problems, namely to determine if the subordinated company is an autonomous company in face of its parent company. In fact, a third party confronted with this possibility and this right to use financial resources cannot see that we are before different companies. Therefore, in order to avoid this, it must be expressly foreseen the terms and conditions to allow such use and, moreover, to forbid the possibility to dilapidate the assets of the subsidiary company. In fact, if the subsidiary is governed by Portuguese Law and the parent is governed by a different law, it is possible for the Bank of Portugal to implement recovery measures if the solvency ratios are low, in order to prevent the collapse of the subsidiary. Therefore, this solution, despite its agility, can grant the possibility to drive to bankruptcy the subordinated company if this right to use is unconditioned. Page 62 of 124

iv) In order to implement this solution, it should be advisable to review the Insolvency Code in order to ensure that its rules allow this transfer of assets, especially it should be foreseen that rules stating that acts practiced in the previous 4 years before the Insolvency cannot be revoked or terminated, in order to protect the effects of the banking groups agreements and, thus, that any eventual insolvency proceeding does not constitute an obstacle to this approval. Proposal n 6 Supervisors of the transferor and the transferee can jointly authorize transfers of assets without any counterpart if: - The transferee is facing difficulties but no insolvency proceeding has been opened; - The transfer does not jeopardize the solvency of the transferor. Possible consequences or conditions: - Transfer cannot be challenged by the national company Law, criminal Law or insolvency law because of the special resolution regime for banks/early interventions; - The legislation ensures the entity providing a transfer a priority right in case of insolvency proceeding of the transferee. e) Other solutions Please be advised that all comments made to the previous proposals assume that in all circumstances, even if there is a crisis situation, and in order to ensure that the concerned credit institution maintains it funds, all transfers of assets cannot go below the solvency ratio and own funds requirements made by the RGICSF and the relevant Instructions and Notices issued by the Bank of Portugal. In fact, it derives from the current legal framework that if a credit institution subject to supervision of the Bank of Portugal becomes object of recovery measures, the Bank of Portugal may take control of such institution in extreme measures and, in general, it seems that determining supplementary requirements before entering certain agreements involving transfer of assets can qualify as a normal measure in crisis situation. Page 63 of 124

In fact, the current framework is drafted to assure that there is any flow of capitals from the Portuguese Financial System to foreign countries. Therefore, limits involving solvency ratios and own funds requirements appear as a de minimis rule/principle to be observed. If this does not occur, there will be a disruption in the current legal framework and, thus, a major revision/amendment should be needed to the RGICSF in order to ensure the coherence with its provisions and any proposal that eventually will be approved. In any case, and once we are dealing with companies groups, any proposal would be an opportunity to revise some concepts contained in the Commercial Companies Code and, additionally, to foresee some central aspects of Companies Law. In this context, it seems that any proposal could try to define central concepts like company group or even group interest. In order to do so, it would also be a significative innovation trying to define the concept social interest once from this concept derive the Directors liability and, according to Portuguese Law, the criteria to determine if some resolutions taken by the General Assembly or in the Board of Directors are annullable. Page 64 of 124

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ANNEX A National regulations relevant in assets transfers between banks part of a same banking group A) Legal Framework of Credit Institutions and Financial Companies [ ] CHAPTER III Acquisition of qualifying holdings Article 43-A Qualifying holdings in companies having their head office abroad A credit institution having its head office in Portugal and wishing to acquire, directly or indirectly, participations in credit institutions having their head office abroad or in financial institutions representing 10% or more of the capital stock of the participated entity or 2% or more of the capital stock of the participating institution, shall communicate this intention to Banco de Portugal, under the terms and conditions to be established by means of a Notice. [ ] TITLE VI Behavioural Supervision CHAPTER I Rules of conduct Article 73 Technical competence Credit institutions shall treat their clients with high levels of technical competence in all the activities which they perform, providing their business organisation with the human and material resources required to ensure appropriate conditions of quality and efficiency. Article 74 Page 66 of 124

Other obligations of conduct The members of the board and the staff of credit institutions shall act, in their relations with clients as well as in their relations with other institutions, with diligence, impartiality, loyalty and discretion, and with scrupulous regard for the interests entrusted to them. Article 75 Obligation to provide information The members of the board of credit institutions, as well as people who are in direction, management, command or similar offices, shall proceed in their functions with the diligence of a scrupulous and diligent manager, according to the principle of the risks distribution and of the security of applications and having in consideration the interests of depositors, investors, the remaining creditors and all clients in general. [ ] CHAPTER III Conflict of interests Article 85 Credit to board members 1. Without prejudice to the provisions of paragraphs 5, 6 and 7 below, credit institutions shall not grant credit, in any form or type, including the provision of guarantees, either directly or indirectly, to members of their management or auditing boards, nor to companies or other collective bodies directly or indirectly controlled by them. 2. It is assumed the indirect character of the credit assignment when the beneficiary is a spouse or a first-degree relative of any member of the managing or accounting bodies or a company directly or indirectly dominated by any of those persons, being this assumption rebuttable before the credit assignment, before the board of directors of the respective credit institution, who is obliged to verify it, subject to previous announcement to the Bank of Portugal, by the means of a proceeding to be defined by instruction. 3. For the purposes of this Article, the acquisition of shareholdings in companies or other collective bodies referred to in the foregoing paragraphs is considered to be equivalent to granting credit. 4. The previous shall no apply the operations of social character or purpose or derived from staff politics, as well as the credit conceded as a result of Page 67 of 124

the use of credit cards associated to the deposit account, in similar conditions to those practised with other clients of similar risk profile. 5. Without prejudice to the provisions of the following paragraph, the provisions of paragraphs 1 to 4 above shall not apply to members of the general and supervision council, to non-executive members of the board of credit institutions which are not part of the accounting commission and to companies or other collective bodies controlled by them. 6. Banco de Portugal may determine the application of the provisions of Article 109 to the entities referred to in the foregoing paragraph, to the members of other bodies, which are deemed by Banco de Portugal to perform equivalent functions and to companies or other collective bodies controlled by them. 7. The provisions of paragraphs 1 to 4 above shall not apply to credit granting operations, the beneficiaries of which are credit institutions, financial companies or holding companies included in the perimeter of supervision on a consolidated basis to which the credit institution in question is subject, nor to pension fund management companies, insurance undertakings, brokers and insurance mediating companies controlling or being controlled by any entity included in the same perimeter of supervision. 8. Members of the management or auditing boards of a credit institution shall not take part in the appraisal and decision about whether or not to grant credit to companies and other collective bodies not included in paragraph 1, of which they are managers or in which they have a qualifying holding, nor in the appraisal and decisions concerning operations covered by paragraphs 5 and 7 above. In all these situations, the approval by at least two thirds of the remaining members of the management board as well as the favourable opinion of the auditing board shall be required. [ ] Article 100 Relationship between holdings and own funds 1. No credit institution may hold a qualifying holding in the capital of a company which exceeds 15% of the former s own funds. 2. The overall amount of qualifying holdings in companies shall not exceed 60% of the own funds of the participant credit institution. 3. For the purpose of calculating the limits laid down in the foregoing paragraphs, the following shall not be taken into account: Page 68 of 124

a) Shares temporarily held during the normal course of firm underwriting of the issuance and within the limits laid down in the foregoing Article. b) Shares or other holdings in the institution s own name but on behalf of a third party, without prejudice to the limits laid down in Article 99. 4. The limits laid down in paragraphs 1 and 3 shall not apply when 100% of the amounts by which holdings exceed the above limits are covered by own funds and the latter are not included in the calculation of the solvency ratio and of other ratios or limits which have own funds as a reference. 5. In the event of amounts exceeding both of the limits referred to in the foregoing paragraph, the amount to be covered by own funds shall be the highest of those excess amounts. 6. The provisions of this Article shall not apply to shareholdings in other credit institutions, financial companies, financial institutions, pension fund management companies or insurance undertakings. Article 101 Relationship between shareholdings and participated companies 1. Without prejudice to the provisions of paragraph 4 below, credit institutions shall not hold, directly or indirectly, for a continuous or noncontinuous period exceeding three years, shares giving them more than 25% of the voting rights corresponding to the capital of the participated company. 2. Indirect holding means the holding of shares or other equity capital by persons or under any of the conditions considered as conferring parallel voting rights for the purpose of a qualifying holding. 3. The limit set forth in paragraph 1 above shall not apply to shareholdings by a credit institution in other credit institutions, financial companies, financial institutions, ancillary services companies, credit securitisation companies, insurance undertakings, subsidiaries of insurance undertakings held according to the law applicable to the latter, brokers and insurance mediating companies, pension fund management companies, risk capital companies and holding companies which only hold stakes in the companies referred to above. 4. The period foreseen in paragraph 1 above is of five years for indirect participations held through risk capital companies. Article 102 Communication of qualifying holdings Page 69 of 124

1. Any individual or legal person who proposes to hold directly or indirectly a qualifying holding in a credit institution shall previously inform Banco de Portugal of his intention. 2. Acts involving increases in a qualifying holding must be previously communicated to Banco de Portugal, whenever from them may result, depending on the situations, a holding reaching or exceeding 5%, 10%, 20%, 33% or 50% of the capital or of the voting rights held in the participated institution, or when the latter becomes a subsidiary of the acquiring entity. 3. The communication referred in the foregoing paragraphs shall be made whenever the initiative or set of initiatives intended by the person in question may result in any of the situations mentioned, even if the result is not a foregone conclusion. 4. Without prejudice to the provisions of paragraph 1 above, the acts or facts resulting in the acquisition of a shareholding which amounts at least to 2% of the capital or of the voting rights held in the participated institution shall be communicated to Banco de Portugal within a period of 15 days as of occurrence. 5. In the case foreseen in the foregoing paragraph, Banco de Portugal shall inform the interested party, within 30 days, if it considers the holding acquired is a qualifying holding. 6. Where Banco de Portugal, in the cases envisaged in paragraphs 4 and 5 above, considers that the holding is not a qualifying holding, it can at any time request from the respective holder a prior or subsequent communication of any act or fact from which, depending on the situation, may result or has resulted the holding of a percentage equal to or higher than 3% or 4% of the capital or of the voting rights held in the participated institution. 7. The communications envisaged in this Article shall specify the juridical acts or facts from which has resulted or may result the holding of the participation, the identity of the counterpart in such acts, where determinable, and the amount of the holding in question. Article 102-A Ex officio declaration 1. Banco de Portugal may, at any time and irrespective of the enforcement of other measures envisaged by law, declare the qualifying nature of any participation in the capital or in the voting rights of a credit institution, whenever it comes to its knowledge that relevant actions or facts have Page 70 of 124

occurred in relation to such holdings, whose communication to the Bank has been omitted or incorrectly made by the respective holder. 2. Banco de Portugal may also, at any time, declare the qualifying nature of any participation in the capital or in the voting rights of a credit institution, whenever it comes to its knowledge that some actions or facts are susceptible of changing the influence exercised by the respective holder on the management of the participated institution. 3. The appraisal mentioned in the foregoing paragraph may be carried out on the initiative of the parties concerned. In this case, the decision of the Banco de Portugal shall be taken within 30 days as of receipt of the request. Article 103 Suitability of owners of qualifying holdings 1. Banco de Portugal shall have a maximum of three months from the date of the communication referred to in Article 102, to oppose such a plan if it is not satisfied that the person in question or the characteristics of the plan are in the proper conditions to ensure sound and prudent management of the credit institution. 2. Without prejudice to other situations examined by Banco de Portugal under the terms of the foregoing paragraph, such conditions are considered not to exist in any of the following circumstances: a) If the manner in which the person in question usually carries out business or if the nature of his professional activity indicates a marked tendency to take excessive risks; b) If the financial and economic situation of the person concerned is inadequate in relation to the amount of the proposed holding; c) If the Banco de Portugal has reason to doubt the legality of the origin of the funds used to acquire the holding, or the true identity of the holder of those funds; d) If the structure and characteristics of the business group in which the credit institution would be included do not permit adequate supervision; e) If the person in question refuses to meet the terms and conditions required for the financial reorganisation of the credit institution which have been previously established by Banco de Portugal; f) If the person in question has been, within the past five years, the object of the penalty envisaged in Article 212 (1) (d); g) In the event of a individual, if any of the facts indicating lack of suitability, according to Article 30, are applicable. Page 71 of 124

3. Before issuing its decision, Banco de Portugal may temporarily oppose the acquisition or increase which has been the object of a prior communication in accordance with the terms of the foregoing Article. 4. If the party concerned is a credit institution authorised in another EU Member State or the parent undertaking of a credit institution authorised in another Member State, or an individual or legal person controlling a credit institution authorised in another Member State and if, as a result of that transaction, the institution in which the acquirer proposes to hold a holding would become a subsidiary, Banco de Portugal shall, in assessing the proposal, request the opinion of the supervisory authority of the home Member State. 5. When Banco de Portugal does not oppose, it may set a reasonable time limit for the carrying out of the proposed transaction, which shall be one year except as otherwise provided for. 6. Banco de Portugal shall inform the European Commission and the competent authorities of the EU Member States whenever a holding is acquired in a credit institution and the shareholder is an individual who is not a national of an EU Member State, or a legal person having its head office in a non-eu country, and as a result of the holding the institution becomes its subsidiary. 7. Banco de Portugal shall determine, by means of a Notice, the information to be provided by the parties concerned for the preparation of the procedure regulated in this Article, without prejudice, at any moment, of claiming any other it deems necessary for its appraisal. 8. Whenever the purpose of a credit institution includes any type of intermediation activities in transferable securities, Banco de Portugal, before deciding under the terms of paragraph 1, shall request the Securities Commission [ Comissão do Mercado dos Valores Mobiliários ] to provide information on the suitability of the owners of qualifying holdings, and where applicable, the Commission shall supply the required information within one month. Article 104 Subsequent communication The acts, which result in the acquisition of a qualifying holding, or in its increase, which are subject to prior communication under the terms of Article 102, shall be notified to Banco de Portugal within 15 days of their occurrence. Page 72 of 124

Article 105 Prohibition to exercise voting rights 1. Whenever the Banco de Portugal gains knowledge of the acquisition of a qualifying holding or of its increase, without the party concerned having made the communication referred in Article 102, notwithstanding the applicable sanctions and save for the provisions laid down in the following paragraph, Banco de Portugal can provide for the prohibition to exercise the voting rights corresponding to such a holding in the participated credit institution, as deemed appropriate to prevent the exercising of influence over the management, obtained through the non-communicated fact. 2. If in the situations referred to in the foregoing paragraph the missing communication is made before the prohibition to exercise voting rights is decided, Banco de Portugal must act in accordance with the powers entrusted to it by Article 103; if the same communication is made after the decision of prohibition to exercise voting rights, such prohibition will terminate if Banco de Portugal raises no objection. 3. In the event of an acquisition of a qualifying holding or of its increase to which Banco de Portugal has raised a definitive or provisional objection, Banco de Portugal, without prejudice to the applicable sanctions, shall provide for the prohibition to exercise the voting rights corresponding to such a holding, as appropriate for the particular situation which led to the objection. 4. In any of the events foreseen in the foregoing paragraphs, Banco de Portugal may, as an alternative, determine that the prohibition shall be applicable to the entity which directly or indirectly has voting rights in the participated credit institution, if this measure is deemed adequate to ensure sound and prudent management conditions and does not involve serious restriction to the carrying on of other economic activities. 5. Banco de Portugal shall also stipulate the extent to which the prohibition covers the voting rights of the participated institution in other credit institutions, which it directly or indirectly controls. 6. The decisions taken under the provisions of the foregoing paragraphs shall be notified to the person concerned, under the general terms, and communicated to the management board of the participated credit institution and to the chairman of the shareholders meeting and, regarding the latter, together with the decision that he shall act in such a way as to hamper the exercise of the prohibited voting rights, according to the provisions laid down in the following paragraph. Whenever the object of the credit institution includes any type of intermediation in transferable securities, the decisions taken under the foregoing paragraphs shall also be communicated to the Securities Commission. Whenever the party concerned Page 73 of 124

is an entity subject to the supervision of the Portuguese Insurance Institute [ Instituto de Seguros de Portugal ], the decisions taken under the foregoing paragraphs shall also be communicated to this Institute. 7. The chairman of the shareholders meeting, to whom the decisions referred to in the foregoing paragraph are communicated, must ensure, in the performance of his functions, that the prohibited voting rights are not exercised, under any circumstances, in the shareholders meeting. 8. If, notwithstanding the provisions of the foregoing paragraph, it is verified that the prohibited voting rights have been exercised, the decision taken can be annulled, save if there is evidence that it would have been taken and would have been similar even if the said rights had not been exercised. 9. The possibility of annulment may be pleaded under the terms of the general law, or by Banco de Portugal. 10. If the exercise of the prohibited voting rights has been a determining factor in the election of the management or auditing boards, Banco de Portugal shall, while the proceedings to annul the decision are pending, refuse the relevant registrations. Article 106 Prohibition on account of facts that subsequently come to light 1. Banco de Portugal, on the basis of relevant facts, which come to its knowledge after the acquisition of a qualifying holding or its increase, and which give rise to grounded suspicions that the influence exercised by its holder can prejudice the sound and prudent management of the participated credit institution, can provide for the prohibition to exercise the voting rights corresponding to the said holding. 2. The decisions taken pursuant to paragraph 1 above shall be subject to the provisions of paragraphs 4 and following of Article 105, duly adjusted. Article 107 Reduction of the shareholding 1. Any individual or legal person, who intends to dispose of his qualifying holding in a credit institution, or to reduce it so that the proportion of the voting rights or of the capital held by him would fall below any of the threshold limits of 5%, 10%, 20%, 33% or 50%, or so that the institution would cease to be his subsidiary, shall give prior notice to Banco de Portugal, stating the new size of his holding. Page 74 of 124

2. Where there is a reduction of a shareholding to a threshold limit below 5% of the capital or the voting rights of the participated institution, Banco de Portugal shall communicate to its holder, within 30 days, whether it considers the resulting shareholding as a qualifying holding. 3. The situations envisaged in this Article shall be subject to the provisions of Article 104, duly adjusted. [ ] Article 131 Scope 1. Without prejudice to supervision on a non-consolidated basis, credit institutions having their head office in Portugal and having one or more credit institutions or entities similar to credit institutions as subsidiaries or holding a participation in such institutions or entities, are subject to supervision on the basis of their consolidated financial situation. 2. Without prejudice to supervision on a non-consolidated basis, credit institutions having their head office in Portugal, the parent undertaking of which is a financial holding company having its head office in another EC Member State, are subject to supervision on the basis of the consolidated financial situation of the financial holding company. 3. Banco de Portugal may decide to bring a credit institution under supervision on a consolidated basis in the following cases: a) Where a credit institution exercises a significant influence over another credit institution or over an entity similar to a credit institution, even without holding participation therein; b) Where two or more credit institutions or entities similar to credit institutions are placed under single management, even when this is not stipulated by contract or in the articles of association; c) Where two or more credit institutions or entities similar to credit institutions have management or auditing boards with the same persons constituting a majority. 4. Ancillary services companies shall be included under supervision on a consolidated basis whenever the conditions envisaged in paragraphs 1 and 2 apply. 5. Banco de Portugal shall establish, by means of a Notice, the terms and conditions under which credit institutions, entities similar to credit institutions or ancillary services companies may be excluded from supervision on a consolidated basis. Page 75 of 124

Article 132 Special rules of competence 1. Banco de Portugal shall exercise supervision on a consolidated basis if a financial holding company has its head office in Portugal and is the parent undertaking of credit institutions having their head office in Portugal and in another or other EC Member States. 2. Where a financial holding company has a subsidiary in Portugal which is a credit institution, and has its head office in an EC Member State in which none of its subsidiary credit institutions is authorised, Banco de Portugal shall be responsible for the supervision in the following cases: a) When the supervisory authorities of the aforesaid subsidiaries and the supervisory authority of credit institutions of the Member State in which the financial holding company has its head office agree to confer such responsibility on Banco de Portugal and also agree to cooperate with the Bank and to communicate whatever information is necessary for the carrying out of supervision on a consolidated basis; b) In the absence of such agreement, when the credit institution having its head office in Portugal has the highest balance sheet total in relation to the other subsidiary credit institutions; if all balance-sheet totals are equal, when the subsidiary having its head office in Portugal was the first to be granted authorisation. 3. Banco de Portugal may come to an agreement with the supervisory authorities of credit institutions of the other Member States concerned, on the redistribution of responsibilities for supervision on a consolidated basis. Article 132-A Mother-companies seated in third countries 1 When a credit institution, whose mother-company is a credit institution or a financial company seated outside the European Union, which is not subject to supervision in a consolidated basis in the same way to the present section, shall be verified if it is subject, through supervision authority of a third country, to a kind of supervision which is similar to that required by the principles foreseen in the present section. 2 The supervision referred in the previous paragraph is made by Banco de Portugal in case that, by the application of those criteria which are foreseen in the articles 130 et sequens, this would be the responsible authority for the supervision in a consolidated basis if this one was made. Page 76 of 124

3 Banco de Portugal has the powers to proceed to the verifying referred in nr. 1: a) By request of the mother-company; b) By request of the entities authorised by the European Union which are subject to supervising; c) By its own initiative. 4 Banco de Portugal shall consult the remaining supervision authorities of the referred branches of the European Banking Comitee. 5 In the absence of an equivalent supervision, are applied, by analogy, the provisions of this section. 6 Alternatively to which is foreseen in the previous paragraph, Banco de Portugal, when is the responsible authority and after the consultation to the authorities referred in nr. 3, can choose other adequate methods which permit to reach the supervising aims in a consolidated basis, namely requiring the creation of a financial company seated in the European Union and applying the provisions about supervision in a consolidated basis. 7 In the case referred in the previous paragraph, Banco de Portugal notifies the supervising authorities mentioned in nr. 3 and the European Commission about the adopted methods. Article 132-B Intragroup operations with mixed companies 1 Credit institutions shall inform Banco de Portugal of any significtive operations made with the mixed company in whose group are integrated and with affiliates of that company. For the effect the credit institutions shall possess proceedings of risk management and adequate intern control mechanisms, including rendering of information and solid accountable proceedings which permit them to identify, measure, follow and evaluate these operatins, in an adequate way. 2 Banco de Portugal takes the adequate measures when the operations foreseen in the previous paragraph can represent a threat to the financial situation of a credit institution. [ ] B) Notice 12/92 of the Bank of Portugal Page 77 of 124

Article 2.º of Decree-Law no 318/99, of September 23, granted competences to the Bank of Portugal in order to establish the elements which can form the own funds of the institutions subject to its supervision and in order to establish the characteristics that such funds must posses As a consequence of such competences Notice 9/90, published in the Diario da República of July 5, 1990, which constituted the first approach to the legal regime of this issue having in consideration the applicable European Community rules. Considering the provisions of Directive 200/12/CE of March 20; Considering the convenience to focus in a single text all the main rules concerning own funds, namely the limits adopted by Notice 12/90, published in the Diário da República of December 4 1990, concerning the solvency ratio; Considering that the experience obtained advises the introduction of amendments in the aforesaid regime according to European Union applicable framework; Considering that prudential regime concerning the own funds must not directly foresee, the distinction between debt and capital instrument established in the International Accountancy Rules; Considering the convenience to establish similar rules to all the institutions subject to the supervision of the Bank of Portugal, except in the cases where special circumstances do not advise the introduction of such rules; The Bank of Portugal, having in consideration article 3.º of the Decree-Law no 318/89 determines: 1. Except as otherwise foreseen, this notice shall apply to all institutions subject to the Bank of Portugal supervision (hereinafter institutions ). 2. In all cases where a law or a regulation applicable to the institutions refers the concept of own funds, the latter shall be considered within the limits and the conditions set forth in the present notice; Page 78 of 124

3. 1. It shall be considered positive elements of the own funds the following: 1) Paid-up capital stock, including the portion represented by nonredeemable preferred stocks; 2) Shares and Participating securities issue premium; 3) Statutory or contractual reserves as well as other reserves formed by non-distributed results; 4) profits and losses brought forward from previous financial years; 5) profits and losses brought forward from the last financial year under the terms and conditions set forth in paragraph 10; 6) Interim positive results from the current financial year, under the terms and conditions set forth in paragraph 10; 7) Fund concerning ordinary banking risks ; 7A) Currency conversion and liquid investment hedging in foreign operational units; 7B) Portion of the reserves and the profits and losses corresponding to assets concerning deferred taxes, under the terms and conditions set forth in paragraph. 7 -A; 8) Elements described in paragraph. 11, whose terms and conditions have been approved by the Bank of Portugal; 9) Elements described in paragraph 12; 9A) Provision for credit general risks until the maximum limit of 1,25% of the weighted assets according with the Standard method; 10) Reserves having its origin in the re-evaluation of the immobilized assets, made in accordance with the terms and conditions to be defined by the Bank of Portugal; 10A) other positive re-evaluation reserves, by the amounts resulting from paragraphs 4.º - A and numbers 7 and 8 of paragraph 17.º - A; 11) Participating securities; 12) Subordinated loans, whose terms and conditions are approved by the Bank of Portugal Page 79 of 124

13) Paid-up portion of redeemable preferred shares; 14) Amounts of value corrections and the provisions exceeding the amounts of the estimated losses concerning the shame risked positions, until the limit of 0,6% of the risk-weighted positions calculated according with the Internal Rating Method (hereinafter IRM ) 2. Elements foreseen in paragraphs /.º-A, 7.º - B and 10 A of the previous number shall apply only to the institutions which prepare its financial statements according with numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal (hereinafter NCA ). 3. Element foreseen in number 7 of paragraph of the present number shall no apply to institutions referred in the previous number. 4. Reference to immobilized assets made in number 10) of number 1) will be made in connection to the fixed tangible assets, in what concerns institutions referred in number 2 of the present number. 5. Element foreseen in number 9-A of number 1 of number 3 shall apply only to institutions calculating the amounts of the risk-weighted positions according with the IRM method. 6. Element foreseen in number 14) of number 1 shall apply only to institutions calculating the amounts of the risk-weighted positions according with the IRM method. 7. In what concerns the institutions referred in the previous number, value corrections and provisions referred in number 14) of number 1) can only be included in the own funds in the terms and conditions set forth in that number; 8. To extent of number 14) of number 1, risk-weighted positions do not include securitization positions applying risk-weight of 1250%. 4. It shall be considered negative elements of the own funds the following: 1) Own shares, attending to the value inscribed in the balance sheet; 2) Other own elements belonging to number 3, attending to the value inscribed in the balance sheet; 3) Intangible assets; Page 80 of 124

4) Final gains or losses deriving from previous financial years; 5) Final gains or losses from the last financial year; 6) Final gains of the current financial year, at the end of the month; 6A) Reserves of negative re-evaluations, under the terms and conditions set forth in number 4.º - A; 7) Amount corresponding to the insufficiencies verified in the creation of provisions, under terms and conditions to be defined by means of a notice from the Bank of Portugal; 8) Expenses with the differed costs, under the terms and conditions set forth in notice 12/2001; 9) Amounts of expected losses concerning risked positions over shares subject to the Simple Weight Method [ Método de Ponderação Simples ] or the method bases in the Default Probability or Loss resulting from Default; 10) Net amount of the expected losses for the risked positions not referred in the previous number, deducted from the sum of value corrections and the provisions concerning these risked positions; 11) Net profits deriving from future revenues funding emerging from s securitized assets allowing credit risk improvement in the securitized positions; 2 Element foreseen in number 6 A) of the previous number shall apply only apply to the institutions which prepare its financial statements according with numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal (hereinafter NCA ). 3 Reference to intangible immobilization in number 3) of number 1of this number shall be made concerning intangible assets. 4 Elements foreseen in number 9) and 10) of number 1 are applicable to institutions calculating the amounts of the risk-weighted positions according to the IRM method. 5 To the extent of numbers 9) and 10) of number 1, amounts of expected losses over securitized positions shall not be taken in account, nor the value corrections and the provisions concerning such provisions; Page 81 of 124

4 A. Institutions preparing its individual financial statements according to numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal (NCA) must also comply with the following: 1 While determining elements referred in numbers 3 and 4, it must be excluded: a) Losses and profits not made in financial liabilities evaluated by the fair value, through results representing own credit risk; b) Profits and losses not made by cash flow covers of covered elements evaluated by the amortization cost and future trades; c) Notwithstanding item e) of the present number 1, profits not deriving from credit and other values to be received, classified as financial assets owned for negotiation or as financial assets evaluated by a fair value trough the results account, when applicable; d) Notwithstanding item e) of the present number 1, profits and losses not made which do not represent credit parity and other values to be receives, classified as assets available for sale; e) When the assets referred in items c) and d) of this number 1 are involved in fair value hedging relations, it must be respectively excluded profits, or the profits and losses corresponding to the part not involved in such hedging relation and/or the portion of such relation considered ineffective. 2. Elements foreseen in number 10 A) of number 1 of number 3 correspond to: a) profits not made in available assets, until 45% of their value; b) gains not made by covering cash flow of available assets for sale, until 45% of their value (by the net effect of the hedging) 3 When the unrealized gains, referred in item a) of number 2 of this number, occur in assets with imparity register which cannot be reversed, the amounts of the unrealized gains and the imparity must be jointly treated to the extent of applying numbers 3 and 4. 4 - Elements foreseen in number 10 A) of number 1 of number 3 and 6 A) of number 1 of number 4 correspond, respectively, to the sum of the Page 82 of 124

individual values of unrealized gains and profits of the financial instruments. Set-off between those amounts is forbidden. 5- Values to have in consideration to the extent of number 6 A of number 1 of number 4 correspond to gross amounts (not considering the effect of the corresponding deferred taxes, when applicable) 5. 1. The amount corresponding to the sum of the elements listed in number 1) to 7) of number 1 of number 1 minus the sum of the elements listed in numbers 1), 3) to 8) and 11) of number 4 shall constitute the base fund. 2 the amount corresponding to the sum of the elements listed in numbers 8) to 14) of number 1 of number 3 minus the sum of the elements listed in number 2) of number 1 of number 4 shall constitute the complementary base funds. 5. A. In what concerns institutions preparing its individual financial statements according to numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal (NCA), the amount corresponding to the sum of the elements listed in number 1) to 7) of number 1 of number 1 minus the sum of the elements listed in numbers 1), 3) to 8) and 11) of number 4 shall constitute the base fund 6. Complementary own fund cannot go beyond the value of the base own funds. 7. Elements foreseen in numbers 11) to 13) of number 3 can only be attended until reaching of 50% of the base own funds. 7 A Elements listed in number 7B) of number 1 of number 3 can only be attended until reaching 50% of the base own funds, calculated before its inclusion and the deductions referred in number 2 of number 8. Page 83 of 124

8. 1. Notwithstanding numbers 6 and 7, own funds of institutions are constituted by the sum of the base own funds with the complementary funds, minus the amounts referred in number 9) and 10) of number 4, 9, 9 A to 9) B and 9 - D to 9 F. 2. Notwithstanding number 6, 7 and 8 1, elements foreseen in numbers 9) and 10) of number 1 of number 4, and numbers 9, 9 B, 9 D and 9 E must be deducted in 50% to the base own funds and in 50% to the complementary own funds after applying the limits to eligibility of complementary own funds considering the base own funds. 3. To the extent of the previous number, if the complementary funds are inferior to the deduction, the remaining value must be deducted to base own funds. 4. Elements foreseen in numbers 14) of number 1 of number 3, number 9) and 10 of number 4 and number 9 E are not considered in the calculation of the own funds to the extent of determining limits to great risks, as well to the extent of the limits foreseen in article 100º of the legal framework of credit institutions. 9. It shall be deducted by the respective net value of positive inscription the amount corresponding to shares, participation securities and other values belonging to number 3, issued or placed by credit institutions and other financial institutions in the following conditions: a) In the cases where the institution has an holding superior to 10% of the capital stock of one of the referred institutions, it shall be deducted the global amount of such participation, as well as the value represented by the other patrimonial elements which that institution has; b) The global amount of the remaining participations and the other patrimonial elements referred in this number not covered by the precedent item shall be deducted only in the portion exceeding 10% of the institution own funds which has such elements, calculated before the deductions foreseen in this number are made; Page 84 of 124

9A it must also be deducted the corrections value amount which allow minimizing the risks incurred in securitization operations, namely the ones resulting from Notice 3/95 to the risked positions, to the extent that such positions are minimized in institution balance sheet when the terms and conditions set forth in an Instruction from the Bank of Portugal are not fulfilled to the extent of recognizing significative transfers of risk credit. 9B In what concerns financial participations not belonging to item a) of number 9 and item a) of number 9 D, it shall be deducted the value resulting from applying the regime established in Notice 4/2002 of the Bank of Portugal; 9C In what concerns institutions preparing its individual financial statements according to numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal (NCA),the value of the balance sheet elements, to be deducted according numbers 9 and 9 D, corresponds to the respective balance sheet value, except what concerns the value of the assets considered available for sale associates to unrealized gains which have not been considered a positive element of the own funds, which must be deducted of the non-eligible parcel of such gains, in accordance to item a) of number 2 of number 4 a. Number 9 B shall no apply to the institutions comprehended by this number. 9 D 1. It shall be deducted taken in account the inscribed value in the balance sheet: a) Participations within the definition in item alínea i) of article 2.º of the Decree-Law nº 145/2006, of July 31, held in insurance and reinsurance companies, and management companies in the insurance sector; b) Instruments referred in number 2 of article 96 and number 2 of article 98 of the Decree-Law of April 17, republished by the Deree- Law no 251/2003, of October 14, held by the companies referred in the previous item; Page 85 of 124

2. As an alternative to the methods prescribed in the previous number, it can be deducted the amount corresponding to: a) The sum of the: i) The value of the instruments in number 1; ii) The value of the solvency ratios margins, corresponding to the participation held; and b) The value of the available solvency margin, corresponding to the participation held; 3. The option foreseen in the previous number must be applied consistently and it shall depend of the verification of obstacles, namely juridical, to the transfer of own funds/solvency margin between the concerned entities; 9 E It shall be also deducted the amounts exposed to risk of securitization positions subject to risk-weight of 1250% if the institution opts for the deduction of its own funds. 9 F Credit institutions subject to a consolidated supervision, according to article 131 of the Legal Framework of the Credit Institutions and Financial Companies, or the complementary supervision foreseen in Decree-Law no 145/2006, and which are subject to own funds in an individual basis, may, for the purposes of calculating its own funds in an individual basis, not deduct the elements referred in no 9 and 9 D, held in credit institutions, financial institutions, insurance and reinsurance companies or management companies in the insurance sector subject to consolidation or complementary supervision. 10.The provisional positive results of the current financial year our or the positive results of the last financial year may solely be considered if the following conditions are met: a) They have been determined after all the costs incurred in the relevant period and all the rules governing provisions and allocations to amortizations are made; b) Have diminished the foreseeable tax values and incomes, calculated proportionally to the relevant period; c) They have been certified by an auditor [ revisor oficial de contas ]; Page 86 of 124

10- A In what concerns institutions which prepare its financial statements according with numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal ( NCA ), the results referred in the previous number are those who result of the application of the inherent corrections foreseen in this Notice for the purposes of determining the positive and negative elements of the own funds. If a negative result derives from the aforesaid application, that value must be taken in account in sum of numbers 5) and/or 6) of number 4. 11.Elements referred number 8) of number are constituted by the amounts of issuing securities, namely with an unfixed maturity date, and those deriving of non-titulated loans, whose contracts, notwithstanding the subordination clause referred in item a) of number 14), foresee: a) That they can only be reimbursed by the initiative of the issuing institution or the borrower and with the previous agreement of the Bank of Portugal; b) The possibility for the institution to postponed the interest payment; c) That the principal and the non-paid interests may be used to absorb losses, in order to the institution carry on its activity; 12.With the previous agreement of the Bank of Portugal, it may be included in the complementary own funds patrimonial assets satisfying the following conditions: a) They may be freely used to hedge risks currently related to the institutions activity, even if the losses or capital losses have not yet been identified; b) They must the take in in account in the financial statements of the institutions; c) Its amounts must be certified by an auditor [ revisor oficial de contas ]; 13.To the purposes of number 3 it shall be taken in account: a) Participation securities foreseen and governed by the Decree-Law no 321/85 of August 5; b) Preferred stocks foreseen in article 214 onwards of the Commercial Companies Code; Page 87 of 124

14.Contracts formalizing subordinated loans must, at least, be in accordance with the following conditions: a) Determine, juris et de jure, that the borrowers bankruptcy or liquidation occurs, the reimbursement shall be subordinate to the previous reimbursement of all other non-subordinated creditors; b) Foresee an initial reimbursement term not inferior to five years; c) Not contain any advance reimbursement clause in connection to the maturity date to be exercised by the lender; d) Clarify that the eventual reimbursement must be preceded of the Bank of Portugal s previous agreement; 15.It shall not be considered own funds of institutions the amounts corresponding to fixed-term redeemable preferred stocks when the latter occurs before 5 years counting from its issuance occur; 16.The Bank of Portugal shall establish, for the institutions which include in its own funds amounts deriving from the issuance of participation securities, fixed-term redeemable preferred stocks and subordinated loans, a gradual reduction program of those amounts in the five years preceding its reimbursement. 17.Notwithstanding number 17-A, in the cases where the own funds calculation is made in a consolidated basis: 1. Elements foreseen in the previous numbers shall betake in account by the amounts deriving from the consolidation made in accordance with the Bank of Portugal s regulamentation, being the basis own funds: 1) Accrued with the amounts corresponding to: a) Minority interests, having in consideration numbers 4 and 17 A; b) Negative differences of the first consolidation; c) Negative differences of reevaluation-patrimonial equivalence; 2) Diminished of the amounts corresponding to the differences referred in items b) and c) of the previous numbers when they are positive. Page 88 of 124

2. In what concerns the deductions referred in numbers 9 and 9 D, the holdings subject to the patrimonial equivalence are diminished by the values for which they are referred in the balance sheet of the participating company; 17 A- Only for institutions covered by article 4 of Regulament no 1606/2002 of European Parliament and the Council, or which are subject by numbers 2 and 3 of Notice 1/2005 of the Bank of Portugal, the following must also be complied with, when own funds calculations is made on a consolidated basis: 1- Numbers 7 A9, 7 b) and 10 A of number 1 of number 3 of this notice shall apply; 2- Number 6 A of number 1 of number 3 of this notice shall apply; 3- The amount corresponding the sum of the elements listed in number 1) to 7 B) of number 1 of number 3, diminished of the sum of the elements foreseen in numbers 1) and 3) to 8) of number 1 of number 4 shall be basis own funds; 4- The value of the balance sheet elements to be deducted according to number 9 and 9 D shall correspond to the balance value, except in what concerns the elements classified as assets available for sale which are connected to non-realized gains which have been considered as a positive element of the own funds, which must be deducted of the non-eligible portion of such gains, according to item a) of number 2 of number 4 A. 5- The results in a consolidated basis referred in number 10 are those deriving of the corrections inherent to the application of the relevant provisions of this notice in what concerns determining the positive and negative elements of the own funds. If a negative result derives from the aforesaid application, that value must be taken in account in sum of numbers 5) and/or 6) of number 4 6- Provision of numbers 2 and 3 of number, of numbers 2 and 3 of number 4 and numbers 1 to 5 of number 4-A shall apply. 7- When applicable, elements foreseen in number 10 A) of number 1 of number include the non realized profits in fixed tangible assets until Page 89 of 124

45% of its value. It the value emerging of the application of such percentage is inferior to the amount determined in an individual basis, comprehended in number 10) of number 3, it must be included the amount of the latter until the verification of the non realized gains. 8- When applicable, the non realized profits in investment real estates must be deducted of the elements of number 3 in which they have been relevant in the financial statements and the must also be added until 45% of its value in the elements foreseen in number 10-A) of number 1 of number 3). 17 B Institutions subject to article 4 of the Regulamente no 1606/2002 of the European Parliament and the Council and those subject to number 2 of Notice 1/20005 (NIC) must also deduct to the consolidated basis own funds the sum of the differences, when positive, between the value of the entities in the consolidation perimeter subject to rules of such notice, in an individual basis. 17 C Institutions subject to article 4 of the Regulation no 1606/2002 of the European Parliament and the Council and those subject to number 2 of Notice 1/20005 (NIC) may recognize, un the consolidated own funds, once they comply with the limits set forth in numbers 6 and7 of this notice, the general credit risks provisions, constituted by the institutions in accordance with Notice 3/95, when the global amount of the regulamentary provisions which would result of the application of the rules of such notice is superior to the amount of the imparity losses for credit, determined for the group, and, notwithstanding the following paragraph, until the amount deducted in accordance with number 17 B occurs. Provisions for general risks of credits to be recognized in the consolidated own funds shall have the following limits: 1,25% of the assets in a consolidated bases, weighted according the Standard method or the value which has been taken in account as a positive element of the own funds in an individual basis. 17 D Numbers 17 B and 17 C shall not apply to the institutions calculating the amounts of the risk-weighted positions according to the IRM method. Page 90 of 124

18.For the purposes of numbers 9, 9 B and 9 D it shall be considered: 1. Credit institutions qualified as such by the Portuguese Law and, in what concerns institutions having its head office abroad, those who carry activities similar to the Portuguese institutions: 2. Other financial institutions: a) In the case of institutions having its head office in Portugal: All institutions subject to the supervision of the Bank of Portugal Companies managing holdings not subject to the supervision of the Bank of Portugal being directly or indirectly controlled by institutions, have holdings foreseen in item a) of number 9; Other companies hot qualified as holding companies, whose assets are constituted by more than 50% in holdings in credit institutions or other financial companies or, being indirectly or directly controlled by such institutions, have holdings foreseen in item a) of number 9; b) In the case of credit institutions with its head office abroad those who carry out, as main activity, activities similar those listed in previous item. 3. Insurance Companies referred in items a)and b) of article 172-A do the Decree-Law nº 94-B of April 17, republished bydecree-law no 251/2003, of October 14. 4. Reinsurance companies referred in item c) of article 172-A do the Decree-Law nº 94-B of April 17, republished bydecree-law no 251/2003, of October 14. 5. Holding companies in the insurance sector and companies referred in item i) of article 172-A do the Decree-Law nº 94-B of April 17, republished by Decree-Law no 251/2003, of October 14. 18 A To the extent of this notice, credits and other values to be received are the financial assets not emerging of fixed or determined payments which are not listed in an active market. 19.The Bank of Portugal may order the adjustment of the own funds calculation of an institution it it considers that the conditions set forth in the applicable laws are not satisfactorily met. Page 91 of 124

19 A 1 This number shall apply only to the institution obliged to fulfill the own funds conditions foreseen in items a) and b) of number 1 of article 8 and article 11 of the Decree-Law no 103/2007, of April 3, and only for the purposes of meeting such conditions and to hedge eventual risks of the negotiation portfolio for the purposes of fulfilling the conditions for great risks limits, accordingly with the correspondent notice. 2 For the extent of own funds foreseen in this number, it shall be considered positive elements, notwithstanding number 3: i) The net profits of the negotiations portfolio, after discounting any costs and foreseeable dividends and aafter deducting the net losses verified in the remaining activity, once none of this amounts have already been included in calculating own funds according to item 6 of number 3 or point 6 of number 4 of this notice. ii) Short-term subordinated loans which meet the conditions set forth in number 3 of this notice; iii) Elements referred in point 7 if this number; 3. Contracts formalizing short term subordinated loans must comply with number 14 of this notice and with the following particularities: a) they must foresee an initial reimbursement period which is not inferior to two years; b) they must foresee that the principal cannot be reimbursed, nor the interests paid, is that reimbursement or payment causes that the institution s own funds shall become lesser than 100% of its global own funds conditions; 4. Institutions whose own funds are part of short term subordinated loans must inform the Bank of Portugal of all the reimbursements of such loans, when this reimbursements cause that the own funds become lesser than 120% of its global own funds conditions. 5. Short term subordinated agreements cannot exceed 200% of the basis own funds available to satisfy the conditions referred in point 1 of this number. Page 92 of 124

6 In order to determine the available basis own funds referred in the previous point, the institutions: a) Must calculate the own funds conditions foreseen in item a), in item b) in what concerns the liquidation and the counterparty risk, and in item d) of number 1 of article 7 of the Decree-Law of April 3, and proportionally charge them to its own funds not comprehended in the previous numbers, having in account the limits foreseen in numbers 5 to 7 of this notice; b) May deduct the elements foreseen in number 9 A and other deductions not foreseen in number 2 of number 8 of this article, at a first level, to the complementary own funds. 7. Institutions may assimilate to the short term subordinated loans the elements foreseen in points 9, 10 and 13 of number 3 of this notice. 8. To the extent of this number, management portfolio is defined in Decree- Law no 103/2007 of April 3. 20.The Bank of Portugal, upon exceptional circumstances, may temporarily authorize that an institution include in its own funds the amounts excluded as a consequence of applying the limits referred in numbers 6 and 7. [*] C) NOTICE 1/93 OF THE BANK OF PORTUGAL [*] 1º - 1 All credit institutions must permanently observe as adequate relation between the amounts of its own funds and its balance sheet and extra-patrimonial assets weights in function of the respective risk. 2 The branches of credit institutions having its head offices in non-member countries are considered credit institutions for the purposes of the present notice. 2.º - The relation referred in the previous number is the solvency ratio. 3.º - 1 The value of the solvency ration cannot be inferior, at any time, to 8%. Page 93 of 124

2 - The Bank of Portugal may augment the value foreseen in the previous number when it verifies that the aforesaid augmentation is necessary to act in accordance with the rule foreseen in the number 1 of number 1º. 4.º Except for the measures that the Bank of Portugal decides to take in accordance with the competence rules foreseen in relevant Laws, credit institutions that, for any reason, do not act in accordance with the previous number shall be automatically hindered to increase the global value of the balance sheet elements and the extra patrimonial accounts that, in the terms foreseen in the present notice, are weighted with a factor different than 0% and shall adopt all the adequate proceedings to normalize the situation. 5.º - 1 The solvency ratio of the credit institutions which are not considered holding companies [ sociedades-mãe ] nor subsidiaries of those companies shall be calculated on an individual basis. 2 The solvency ratio of the credit institutions considered subsidiaries of a holding company, when this company has its head office in a territory outside Portugal, shall be calculated on individual basis or, if applicable, on a subconsolidated basis. 3 The solvency ratio of the credit institutions considered holding companies or affiliates of those companies and those of the Sistema Integrado do Crédito Agrícola Mútuo shall be calculated on a consolidated basis. 4 Notwithstanding the calculation of the solvency ratio on a consolidated basis or, when applicable, on a subconsolidated basis, the Caixa Central de Crédito Agrícola Mútuo and credit institutions covered by points 2 and 3 must continue to calculate its solvency ratio on an individual basis, as a mere indication benchmark. 5 The Bank of Portugal shall examine the results of the calculation referred in the previous number and shall determine, if that is justifiable, the adoption of the measures considered adequate to the balanced distribution of the own funds of the respective group or subgroup. 6 The qualification of a credit institution as a holding company or an affiliated and the consolidation rules are determined according with the applicable rules to the supervision on a consolidated basis. 6.º - Credit institutions must proceed with the calculation of the solvency ratio, at least, with the reference of June 30 and December of each year, submitting to the Bank of Portugal, until the en of August and Marche, respectively, the results Page 94 of 124

obtained, as well all elements considered when making the solvency ratio calculation. 7.º Weightings referred in number 1 are made in accordance with the terms set forth in annex attached to the present notice. 8.º The Bank of Portugal shall issue the instructions deemed convenient to the fulfilment of terms and conditions set forth in the present notice. [*] D) SECURITIES CODE Chapter IV Public companies Section I General provisions Article 13 Criteria 1. The following are considered to be companies open to public investment, hereinafter described as "public company": a) A company incorporated through an initial public offering for subscription specifically addressed at individuals or entities resident or established in Portugal; b) A company that issues shares or other securities that grant the right to subscribe or acquire shares that have been the object of a public offer for subscription specifically addressed at individuals or entities resident or established in Portugal; c) A company that issues shares or other securities that grant the right to their subscription or acquisition and are or have been listed on a regulated market situated or operating in Portugal; Page 95 of 124

d) A company that issues shares that have been sold by public offer for sale or exchange in a quantity greater than 10% of the company's capital directed specifically at individuals or entities resident or established in Portugal; e) A company created as a result of the demerger of a public company or a company that incorporates, through merger, all or part of its net equity. 2. The company's bylaws may make the launching of a public offer for sale or exchange of nominal shares, that results from the opening of share capital according to paragraph d) of the previous sub-article, subject to a resolution by the General Meeting. [ ] Section II Qualifying holdings Article 16 Communication duties 1. Any entity reaching or exceeding a holding of 10%, 20%, a third, a half, two thirds and 90% of the voting rights in the capital of a public company subject to Portuguese law or reducing its holding to a value lower than any of the above thresholds, should, within 4 trading days of the occurrence of said fact or the knowledge thereof: a) Inform the CMVM and the company holding the participating interest of said fact; b) Inform the entities described in the previous paragraph of those situations that determine the granting to the participant of voting rights inherent in securities belonging to third parties, according to Article 20(1). 2. The following is also likewise subject to the duties referred to in the preceding paragraph: Page 96 of 124

a) Any entity reaching or exceeding a holding of 5%, 15% and 25% of the voting rights in the capital or reducing its holding to a value lower than any of the above thresholds with regard to: i) A public company, subject to Portuguese Law, that issues shares or other securities granting the right to its subscription or acquisition, listed on regulated markets situated or operating in a EU Member State; ii) A company, with registered office in another Member State, that issues shares or other securities granting the right to its subscription or acquisition, listed exclusively on regulated markets situated or operating in Portugal; iii) A company, with head-office outside the European Union, that issues shares or other securities granting the right to its subscription or acquisition, listed on regulated markets situated or operating in Portugal, regarding which the CMVM is the competent authority pursuant to Article 244-A; and b) Any entity reaching or exceeding a holding of 2% and reducing its holding to a value lower than said percentage of the voting rights in the capital of a public company envisaged in i) of the preceding subparagraph. 3. For the purposes of the preceding paragraphs: a) It is deemed that the participant has knowledge of the determinant fact of the reporting requirements within a period of two trading days of the occurrence of said fact; b) The voting rights calculations are based on all the shares with voting rights, with the suspension of the respective exercise being of no consequence to the calculations. 4. The communication carried out in accordance with the preceding paragraphs should include the following: a) The identification of the entire chain of entities to which the qualifying holding is assigned by Article 20/1, regardless of the law to which same is found to be subject; Page 97 of 124

b) The percentage of voting rights assigned to the holder of the qualifying holdings, the percentage of equity capital and the number of corresponding shares, and in addition, when applicable, the details of holding per class of shares; c) The date whereon the holding reached, exceeded or the thresholds reduced as envisaged in paragraphs 1 and 2. 5. In the event of the reporting duty being incumbent on more than one participant, a single communication may be made that would exonerate the participants from the reporting duties in the sense that the communication would be considered done. 6. When the relevant thresholds are exceeded, pursuant to Article 20/1/e), the holding of the financial instruments that confer the right to acquire, on the participant, solely by own initiative, by virtue of an agreement, shares with voting rights, already issued by the issuer whose shares are admitted to trading on a regulated market, the participant should: a) Include all the instruments that have the same underlying asset in the communication; b) Issue as many communications as there are issuers for the underlying asset of the same financial instrument; c) Include in the communication referred to in the preceding paragraph, an indication of the date or period wherein the acquisition rights that the instrument confers may be exercised and the date whereon the instrument lapses. 7. When the relevant thresholds are reduced or exceeded, pursuant to Article 20/1/g), the assignment of discretionary powers to a single General Meeting: a) Whoever confers discretionary powers, may issue a single communication, at that time, provided that the information required in paragraph 4 as to the beginning and the end of the assignment of discretionary powers for the exercise of the voting rights is made clear; b) The person, to whom the voting rights are assigned, may issue a single communication, at the point when the discretionary powers are Page 98 of 124

conferred, provided that the information required in paragraph 4 as to the beginning and the end of the assignment of discretionary powers for the exercise of the voting rights is made clear. 8. The duties laid down in the present Article are not applicable to the holdings resulting from the transactions involving members of the European System of Central Banks, acting in the capacity of monetary authorities, within the context of a guarantee, of a repurchase agreement or a similar agreement of liquidity authorised for monetary policy reasons or within the context of a payment system, provided that the transactions are carried out within a short time period and provided that the voting rights inherent to the shares in question are not exercised. 9. The holders of qualifying holdings in the company referred to in paragraph 2/a)/i) should provide the CMVM, at the request of same, information on the origin of the funds used in the acquisition or increase of said holding. [ ] D) Companies Law Article 72 Liability of Directors before the company 1 Managers and Directors are liable before the company for damages to it by acts and omissions practiced with no respect for legal or contract obligations, except if they prove that they acted with no guilt. 2 Liability is excluded if any of the people referred in the previous paragraph prove that has acted by informed means, free of any personal interest and according to criteria of enterprise rationality. 3 Managers or directors who have not participated or have voted with a dissenting opinion in a collegial resolution are not responsible for the damages which result from that. They can also ask the transcription of their opinion in a five days term, in the respective book of minutes or in a statement to the accounting body, if there is one, or before a notary or a registrar. Page 99 of 124

4 The manager or director who has not exercised the right of opposition conferred by law, when was in conditions of exercising it, answers jointly by the acts to which he could have opposed. 5 Managers and Directors liability before the company does not take place when the act or omission is based on quotaholders resolution, even if annullable. 6 In companies which have an accounting body, its favorable opinion or consent of do not exclude the Board members responsibility. Article 73 Joint lialibility 1 Liability is joint for founders, managers or directors. 2 Right of recourse prevails according to the respective liability and their consequences, presumpting that the liabilities of the responsible people are equal. Article 74 Null Clauses. Renounce and transaction 1 Any clause, inserted or not in the company s bylaws, which excludes or limits liability of founders, managers or directors, or which subordinates the exercise of a judicial proceeding, when applied according to the article 77, with previous opinion or resolution of the quotaholders, or which depends the exercise of a judicial proceeding of a previous judicial decision about the existence of a cause of liability or the discharge of the liable officer. 2 The company can renounce to its right to set-off or to settle on it by express resolution of the quotaholders, with no opposing vote of a minority which represents at least 10% of capital stock, the possible liable officers cannot vote in that resolution. 3 Any resolution by which the general meeting approves the accounts or the managing report does not involve the renouncing of rights to set-off of the company against these ones, except if the facts that constitute responsibility have been expressly presented to the quotaholders before the approval and this has respected the vote requirements established in the previous paragraph. Article 75 Action of the company Page 100 of 124

1 The liability proceeding applied by the company depends on the resolution of the quotaholders, by simple majority, and must be applied in a term of six months counting from the mentioned resolution, for the exercise of the right to compensation the quotaholders can appoint special representatives. 2 In the general meeting which approves the accounts and, although those matters are not laid down in the convocation, can be resolved on an action of responsibility and on a managers or directors discharge that the general meeting consider responsible, who cannot be appointed again in abeyance of that proceeding. 3 Those whose responsibility is in question cannot vote for the resolutions foreseen in the previous paragraphs. Article 76 Special Representatives 1 If the company resolve the exercise of a right set-off, court, by request of one or more quotaholders who holding at least 5% of capital stock, shall appoint, in the respective proceeding, as representative of the company a person or people different from those to whom may usually be its representation, when quotaholders have not proceeded to that appointment or a substitution of the representative appointed by quotaholders is justified. 2 Judicial representatives appointed according to the previous paragraph can claim from the company in the same proceeding, if necessary, the refund of the expenses made and a fee set by the court. 3 If the company loses the proceeding, the minority requiring the appointment of the judicial representatives is obliged to refund the company of the court fees and other costs emerging from that appointment. Article 77 Liability proceeding presented by quotaholders 1 Independently on the setting-off request of the individual costs which have been caused, one or various quotaholders holding at least 5% of capital stock or 2% in case of a company issuant of shares listed in a regulated market, apply a liability proceeding against managers and directors, regarding a repair, in favor of the company, of the damage that this one has suffered, when it was not requested. Page 101 of 124

2 Quotaholders can, in the common interest, instruct, by their expenses, one or some of them to represent them for exercising the social right foreseen in the previous paragraph. 3 If one or various quotaholders referred in the previous paragraph lose that quality or discontinue the proceeding, during this one, it does not inhibit its continuance. 4 When the judicial proceedings applied by one or various quotaholders according to the previous paragraphs, shall the company be called to the proceedings through its representatives. 5 If the sued party affirms that the petitioner applied the pledge foreseen in this article to defend especially interests which are different than those protected by law, can plea for a previous decision or a guarantee on this matter. Article 78 Liability before the company s creditors 1. The managers or directors of a company are liable before the company s creditors when the company s assets becomes insufficient to satisfy its debts, as a result of the misconduct failure to comply with legal and/or contractual requirements aiming for the creditors protection. 2. The company s creditors may, according to articles 606.º to 609.º of the Civil Code, enforce the right to be indemnified when the company or its directors do not exercise such right. 3. The indemnification obligation foreseen in number 1 above shall not, in what concerns the company s creditors, be excluded even if the company renounces or settles nor by the fact that the act or omission derives from a resolution taken by the general assembly. 4. If the company goes to bankruptcy, the creditor s rights can be exercised, during the insolvency proceeding, by the manager of the bankrupt assets. 5. Provisions set forth in article 72, numbers 2 to 6, in article 73.º and in article 74, number 1 shall apply to this right to be indemnified. Article 78 Liability before the company s creditors Page 102 of 124

1. Managers or directors are also liable, according to general principles of Law, before the company s partners and before third parties for the damages directly cause in the exercise of their functions. 2.. Provisions set forth in article 72, numbers 2 to 6, in article 73.º and in article 74, number 1 shall apply to this right to be indemnified Article 79 Liability before the partners and third parties 1. Managers or directors are also liable, according with the general principles of Law, before the partners and third parties for the damages directly emerging from the exercise of its functions. 2. Numbers 2 to 6 of article 72.º, article 73.º, and number 1 of article 74.º shall apply to liability rights foreseen in this article. Article 80.º Liability of other persons with management functions Rules foreseeing liability of managers and directors shall apply to other persons with management functions. Article 81.º Liability of the members of the audit corporate bodies 1. Members of the audit corporate bodies are liable in the terms set forth in the previous articles. 2. Members of the corporate audit bodies are jointly liable with the company s managers and directors by acts or omissions occurred when in functions, when such damage would not occur if they fulfilled its auditing obligations. Article 82.º Liability of the CertifiedPublic Acountants [ Revisores Oficiais de Contas ] 1. Certified Public Accountants are liable before the company and its shareholders for the damages emerging from its wilful conduct. Article 73.º shall apply. 2. Certified Public Accountants are liable before the company s creditor in the terms set forth in article 78.º. Article 83.º Joint liability of the shareholder Page 103 of 124

1. Shareholder that, individually or jointly with other shareholders as a result of a shareholder s agreement, has, as result of provisions set forth in the bylaws, the right to appoint managers without the necessity of other partners adopt such resolution, is jointly liable with the appointed person, in all cases where such person is liable before the company or its shareholders in the terms set forth in this code, but only if there is guilt in the choice of such person. 2. The previous number shall also apply to legal persons appointed to corporate bodies, in what concers to the individuals appointed by such legal persons. 3. The shareholder that, as a result of its voting rights, has, for itself or other shareholders as a result of a shareholder s agreement, has the possibility to appoint a manager, a director or other members of the audit body is jointly liable with the elected person if there is guilt in the choice of such person, in all cases where the elected person is liable before the company or its shareholders in the terms set forth in this code. The liability shall verify only if the resolution is taken with the votes of such shareholder and the shareholders previously referred and with less than 50% of the votes of the present shareholders in such general meeting. 4. The shareholder with the possibility to, jointly or in conjunction with persons as a result of a shareholder s agreement or as result of powers granted by the bylaws, remove a manager, a director or a member of the audit corporate bodies and using its influence induces such person to practice or omit an act, is jointly liable with her, if such act or omission causes liability before the company or its shareholders in the terms set forth in this code. [ ] CHAPTER II Companies of simple participation, reciprocal participation and control relation Article 483 Companies of simple participation relation 1 A company is considered in a relation of simple participation with another one if one of them owns quotas or shares from the other in an amount equal or superior to 10% of its capital stock, but does not exist any of the relations foreseen in the article 482 between the concerned companies. Page 104 of 124

2 The holding of quotas or shares by a company is, for the purposes of the amount referred in the previous paragraph, with holding of quotas or shares by another company which is direct or indirectly dependant of it, or has a relation of group, and shares of which a person is holder by any of those companies. [ ] Article 486 Companies in control relation 1 Two companies are considered to be in a control relation when one of them ( dominant ) can perform, directly or through other companies or people that meet the requirements mentioned in the article 483, nr. 2, over the other one ( dependant ) a controlling influence. 2 A company is deemed to be dependant of another one if the latter, direct or indirectly: a) Holds the majority of the capital stock; b) Holds more than half of the voting rights; c) Has the power to appoint more than a half of the members of the directing body or the surveillance body. 3 When the law foresees the publication or holdings statement, it must be disclosed whether by the deemed dominant company or whether by the deemed dominated company if any of the situations foreseen on the nr. 2 of this article occur. [ ] CAPTER III Companies in a group relation SECTION I Groups constituted by total control Article 488 Total initial control Page 105 of 124

1 - A company can create a limited company by shares whose shares are initially solely held by it. 2 All the remaining requirements for the incorporation of limited companies by shares shall be observed. 3 To the group therefore created according to this rule shall apply nrs. 4, 5, and 6 of article 489. Article 489 Total supervenient control 1 A company which, directly or through other companies or people that meet the requirements mentioned in the article 483, nr. 2, totally controls another company, due to the inexistence of quotaholders, forms a group with the last one, by the force of law, except if the general meeting of the first company takes a resolution accordingly to letters a) and b) of the following paragraph. 2 In the following months to the occurrence of the requirements referred above, the board of the dominant company shall call a general meeting to resolve in alternative on: a) Dissolution of the dependant company; b) Assignment of quotas or shares from the dependant company; c) Maintenance of the existing situation. 3 If the resolution foreseen in the letter c) of the previous paragraph is taken or while no resolution is taken, the dependant company is considered in a group relation with the dominant company and is not dissolved, even with only one quotaholder. 4 The group relation terminates: a) If the dominant company or the dependant company leaves its registered Office in Portugal; b) If the dominant company if dissolved; c) If more than 10% of the dependant company s capital stock does not belong anymore to the dominant company or to the companies and people referred in the article 483, nr. 2. 5 In the case foreseen in the letter c) of the previous paragraph, the dominant company shall communicate that fact, immediately and in writing, to the dependant company. Page 106 of 124

6 Dependant company s board shall ask for the resolution registry, referred in the letter c) of nr. 2, as well as the termination of the group relation. [ ] SECTION II Joint group agreement Article 492 Agreement s regime 1 Two or more companies which are not dependant neither between them nor of other companies can create a group of companies, by agreement through which they accept to be submitted to unitary and common direction. 2 The agreement and its modifications and extensions shall be written and preceded of the resolutions of all intervenient companies, taken by proposal of their boards of directors and opinions of their surveillance bodies, by the majority rule that the law or the bylaws establish for the merger. 3 The agreement cannot be stipulated for an undetermined duration, but can be extended. 4- The agreement cannot modify the legal structure of the company s board of directors and the surveillance body. When the agreement created a common body of direction or coordination, all companies shall be equally represented. 5 At the term of the agreement the article 506 is applied. 6 The legal provisions which regulate competition between companies are excluded. SECTION III Subordination agreement Article 493 Definition Page 107 of 124

1 A company can, by agreement, subordinate the management of its own activity to the direction of another company, dominant or not. 2 The director company creates a group with all companies by it directed, according to a subordination agreement, and with all companies by it integrally dominated, direct or indirectly. [ ] E) Insolvency Law Article 3 Insolvency situation 1 It is considered in an insolvency situation the debtor who cannot fulfill its obligations. 2 Companies and autonomous assets whose debts no single person responds personal and unlimitedly, directly or indirectly, are also considered insolvent when their passive is clearly superior to its assets, according to the applicable accounting rules. 3 The foreseen in the previous paragraph shall not apply when the assets are superior to the passive, evaluated according to the following rules: a) It is considered part of the assets and the passive the identified elements, even if not provisioned in the balance sheet, by its fair value; b) When the debtor owns a company, the valorization is based in a perspective of continuity or liquidation, depending on which is more probable, but in any case with exclusion of the item of activity assignment; c) Debts which have not been paid with distributable funds or from the remaining assets are not included in the passive, after satisfied and prevented the rights of the other creditors of the debtor. 4 If the debtor is presented to an insolvency proceeding, the merely imminent insolvency situation is similarly treated as a situation of an actual insolvency. [ ] CHAPTER IV Effects about deals in course Page 108 of 124

Article 102 General principle regarding contracts not yet fulfilled 1 Except as otherwise foreseen in the following articles, in each bilateral agreement in which, in the moment of the insolvency declarations, there is no total fulfillment neither by the insolvent nor by other party, the compliance is suspended until the insolvency manager declares to opt for the execution or rejects the fulfillment. 2 The other party can, however, set a reasonable term for the insolvency manager to exercise his option and if that ends the compliance is considered rejected. 3 If the fulfillment by the legal liquidator is refused, and notwithstanding the right to spin off the thing, if it is the case: a) No party has the right to the restitution of which has already paid; b) The insolvent mass has the right to claim the consideration which corresponds to the payment already made by the debtor, if it still has not been executed by the other party. c) The other party has the right to claim, as a credit over the insolvency, the value of the payment from the debtor, in the complied part, deducted of the value of the corresponding consideration not yet rendered. d) The right to compensation of damages caused to the other party for incompliance: i) Only exists until the value of the obligation eventually imposed by letter b); ii) The quantitavive reduction to which the other party has right, by application of letter c); iii) Constitutes credit on the insolvency. e) Any of the parties can declare the compensation of the obligations referred in letters c) and d) with the mentioned in letter b), until the corresponding amounts occur. 4 The option for the execution is considered abusive if the punctual fulfillment of contractual obligations by the insolvent mass is clearly improbable. Article 103 Indivisible renderings 1 If the agreement imposes to the other party the compliance of a payment which has intuitu personae nature, or is divisible in the delivery of different things, not easily substitutable, between which intercedes a functional connection, the legal liquidator refuses the fulfillment: Page 109 of 124

a) The right referred in item b) of number 3 of the previous article is substituted for the right of claiming to the other party the restitution of which has been paid, according to his enrichment on the date of the insolvency declaration; b) The right foreseen in item c) of number 3 of the previous article has as its object the difference, is favourable to the other party, between the values of the globality of the contractual payments. c) The other party has the right, as an insolvency creditor, to the reimbursement of the cost or to the restitution of the value from the part of the payment made previously to the insolvency declaration, according to the intuitu personae nature or not of the payment. 2 However, the other party has the right to complete its payment and to claim, as a credit over the insolvency, the part of the consideration in debt, ceasing in this case which is foreseen in paragraph and in the previous article. 3 If the legal liquidator does not refuse the fulfillment, the counterparty to the consideration only constitutes a credit over the assets in which exceeds the value of what would be calculated by application of item c) of number 1, if the legal liquidator had opted to refuse the fulfillment. 4 If the fulfillment of a payment of the type referred in number 1 imposed by the agreement to the insolvent, and the legal liquidator refuses such fulfillment: a) The right referred in item b) of number 3 of the previous article ceases or is substituted for the right to the restitution of the value of the party in the payment which has been made previously to the insolvency declaration, according to the intuitu personae nature of that payment; b) item b) of number 1 is applied, having the other party, additionally, right to the reimbursement of which has been paid, also as credit over the insolvency. 5 If the fulfillment of a payment of the consideration referred in number 1 is imposed by an agreement to the insolvent and the legal manager does not refuse that compliance, the right of the other party to the consideration in debt constitutes, in its integrality, credit over the assets. 6 If an intuitu personae payment is divided in autonomous parcels and some of these have already been done, the provisions foreseen in the previous numbers shall apply only to the remaining ones, dividing the consideration for all of them, in the appropriate form. Article 104 Sale with retention of title and similar operations Page 110 of 124

1 In the sale and purchase agreement with property reserve in which the seller is the insolvent, the other party can claim the fulfillment of the agreement if the thing has been delivered on the date of an insolvency declaration. 2 The previous number shall apply in case of insolvency of the lesser to the financial leasing agreement and to the lease agreement with the clause which established that the leased thing shall be property of the lessee after all the convened rental fees are paid. 3 If the purchaser or lesser is the insolvent, and being in the possession of the thing, the set term to the insolvency manager, according to paragraph 2 of the article 102, cannot be exhausted before the five days after the date of the general meeting which has appreciated the report, except if the thing have a potential of considerable devaluation during that period and the other party expressly adverts the insolvency manager of that circumstance. 4 The clause of property reserve, in agreements of assignment of a determined thing in which the purchaser insolvent, it is only enforceable to the assets in case of being stipulated by writing, until the moment of the delivery of the thing. 5 The effects of the refusal of compliance by the legal liquidator, when acceptable, are those foreseen in number 3 of the article 102, assuming that the right which is consigned in the corresponding item c) has by object the payment, as credit over the insolvency, of the difference, if positive, between the amount of the payments or rental fees foreseen until the termination of the agreement, updated to the date of the insolvency declaration by application of which is established in number 2 of the article 91, and the value of the thing on the date of refusal, if the other party is the seller or lesser, or the difference, is positive, between this last value and that amount, in case o being purchaser or lessee. Article 105 Sale without delivery 1 Notwithstanding of which is foreseen in article 107, if the obligation of delivery by the seller has not been already complied, by the property has been transferred: a) The insolvency manager cannot refuse the fulfillment of the agreement, in case of the seller s insolvency; b) The refusal of compliance by the legal liquidator, in case of insolvency of the purchaser, it has the effects foreseen in paragraph 5 of the previous article, applicable mutatis mutandis; Page 111 of 124

2 All which is foreseen in the previous paragraph shall be applicable, mutatis mutandis, to agreements which are translative regarding other usage property rights [ direito reais de gozo ]. Article 106 Promise of agreement 1 If the promissory-seller is insolvent, the legal liquidator cannot refuse the fulfillment of the promissory-agreement with real effects, if there has already been the delivery of the thing in favor of the promissory-purchaser. 2 Number 5 of article 104 shall apply mutatis mutandis to the refusal of fulfillment of the promissory-agreement of sale and purchase by the legal liquidator, if the insolvency concerns to the promissory-purchaser or to the promissory-seller. 3 [Revoked.] Article 107 Transaction with term 1 If the delivery of commodities, or financial payments, with a market value, has been made in a determined date or in a fixed-term, and the date occurs or the term finishes after the insolvency declaration, the execution cannot be claimed by any of the parties, and the purchaser or the seller, according to the case, has only right to the payment of the difference between the foreseen price and the market value of the commodities or financial payment in the 2 nd day after the insolvency declaration, regarding agreements with the same date or term of compliance, which, being demandable to the insolvent, constitutes a credit over the insolvency. 2 In any of those cases, the seller will restitute the amounts already paid and can set-off that obligation with the credit that has been conferred by the previous paragraph, until the concurrence of the corresponding amounts; if the seller is the insolvent party, the right to restitution constitutes to the other party a credit over the insolvency. 3 According to the effects of the previous number are considered financial payments, namely: a) The delivery of securities, except if representative shares of almost 10% of the capital stock of the company, and if the convened liquidation has no merely financial character; b) The delivery of precious metals; Page 112 of 124

c) Payments in cash whose amount is direct or indirectly determined by the exchange tax of a foreign currency, by the interest reference rate by unit of calculation or by the price of other commodities and services; d) Options or other rights to the selling or the delivery of commodities referred in items a) and b) or to payments referred in item c). 4 If different agreements about financial payments in an base agreement to which can only terminate unitarily in case of non-compliance, the group of those agreements is considered as a bilateral agreement, for the effects of this article and article 102. 5 To the term operations not covered by the paragraph 1 is applicable the foreseen in paragraph 5 of the article 104, mutatis mutandis. Article 108 Lease with an insolvent lessee 1 The insolvency declaration does not suspend the lease agreement in which the insolvent is lessee, but the insolvent manager can always denounce it with a previous notice of 60 days, if according to the law or the agreement an inferior previous notice is not sufficient. 2 It is excluded of the previous paragraph the case when the leased thing is used for housing of the insolvent. In this case the insolvency manager shall only declare that the right to the payment of the expired rental fees after occurred 60 days over that declaration will not be demandable in the insolvency proceeding, being the lesser, in that situation, constituted in the right of claiming, as credit over the insolvency, compensation of the damages suffered in case of eviction for debts of some of the referred rental fees, until the amount of those corresponding to a three months period. 3 The notice of an agreement of an agreement by the legal liquidator given by the number 1 obliges to the payment, as a credit over the insolvency, of the retributions corresponding to the period interceding between the date of production of its effects and the termination date of the agreement, or the date for which in other case the notice of termination by the insolvent would be possible, deducting the costs inherent to the rendering of the lessor for this period, as well as the profit win through the alternative application of the leased thing., if imputable to the anticipation of the end of the agreement, with updating of all values, according to number 2 of article 91, for the date of the commencement of effects of notice of termination. 4 The lessor shall not require the resolution of the agreement after the insolvency declaration of the lessee with any of the following causes: Page 113 of 124

a) Lack payment of rental fees or rents corresponding to a period previous to the date of the insolvency declaration; b) Deterioration of the lessee financial situation. 5 If the leased thing has not already been delivered to the lesser on the date of its insolvency declaration, the legal liquidator and lesser can resolve the agreement, being licit to any of the to set for the other one a reasonable term for the effect. Finished this term, ceases the right to resolve the agreement. Article 109 Lease with an insolvent lesser 1 The insolvency declaration does not suspend the execution of the lease agreement in which the insolvent is the lesser, and its notice of termination by any of the parties is only possible to the end of the term in course, not with standing to the cases of compulsory renewal. 2 Number 5 of the previous article shall aplly mutatis mutandis if the thing has not been delivered to the lessee on the date of the insolvency declaration. 3 The transfer of the leased thing in the insolvency proceeding does not deprive the lesser from the rights which are provisioned in civil law for that circumstance. Article 110 Mandate and managing agreements 1 Mandate agreements, including commercial mandates [ contrato de comissão ], which are not part of the insolvent mass shall lapse with the insolvency declaration, even if the mandate has been granted in the interest of attorney [ mandatário ] or of a third party. The Attorney shall not have a right to be indemnified. 2 Nevertheless, the mandate shall remain valid: a. If there is a need to the attorney to practice acts aiming the occurrence of foreseeable damages for the insolvent mass, until the legal liquidator has taken the due measures; b. For the period where the attorney has exercised its functions unwillingly ignoring the declaration of insolvency; 3 The remuneration and the reimbursement of the attorney s expenses shall constitute a debt of the insolvent mass in the case foreseen item a) of Page 114 of 124

the previous number and an insolvency debt n the case foreseen item b) of the previous number. 4 The previous numbers shall apply, mutatis mutandis, to any other agreements where the insolvent has entrusted to a third party the management of patrimonial issues, with a minimum of independence, namely portfolio management and asset management agreements. Article 111 Agreement of long-term rendering of services 1 Agreements obliging to long-term rendering of services on the interest of the insolvent and which not lapse as a result of the provisions of the previous article, shall not suspend with the insolvency declaration. Nevertheless there may be a notice of termination by each of the parties accordingly to number 1 of article 108., which shall apply mutatis mutandis. 2 The notice to terminate the agreement only obliges to the indemnification of the damage if has been given by the legal liquidator. If this occur, the indemnification shall calculated according to article 108, which shall apply mutatis mutandis, and it shall constitute for the counterparty a credit over the insolvency. Article 112 Powers of attorney 1 Except in cases foreseen by item a) of number 2 of article 110, with the insolvency declaration all powers of attorney concerning the assets integrating the insolvent mass shall lapse, even when granted on behalf of the attorney or of a third party. 2 Numbers 6 and 7 of article 81 shall apply, mutatis mutandis, to acts practiced by the attorney after the lapse of the power of attorney. 3 The attorney that unwillingly ignores the insolvency declaration shall not be liable before third parties for the invalidity of the transaction derived from the lack of powers. Article 113 Insolvency of the employee 1 The insolvency declaration by the worker does not suspend the labour contract. 2 The indemnification of the damages emerging from an eventual breach of contractual duties can only be claimed by the insolvent. Page 115 of 124

Article 114 Rendering of services by the debtor 1 the previous article shall apply to contracts where the insolvent being an individual is obliged to render a service, except if the service can integrate the company s activity of the company which he owns and if such service is not intuitu personae. 2 Notwithstanding the previous number, article 11.º shall apply mutatis mutandis to contracts having as its object a long-term rendering of service by the owner. Nevertheless, the right to be indemnified shall exist only if the counterparty gives a notice to terminate the contract. Article 115 Assignment and pledge of future credits 1 If the debtor is an individual as has assigned or pledge, previously to the insolvency declaration, future credits emerging of a labour or services rendering contracts, or the the rgith to similar future obligations, namely unemployment pay or half pays, the validity of the transaction shall be limited to the income of the period previous to the insolvency declaration, to the remaining of the current month in such date and the 24 subsequent months. 2 The validity of the assignment of the pledge constituted previously to the insolvency declaration having as an object rents due as virtue of a lease contract that the legal liquidator cannot give a notice to terminate or terminate in the terms of article 104, number 2 and of article 109.º shall be limited, despite of the debtor being an individual, to the rents related with the period previous to insolvency declaration date, to the remaining of the current month in such date and the 24 subsequent months. 3 Notwithstanding item b) of number 1 and items b) to d) of article 99.º, the debtor of the credits referred in the previous numbers may set-off with debts to the insolvent mass. Article 116 Current accounts The insolvency declaration implies the termination of the current account agreements in which the insolvent is a party, as well as the closure of the corresponding accounts. Page 116 of 124

Article 117 Holdings association [ associação em participação ] 1 The holdings association shall be extinct as a consequence of the insolvency of the associating member. 2 the associated counterparty to the insolvency assets of the associating member its share, even if not satisfied, in the losses in which it should contribute, maintaining the right to claim, as credit over the insolvency, the obligations which has made and which should not be included in its losses contribution. Article 118 Enterprise Complementary Grouping and european economic interest grouping 1 Notwithstanding any different provision, an Enterprise Complementary Grouping or an European Economic Interest Grouping shall not dissolve as a consequence of the insolvency of one of its members. 2 The member declared insolvent may resign the Enterprise Complementary Grouping. 3 It shall be considered null the clause obliging the member declared insolvent to indemnify the damages caused to the remaining members of the grouping. Article 119 Compulsory rules 1 Any convention excluding or limiting the application of the rules of the present chapter shall be null. 2 In particular, it shall be null the clause granting to the insolvency situation of one of the parties the value of a condition subsequent to terminate the contract or which grants the counterparty a right to be indemnified, to terminate or give a notice to terminate in different terms and conditions than those foreseen in the present chapter. 3 Notwithstanding the previous numbers, the insolvency situation may be a fair ground [ justa causa ] to terminate or give a notice to terminate considering the nature and the content of the contractual obligations concerned. [ ] Page 117 of 124

F) Corporate Income Tax [ ] Article 58 Transfer Prices 1. In commercial operations, including, but not limited to, operations or groups of operations concerning assets, rights or services as well in financial operations made between a taxable person and any other entity with which the taxable person is in a special relation, must be made in the same terms and conditions that would normally agreed and practiced between independent parties in comparable operations. 2. The taxable person must adopt in order to determine the terms and conditions which would be normally agreed, accepted or practiced between independent entities, the method or methods ensuring the most higher comparability between the operations or groups of operations that carries out and others substantially similar, in normal market conditions or in the absence of special relations, having in account, namely the characteristics of the assets, rights or services, the market position, the economical and financial situation, the business strategy and other relevant characteristics of the concerned companies, the functions that they carry out, assets used and risk distribution. 3. The methods to be used must be: a) the comparable market price method, diminished resale price or the augmented cost method; b) profit splitting method, net margin of the operation method or other when the methods referred in the previous item cannot be applied or, when they can, they are not able to obtain the most reliable measure of the terms and conditions that independent entities would normally agree, accept or practice. 4. It is deemed that special relations between two entities occur when one of such entities has the power to directly or indirectly exercise a significative influence in the management decision. It is considered that such influence occurs between: f) an entity and the owners of the respective capital stock owners, its spouses, ascendants or descendants, which hold, Page 118 of 124

directly or indirectly, a holding not inferior to 10% of the capital stock or the voting rights; g) entities in which the same owners of the capital stock, its spouses, ascendants or descendants, which hold, directly or indirectly, a holding not inferior to 10% of the capital stock or the voting rights; h) an entity and the members of its corporate bodies, or the members of any management or audit bodies and the respective spouses, ascendants and descendants; i) entities in which the majority of the members of the corporate bodies or the members of any management or audit bodies are the same persons or, if they are different persons, they are linked by marriage, companionate marriage judicially acknowledged or if they relatives in a direct line; j) entities connect by means of a subordination agreement, a group contract or any other equivalent effect; k) companies in a dominion relationship in the terms set forth in the applicable laws determining the obligation to supply consolidated financial statements; l) entities where as a result of commercial, financial, professional or juridical relationships, directly or indirectly foreseen or practised, occurs dependency situation, namely when any of the following occurs: i. the exercise of one s activity substantially depends of the assignment of industrial rights or copyright or know-how owned by the counterparty; ii. the supply of commodities or the access to the products distribution channels, commodities or services substantially depends of the counterparty; iii. a substantial part of one s activity can only be performed or depends of the counterparty decision; iv. the right to determine prices, or equivalent economical effect, concerning the assets or services sold, performed or acquired are in the counterparty s ownership, as a result of a provision foreseen in a contract; v. by the terms and conditions of its commercial or juridical relationship, which allows imposing conditions to the management decisions of the Page 119 of 124

counterparty, as a result of facts and circumstances not related with such commercial or professional relation; m) a domiciled entity or a non-domiciled entity with a fixed establishment in the Portuguese territory and an entity subject to a favourable tax regime domiciled in a country, territory or region referred in the list approved in an ordinance ( Portaria ) of the Minister of State and Finances. 5. To the extent of the calculation of the percentual level of indirect holding in the capital stock or in the voting rights, in the cases where no special rules are applicable, criteria foreseen in article 483, number 2 of the Commercial Companies Code shall apply. 6. The taxable person must maintain organized in the terms and conditions set forth for the tax documents foreseen in article 121.º the documents concerning the policy adopted for transfer prices, including instructions concerning its application, contracts and any other juridical acts entered into with entities which are in special relations, with the amendments that have occurred and with information on its fulfilment, the documentation and information concerning those entities as well as companies and assets or services used as a benchmark parameter, functional and financial analysis and sector data, and all other information and elements taken in account to determine the terms and conditions normally agreed, accepted or practiced between independent entities and for the method or methods used. 7. The taxable person must adopt in the annual declaration of accountancy and tax information referred in article 113 the existence or inexistence on the relevant financial year of operations which it has special relations. If it declares the existence of such operations the following: a. identify the concerned entities; b. identify and declare the amount of the operations made with each of such entities; c. declare if it has organised, when the operations were made, and maintains the documentation concerning the price transfers practiced. 8. In all circumstances concerning non-domiciled entities where the rules foreseen in number are disrespected, the taxable person must perform, in the declaration foreseen in article 112, all necessary corrections when determining the taxable profit by the amount correspondent to tax effects chargeable to that disrespect. 9.in the operations made between a non-domiciled entity and its permanent establishment located in the Portuguese territory or between such Page 120 of 124

establishment and other permanent establishments belonging to such entity no located in such territory, rules foreseen in the previous numbers shall apply. 10 The previous numbers shall also apply to persons performing activities subject to general regime of the Corporate Income Tax. 11 - When the General Tax Authority [ Direcção-Geral dos Impostos ] makes the necessary corrections to determine the taxable profit in virtue of the special relations with other taxable person for the purposes of Corporate Income Tax or Individual Income Tax, in the latter case adequate adjustments should be made in order to reflect the corrections made when determining the taxable profit. 12 - The General Tax Authority may also proceed with the adjustment referred in the previous number when such adjustment is foreseen in international treaties executed by Portugal, and in the terms and conditions which such international conventions foresee. 13 The application of the methods to determine the transfer prices, whether to stand-alone operations, whether to a group of operations, the type, nature and content of the documentation referred in number 6 and the applicable proceedings to such adjustments shall be governed by a Ministerial Order ( Portaria ). G) CRIMINAL LAW [ ] Article 227.º (Fraudulent Insolvency) 1. The debtor that with intention to harm its creditors: e) destroys, damages, makes useless or disappears part of its assets; f) fictitiously diminishes its assets, concealing materials, claiming fictitious debts, recognizing fictitious credits, prompting third parties to present such credits or by any means simulates a patrimonial situation inferior to reality, namely through inexact accountancy, fake balance sheets, destroying or concealing accountancy documents or trough the non-organisation of its accountancy; g) artificiously creates or aggravates losses or diminishes profits; or Page 121 of 124

h) buys, in order to postpone the bankruptcy, assets through credit facilities aiming its sale or its use as a payment with a lower price comparing with the current one [for such assets] shall be punished with an imprisonment penalty or with a fine not exceeding 600 days if the insolvency situation occurs and its recognized in a judicial proceeding. 2. The third party performing any of the facts described in paragraph 1 above, with the knowledge of the debtor or in its benefit, shall be punished with foreseen in the previous paragraph, as applicable, specially attenuated. 3. Without prejudice of the provisions set forth in article 12.º, who has de facto performed the effective management and has practiced the facts described in paragraph one, if the debtor is a legal person, a company or a de facto association. Article 227.º - A Debts Frustration 1 The debtor who, after a enforceable judgment, destroys, damages, makes disappear or conceals part of his assets, in order to, totally or partially, frustrate the satisfaction of a credit of others, shall be punished with an imprisonment penalty until three years or a fine if an enforcement procedure, fails to completely satisfy the claims of the creditor,. 2 Numbers 2 and three of the previous article shall be applicable. 1 The debtor who: Article 228.º Negligent Insolvency a) By serious recklessness or imprudence, lavishness, or clearly exaggerated expenses, ruinous speculations, or serious negligence in the course of its activities, creates a state of insolvency; or b) Having knowledge of the economical and financial difficulties of its company, do not request, at any time, any recovery measure;; shall be punished, if an insolvency situation occurs and becomes acknowledged in a judicial proceeding, with an imprisonment penalty until one year or a fine not exceeding 120 days. 2 N 3 of article 227.º shall be applicable. Page 122 of 124

Article 229.º Favourable treatment of creditors 1 The debtor who, knowing its insolvency situation or being aware of its imminence and intending to favour certain, pays debts not due, or pays with other assets beside money, or gives securities to its debts without being obliged to it, shall be punished with an imprisonment penalty until two years or with a fine not exceeding 240 days, if the insolvency comes to be judicially declared. 2 It's correspondingly applicable the foreseen in number 3 of article 227.º. Article 229.º - A Aggravation The penalties foreseen in number 1 of article 227.º, in number 1 of article 227.º -A, in number 1 of article 228.º and in number 1 of article 229.º shall be aggravated by one third, in their minimum and maximum limits, if, as a consequence to the practise of the facts described in the aforesaid articles leads to the frustration of credits of labour nature, in a enforcement procedure or in a insolvency procedure. [ ] Page 123 of 124

ANNEX B Examples of transfer of assets agreements Page 124 of 124