Structures and applicable lawTypes of transaction
How may publicly listed businesses combine?
In general, businesses combine through the acquisition of the target’s assets or shares. It is also possible to combine businesses by merging or dividing companies.
Asset and share deals
An asset deal may be structured as the sale of bare assets not constituting a business, or as the sale of the target’s business (or an organised part). The structure of an asset deal affects the tax consequences for the parties as well as the buyer’s liability. In theory, the buyer of a business is jointly and severally liable with the seller up to the value of the acquired business for obligations connected with its operations, unless at the date of transfer the buyer was not and could not have been aware of these obligations. However, in practice a buyer may obtain indemnities from the seller against claims that arise from the past activity of the business.
Shares of a public company can be acquired through a regular market transaction or block trade on the stock exchange or through a public tender offer. If the bidder intends to exceed the thresholds of 33 per cent or 66 per cent of the voting rights of the company, it must announce a mandatory tender offer for either 66 per cent of the shares or all the shares. Shareholders who purchase shares that should be purchased through a tender offer without announcing a tender offer can be fined up to 10 million zloty for each infringement, will be unable to exercise the votes arising from all shares held in that company.
The buyer may pay in cash or securities for both shares and assets.
Merger and division of companies
Companies may merge by transferring all the assets and liabilities of one company to another existing company or by transferring all the assets and liabilities of the merging companies to a newly formed company. A company may be divided into two or more companies if all or some of its assets and liabilities are transferred to a pre-existing or newly formed company.
In a merger or division of companies, the principal consideration for the transferred business is shares in the company acquiring the business. Additionally, the transferring companies may receive a cash payment (subject to a statutory maximum amount). Also, as part of the merger or division process, the transferring companies may be obliged to make a cash contribution to the company acquiring the business (also subject to a statutory maximum amount). Both mergers and divisions of companies generally result in the dissolution of the companies transferring all their assets and liabilities. Moreover, the companies acquiring the business through a merger or division are the legal successors of the transferring companies unless a specific statute or decision on the grant of a permit, concession or relief provides otherwise.
In addition, a prospectus or an offering memorandum for offering shares in a company acquiring a business might need to be prepared, then approved by the Financial Supervision Authority and finally disclosed to the public.Statutes and regulations
What are the main laws and regulations governing business combinations and acquisitions of publicly listed companies?
The main statutes applicable to business combinations are:
- the Civil Code;
- the Commercial Companies Code;
- the Act on Competition and Consumer Protection;
- the Act on Commercialisation and Certain Rights of Employees;
- the Labour Code;
- the Act on Trade Unions;
- the Act on Information and Consultation of Employees;
- the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies;
- the Act on Capital Market Supervision;
- the Act on Trading in Financial Instruments;
- the Act on Acquisition of Real Estate by Foreigners; and
- the Act on the National Court Register.
In addition, the EC Merger Regulation may apply in the context of a business combination. Also, as of 3 July 2016, capital market participants are obligated to apply the provisions of the Regulation No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (the Market Abuse Regulation).Cross-border transactions
How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?
The structure of cross-border transactions is usually tax-driven. It is typical for share acquisitions to be made through a company domiciled in a jurisdiction with which Poland has a favourable treaty on the avoidance of double taxation and asset deals to be made through a Polish subsidiary.
Sizeable cross-border acquisitions that significantly affect trade in the European Union may be subject to merger control proceedings at the EU level instead of the national level in accordance with the EC Merger Regulation. Such transactions cannot be completed without clearance by the European Commission. Clearance depends on whether the transaction would significantly impede competition in the European Union or a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.
Poland has implemented the EC Cross-Border Mergers Directive into the Commercial Companies Code, which now provides the framework for mergers of Polish companies with other EEA companies (cross-border mergers). The procedure applicable to cross-border mergers is similar to the procedure applicable to domestic mergers.Sector-specific rules
Are companies in specific industries subject to additional regulations and statutes?
Business combinations involving companies operating in certain regulated sectors, such as the financial and gaming sectors, are subject to additional statutory restrictions.
In accordance with the Banking Law, a contemplated acquisition of an equity stake equalling or exceeding 10, 20, 33 or 50 per cent in a Polish bank may be vetoed by the Financial Supervisory Authority. The same veto right applies to any entity intending to become – directly or indirectly – a dominant entity of a Polish bank (other than by way of acquisition or taking-up of the shares or rights attached to shares) in the quantity allowing this entity to hold the majority of votes at the general meeting of the bank. The obligation to notify the Financial Supervisory Authority applies also in share acquisitions of insurance companies pursuant to the Insurance Law.
In accordance with the Act on Trading in Financial Instruments, in general, the shares of a stock exchange may only be held by specified entities such as the State Treasury, banks, insurance companies and issuers of securities traded on the exchange. Additionally, the Financial Supervisory Authority may veto an intended acquisition of an equity stake equalling or exceeding 5, 10, 15, 20, 25, 33 or 50 per cent in a stock exchange. Moreover, the Financial Supervisory Authority may veto the contemplated acquisition of control or a significant stake in a securities depositary and clearing house as well as a brokerage house. The triggering equity thresholds in the case of a securities depositary and clearing house are 10, 20, 33 and 50 per cent, whereas the triggering equity thresholds in the case of a brokerage house are 10, 20, 33 and 50 per cent.
In the gaming sector, foreign ownership restrictions apply to companies operating certain types of licensed gaming activities. Additionally, changes in the ownership structure of a company operating a licensed gaming activity must be notified within seven days to the Minister of Finance and require his or her consent.Transaction agreements
Are transaction agreements typically concluded when publicly listed companies are acquired? What law typically governs the agreements?
The parties are generally free to choose the governing law applicable to transaction agreements in both share deals and asset deals. Typically, Polish law is chosen as the governing law; however, it is not uncommon for major transactions to be governed by foreign law such as English law. Nonetheless, even when a share purchase agreement is governed by foreign law, to effectuate a valid transfer it may be necessary to obtain shareholders’ consent or prepare a tender offer document governed by Polish law. Similarly, even when an asset purchase agreement is governed by foreign law, it may be necessary to obtain shareholders’ consent or subject the transfer of certain assets such as real estate to Polish law.
With the exception of cross-border mergers, Polish law is the governing law applicable to mergers and divisions of Polish companies.
Filings and disclosureFilings and fees
Which government or stock exchange filings are necessary in connection with a business combination or acquisition of a public company? Are there stamp taxes or other government fees in connection with completing these transactions?Registration with the National Court Register
Mergers and divisions of companies must be registered in the company’s register of the National Court Register. Mergers and divisions become effective upon registration while share transfers are effective irrespective of registration. Registrations are subject to court and registration fees usually in the amount of 350 zloty.
Consent of the President of the Office of Competition and Consumer Protection
The types of business combinations that may be subject to notification and approval of the President of the Office of Competition and Consumer Protection (the Competition Authority) are: mergers, takeovers of direct or indirect control, joint venture formations or acquisition of assets, which generate a target turnover exceeding €10 million in any of the two financial years preceding the notification. Notifications are subject to a small filing fee.
A notification to the Competition Authority is only compulsory if at least one of the following conditions (subject to certain exceptions) is met:
- the combined worldwide turnover of the capital groups of both parties to the transaction in the financial year preceding the year in which the notification is made exceeded €1 billion; or
- the combined turnover of the capital groups of both parties to the transaction in Poland in the financial year preceding the year in which the notification is made exceeded €50 million.
For the purpose of the above calculations, in takeovers of control and asset acquisitions only the turnover of both the purchaser and its capital group and the seller and its capital group is taken into account and not the turnover of the target’s capital group.
There are several exemptions from the obligation to notify the Competition Authority, including in the event of a takeover of control if the turnover of the target in Poland did not exceed €10 million in any of the two financial years preceding the filing.
Transactions that meet the above criteria require the consent of the Competition Authority. Transaction completion prior to clearance or lack of notification if it is required may result in a fine of up to 10 per cent of the turnover in the financial year preceding the year in which the penalty is imposed. Moreover, providing false or misleading information may be subject to a fine of up to €50 million. Members of the management board may also be fined up to 50 times published average national remuneration for failure to notify the transaction or providing untrue or misleading information.
If the thresholds and conditions stipulated in the EC Merger Regulation are met, the transaction may be subject to compulsory notification to the European Commission. In such a case, the transaction does not require notification to the Competition Authority.
Interaction with the Financial Supervision Authority
In connection with a business combination of a listed company, interaction with the Financial Supervision Authority might be necessary. If in the course of the business combination shares in the company acquiring the business will be publicly offered (eg, offered to at least 150 shareholders), then a prospectus or an offering memorandum for offering these shares might need to be prepared, approved by the Financial Supervision Authority and disclosed to the public.Information to be disclosed
What information needs to be made public in a business combination or an acquisition of a public company? Does this depend on what type of structure is used?
The information that needs to be made public depends on the type of transaction as well as the legal form and character of the target. The corporate files of joint-stock companies (including public companies) are kept in the National Court Register of the district court where the company has its registered office. These files are publicly accessible. Business combinations trigger the obligation to file some information and documents with the National Court Register, such as drafts of merger or division plans and shareholder resolutions on mergers and divisions. Merger and division plans also need either to be formally announced or made available on the company’s website.
In a tender offer for shares in a public company, the bidder publishes an offer document that contains information allowing the shareholders to make an informed decision on the tender offer, including the identity of the bidder, the number of shares covered by the tender offer, the proposed price, the subscription period, the bidder’s intention with regard to the target, and whether the tender offer may be abandoned if another entity announces a tender offer for the same shares.Disclosure of substantial shareholdings
What are the disclosure requirements for owners of large shareholdings in a public company? Are the requirements affected if the company is a party to a business combination?
Shareholders of public companies who have achieved or exceeded (or fallen below) the statutory thresholds of 5, 10, 15, 20, 25, 33, 33.3, 50, 75 or 90 per cent of the voting rights of a company are subject to notification requirements. Moreover, a shareholder whose stake in a public company has exceeded 10 per cent of the voting rights of the company is required to notify any stake change of 2 per cent or more, and a shareholder whose stake in a public company has exceeded 33 per cent of total voting rights is required to notify any stake change 1 per cent or more. All these notifications should be made to the public company and the Financial Supervision Authority. Failure to make the required notifications may result in the Financial Supervision Authority imposing a fine of up to 1 million zloty on an individual shareholder or the higher of up to 5 million zloty or the zloty equivalent of 5 per cent of the annual turnover evidenced in the last audited financial statements of the corporate shareholder.
Subject to certain limited exceptions, public companies are required to publish inside information (including precise information relating to an impending business combination affecting the company’s assets or shares, which has not been made public and which, if made public, would be likely to have a significant effect on the share price). Also, the EU Market Abuse Regulation imposes disclosure requirements on issuers, which themselves must determine whether a particular event should be regarded as inside information and disclosed to the market.
Law stated dateCorrect on
Give the date on which the above content is accurate.
20 May 2020.