I am a manager in a Polish limited liability company (spółka z ograniczoną odpowiedzialnością) which was established in 1995. The majority of shares in the company is held by a Russian citizen. From the day of its founding the company has been selling its products mostly in the Polish market. The company is interested in acquiring a local sugar refinery where the Polish turnover was PLN 50 million in the last financial year. Do I have to notify the transaction to the PCA under the Shield 4.0?

Yes. The country affiliation of the investor is determined by reference to the ultimately controlling entity which is a Russian citizen. Given that the Russian Federation is not a member of EEA or OECD, the companies controlled by Russian citizens are treated as foreign entities even though they have been previously active in Poland. The transaction would constitute the acquisition of dominance. The criteria related to the target are also met because it is a food processor with turnover which exceeded EUR 10 million in Poland.#

The contemplated transaction is caught by Polish merger control legislation and it is notifiable to the PCA. Do I have to make two submissions – merger filing and Shield 4.0 notification? Yes if the transaction meets the criteria laid down in the Shield 4.0. The screening mechanism is independent from the merger control legislation. If the operation is caught by both regimes, two notifications to the PCA are required.

The proposed transaction is notifiable to the European Commission. Do I have to notify the transaction to the PCA even though it lacks jurisdiction over the merger?  Yes. The screening mechanism is independent from the merger control system. In such situation the PCA does not examine the effects on competition but the impact of the transaction on public order and safety. If the transaction meets the criteria laid down in the EUMR and in the Shield 4.0, two notifications are necessary: to the European Commission and to the PCA.

Are joint-ventures subject to PCA review under the screening mechanism? The screening mechanism covers operations which result in significant participation or dominance over the protected entity with an annual Polish turnover exceeding EUR 10 million in any of two preceding financial years. As long as JV is a greenfield project (e.g. construction of the new plant) which does not involve transfer of existing assets which used to generate any revenue, such operation would not be notifiable because the turnover threshold is not met. However, if the parent undertakings decided to contribute the existing business to the JV, such transaction may be subject to the notification requirement if the other criteria laid down in the Shield 4.0 are met.

What are the fees for Shield 4.0 notification? Contrary to Polish merger control regime, Shield 4.0 notification is not subject to any fee. Nevertheless, the notification may trigger some administrative costs such as translation of source documents.

As a Polish citizen I established a joint-stock company (spółka akcyjna) in 2009 (I used to be the sole shareholder at that time). In 2015 I sold 30% of shares to a Chinese investor. Our legal advisors instructed us that no merger notification was necessary at that time, because the transaction did not pertain to the change of control over the company. Given that the Shield 4.0 came into force, do we have to notify the PCA of the existing shareholding structure over company? The screening mechanism is applicable to transactions effected after 24 July 2020. The existing structures – even if there is significant participation or dominance of non-EEA/OECD entity – are not subject to the notification requirement.

An Indian company is considering investing in a Polish wind farm company with an annual turnover exceeding EUR 30 million (in Poland). Having learned that the transaction may require Shield 4.0 notification, the investor is seeking a way not to engage in screening proceedings, because it would require presenting the corporate structure to the PCA which is kept secret. The local M&A advisor instructed the investor to buy the shares via a Polish investment fund which would be managed by a local investment fund company (TFI) whereas the certificates would be held by the investor. The advisor said that such solution is frequently used and that under Polish law, it is the investment fund company which controls the fund and portfolio companies independently from the certificate holders. Would the acquisition by the investment fund be subject to the Shield 4.0 notification? The screening mechanism prescribed by the Shield 4.0 covers a wide range of transactions. Acquisition of right to a protected entity’s income, e.g. investment certificates, is treated in the same manner as acquisition of shareholding or voting rights. Hence, “hiding” behind the investment fund does not affect PCA’s jurisdiction.

In January 2020 we opened the bidding process for the sale of our U.S. hi-tech business. One of the target companies is the majority shareholder in the Polish company listed on the Warsaw Stock Exchange. As a result of COVID-19 all the bidders withdrew except for the South African company which is rapidly expanding overseas. The purchaser is however pushing for a fast closing. Given that we incurred many financial losses as a result of the ongoing crisis, we would also like to receive the purchase price as soon as possible. The investor is afraid that the Polish screening procedure would take too long, so he agreed to make an upfront payment if we transfer the shareholding in the target U.S. companies to the Delaware SPV incorporated by managers employed by the investor (3 persons) and our American companies (2 persons) (all shareholders would be American citizens). Then the investor would apply for PCA clearance for indirect acquisition of the Polish listed company from Delaware SPV. Is such solution admissible under the Shield 4.0? No. Under the Shield 4.0 the standstill obligation is also applicable to the operations performed on behalf of or in the interest of the ultimate purchaser. Although the SPV is the OECD entity (incorporated in the U.S. and all shareholders are Americans), it does not intend to remain the shareholder of the target business. In fact, the shares would be temporarily “parked” in the SPV which is acting in the interest of the South African (non-EEA/OECD) investor. Hence, the transfer of shares to the SPV would also be subject to the notification requirement. Please note that such operation may also be caught by national merger control regulations. If yes, the warehousing mechanism would be treated as gun-jumping which may trigger competition law exposure (see: European Commission decision 27.06.2019, COMP/M.8179 – Canon/Toshiba Medical Systems Corporation).

The protected entity operates as a limited liability company (spółka z ograniczoną odpowiedzialnością). The Company’s shares are held by six natural persons in equal proportions (16.67% each). None of the shares are privileged. One of the shareholders violated statutory non-compete provisions, so the other five shareholders decided to redeem their shares in accordance with the articles of association. One of the remaining shareholders is a Ukrainian citizen. Given that the participation of each shareholder would increase to 20% as a result of compulsory redemption, should this fact be notified to the PCA?  Yes. Although the change in shareholding was not intended by the Ukrainian shareholder, the situation should be notified to the PCA as the ex post acquisition. The notification should be made by the protected entity.

A French company listed on the Paris Stock Exchange has an indirect subsidiary in Poland. The subsidiary is a protected entity of annual turnover exceeding EUR 10 million in Poland. For tax reasons the board of the ultimate parent (French company) is negotiating with shareholders to relocate the corporate seat from Paris to the Cayman Islands. The shareholding structure (dispersed shareholders) would remain unchanged. Does the migration overseas trigger notification obligation under the Shield 4.0? Yes. The legal operation effected under the foreign law would result in losing the status of EEA/OECD entity by the ultimate shareholder. As a consequence, the Shield 4.0 notification would be mandatory.