The Polish government is planning to implement a special procedure to control acquisitions of “protected entities” by buyers from outside of the European Economic Area. “Protected entities” would include most listed companies, as well as private companies that hold assets critical for the Polish economy or operate in strategic sectors such as energy, oil and gas, military technologies, telecommunications, and pharmaceutical production.
Reacting to changes in the macroeconomic landscape and European Commission guidelines
The Polish government has proposed a new draft law aimed at combating the effects of the COVID-19 pandemic, which introduces new rules applicable to the control of foreign direct investments leading to an acquisition of control or a qualifying holding in a protected entity by buyers from outside of the EEA.
When the new regulations would enter into force, and what their final shape would be, remains uncertain. However, given that they would be a part of the overall response to the looming economic crisis, the legislative process might accelerate quickly and the new regime could apply even to currently pending transactions. The current draft stipulates that the regulation will enter into force after 30 days from its publication and the new rules are to be applicable to transactions not completed before their entry into force (which means that all preliminary/conditional transactions with an expected completion date after the new law enters into force will be analyzed in light of the new clearance obligations). The new rules will expire after 24 months following the effective date of the new law.
Please note that the draft law may change in the course of the ongoing legislative process.
New clearance obligations will apply to transactions involving companies and partnerships (the “protected entities”) that: (i) have their registered seat in Poland and (ii) in at least one of the two preceding financial years, achieved income in Poland exceeding EUR 10 million and:
– are publicly listed in Poland – i.e., at least one of their shares is admitted to public trading on a regulated market (e.g., the Warsaw Stock Exchange) or a multilateral trading facility (e.g., New Connect); and/or
– hold assets classified as parts of critical infrastructure – i.e., assets that have been identified as key for the functioning of the Polish economy (the list of such assets is confidential, but the current holders should have been informed about such classification); the list includes mostly energy networks, key food and water provision facilities, communication networks, transportation networks, as well as financial systems and systems maintaining the continuity of the functioning of the public administration, etc.; and/or
– develop or modify important software1; and/or
– operate in strategic sectors.
The proposed new obligations would apply on top of any other regulatory and antitrust clearances required under Polish law to complete the acquisition of a given protected entity.
All non-EEA nationals (natural persons who do not have EEA citizenship) or non-EEA entities (entities without a registered office in the EEA for at least the last two years) are obliged to comply with the clearance procedure when entering into any of the affected transactions. In addition, indirect acquisitions (made via a subsidiary) will also be covered by the law. Finally, the draft law includes specific provisions against circumventing the EEA-domicile rule, in particular: (i) subsidiary entities, branches or representative offices of a non-EEA national or non-EEA entity will also be regarded as non-EEA entities, and (ii) even if an acquisition is pursued by an EEA citizen or an entity having its registered office within the EEA, the buyer may still be regarded as affected, if there is an allegation of circumvention of law, such as the situation in which the buyer does not carry out any business activity other than holding shares or controlling other entities or does not run a sustainable enterprise or employ staff within the EEA.
Any transaction involving a protected entity would be subject to the new clearance obligation if it involved direct or indirect (through a subsidiary, by the acquisition of an intermediate element of the corporate chain and/or other change of control over an intermediate part of the corporate chain, including through a merger or a demerger):
a) acquisition of control over the protected company – i.e., any of the following:
– holding more than 50% of votes at the general/shareholders’ meeting (in case of companies) or 50% or more capital (in case of partnerships);
– having the right to appoint and/or dismiss the majority of the members of the management board or the supervisory body of the protected company;
– the majority of the members of the management board of the protected company are also directors, representatives, and/or employees of the buyer;
– having any other right to decide on directions of the protected company’s business, including under an agreement with the protected company;
b) acquisition of a qualifying holding in the protected company – i.e., a holding representing 20% or more (as well as acquisition of any holding that would bring the buyer above 40%) of the: (i) votes at the general/shareholders’ meeting; (ii) share capital; and/or (iii) share in distributed profits;
– purchase or lease of the enterprise (or an organized part thereof) of a protected company through an asset deal.
Additionally, the clearance obligation would be triggered if any of the above situations results from: (i) redemption of shares of a protected entity; (ii) a protected entity’s purchase of its own shares; or (iii) merger or spin-off of a protected entity.
However, in those cases the notification would have to be made by the protected entity itself after the relevant transactions are completed.
Acting in concert with other entities in the above transactions involving protected entities would also trigger a clearance obligation for all the parties concerned.
The proposed new clearance obligation will consist of an obligation to notify the President of the Office of Competition and Consumer Protection (“UOKiK”) of the planned transaction and the UOKiK’s right to object to the transaction within a specified deadline. The UOKiK would issue such objection if the transaction poses at least a potential threat to public order, public security or public health in Poland. The objection can be challenged in administrative court, but the court proceedings are usually lengthy and their duration goes well beyond typical transaction timelines.
As a rule, the notification would have to be made prior to the completion of the transaction (or announcement of the tender offer if the target is a listed company) and would have a suspensory effect. Agreements/tenders conditional upon the receipt of clearance will be allowed.
A transaction made without the required notification or in spite of an objection voiced by the UOKiK would be void. However, in case of an indirect acquisition under transactions not governed by Polish law (e.g., a merger of non-Polish entities resulting in a change of control over a protected entity) the transaction would be effective, but the acquirer could not exercise its corporate rights in protected Polish entities.
The procedure before the UOKiK would take up to 30 business days, but it could be extended for further 120 calendar days if the UOKiK decides to initiate control proceedings. Deadlines would be suspended for periods when the UOKiK is waiting for requested information and documents.
Breach of the proposed new clearance obligation would constitute a criminal offense punishable by a fine of up to PLN 50 million and/or imprisonment for up to 5 years. Additionally, an entity required by law or by an agreement to manage the affairs of its subsidiary, which has not submitted the required notification, will also be subject to a fine of up to PLN 5 million and/or imprisonment for up to 5 years if such entity was aware of the acquisition being made by its subsidiary.