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
Anticipating significant changes in the macroeconomic landscape and possible downward pressure in company valuations, as well as following the so-called FDI Screening Regulation and European Commission guidelines dated 25 March 2020, which called on the member states to strengthen the protection of EU companies, the Polish government is considering complementing the existing framework protecting key companies against hostile takeovers and extending clearance obligations to cover a much broader scope of acquisitions by non-EEA entities.
The government has not published any official draft of the new framework yet and the legislative process is at a relatively early stage. However, there have been a number of press reports already and certain details of the proposed regulations have been publicly discussed.
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.
New clearance obligations will apply to transactions involving companies and partnerships (the "protected entities") that, in at least one of the preceding financial years, recorded turnover 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 maintain important software used to:
- manage power plants, networks or services or systems relating to the supply of energy, natural gas, fuels or heat;
- manage, control or automate drinking water supply or wastewater treatment installations;
- operate equipment or systems used for voice or data transmission or for storage and data processing;
- operate or manage equipment or systems used for cash supply, card payments, cash transactions, settlement of securities and derivative transactions or to provide insurance services;
- operate hospital information systems, operate equipment and systems used in the sale of prescription drugs or operate laboratory information systems or laboratory tests;
- operate facilities or systems used for the transport of passengers or goods by air, rail, sea or inland waterway, road, public transport or logistics;
- operate equipment or systems used in air, rail, sea or inland waterway, road passenger or cargo transport, public transport or logistics;
- operate equipment or systems used in the supply of food;
- provide cloud computing data storage or processing services; and/or
- operate in strategic sectors, which include:
- energy production;
- oil and gas production;
- oil and gas pipe transmission;
- oil, gas and natural gas storage;
- underground oil and gas storage;
- manufacturing of chemicals, fertilizer and chemical products;
- manufacturing and trade in explosives, arms and ammunition and products or technology with military or police use;
- regasification or liquefaction of natural gas;
- transshipment of crude oil and its products in seaports;
- natural gas and energy distribution;
- transshipment in ports of major importance for the national economy;
- transmission of gaseous fuels;
- rhenium manufacturing;
- mining and processing of metal ores used for the manufacturing of explosives, arms and ammunition and products or technology with military or police use;
- manufacturing of medical devices and products;
- manufacturing of medicinal and other pharmaceutical products;
- cross-border trade in gaseous fuels and gas;
- heat production, transmission or distribution;
- transshipment in inland ports; and/or
- processing of meat, milk, cereals, fruits or vegetables.
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. All direct or indirect subsidiary entities, branch or representative offices of a non-EEA national or non-EEA entity will also be regarded as affected buyers.
However, the draft legislation states that 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, which will have to be determined in a special pre-clearance procedure where the substance of the buyer will be verified. Circumstances that may prove an attempt to circumvent the law will include in particular cases where the buyer does not carry out any business activity other than holding shares or controlling other entities and 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):
- 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;
- acquisition of a qualifying holding in the protected company – i.e., a holding representing 10% or more (as well as acquisition of any holding that would bring the buyer above 20% or 40% of):
- votes at the general/shareholders' meeting;
- share capital; and/or
- 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:
- redemption of shares of a protected entity;
- purchase of own shares by a protected entity; or
- 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 Polish antitrust authority ("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 the transaction could not be completed before the deadline for the UOKiK to voice its objection expires.
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 rights associated with the relevant shares in the protected entity (including in particular voting rights) would be suspended; and/or
- the UOKiK might decide that the transaction is effective with respect to a part of the shares in the protected entity that do not constitute a qualifying holding.
The procedure before the UOKiK would take up to 60 business days, but it could be extended for a further 90 calendar days (or even an additional 90 calendar days in complex cases). This deadline 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 100 million and/or imprisonment for up to 5 years.