In a high-profile case before the Supreme Administrative Court, a class action (Case 15/15.4BELSB) has been initiated (in to 2015) to protect the rights of shareholders in Luz Saúde, S.A (“Luz Saúde”), regarding the sell out right of securities not acquired by Fidelidade – Companhia de Seguros, S.A. (“Fidelidade”) during the takeover bid.

The public prosecutor (“ministério público“) has taken a significant stance, aligning with the plaintiffs and emphasizing the necessity of seeking a preliminary ruling from the Court of Justice of the European Union. The ruling would clarify the right of sell out outlined in article 16 of Directive 2004/25/EC. This crucial decision is deemed essential for the proper adjudication of the case.

At the center of the controversy are the plaintiffs, who are seeking recognition of their right to sell out is shares as provided for in article 16 of the Directive 2004/25/EC. These shareholders hold securities of Luz Saúde that were not sold during the takeover bid of Luz Saúde from Fidelidade, but were acquired subsequent to the tender offer’s conclusion. Unfortunately, their claim to this right has been rebuffed by both Fidelidade (offeror/bidder) and the CMVM (Portuguese Securities Market Commission).

Fueling this legal battle are two associations: the ATM – Association of Portugue Investors and Technical Analysts for Capital Markets, which originally sponsored the action, and the Citizens’ Voice – Consumer Advocacy Association, which has recently joined the cause.

Both associations assert that article 16(2) of Directive 2004/25/EC should be interpreted in a manner that classifies all unsold securities on the tender offer, even if they were traded post-offer, as remaining securities, thereby enjoying the right of sell out. They further argue that the right of sell out is inherent to the securities and not “intuitu personae” in relation to the shareholders

The plaintiffs and supporting associations contend that neither the preamble nor the various articles of the directive make any distinction concerning remaining securities. Consequently, they argue that article 15 and article 16 of the directive 2004/25/EC must encompass all securities that were not sold during the takeover bid. Any interpretation to the contrary, as advocated by the Portuguese Securities Market Commission (CMVM), would unduly exclude post-offer traded securities from the scope of article 15, which protects the right to squeeze out. This interpretation, if adopted, would render the very purpose of the right to squeeze out (and not only the sell out right). Essentially, failing to achieve this objective would raise concerns about the constitutionality of the norm governing the squeeze out (article 194 of the Portuguese Securities Code, which transposes article 15 of the aforementioned directive).

The Central South Court has confirmed the procedural standing of the intervening plaintiffs, affirming their right to bring the class action – the class action was considered procedurally admissible.

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