The control will apply to acquisitions of shares giving min. 20% of votes in entities considered key to maintaining safety, order and public health. Lack of notification of the planned acquisition will be subject to severe sanctions (fine up to PLN 50 million or imprisonment from 6 months to 5 years).
New rules for control of acquisitions
On Tuesday, June 23rd, the so called anti-crisis shield 4.0 act was published in the Journal of Laws (Act of 19 June 2020 on interest rates subsidies for bank loans granted to entrepreneurs affected by COVID-19 and on simplified proceedings for approval of the arrangement in connection with the occurrence of COVID-19).
Among the regulations aimed at counteracting the effects of the pandemic, the Act also includes provisions intended to protect Polish companies against hostile takeovers by investors outside the EU, EEA and OECD . Most of the provisions of the Act are effective from the day following the announcement, i.e. from Wednesday, June 24. The regulations regarding investments control will come into force 30 days from the publication of the Act and will apply for 24 months from when coming into force.
The purpose of the Act is to protect Polish companies against hostile takeovers due to the deteriorated economic situation in which they may find themselves as a result of the COVID-19 pandemic, because of which the valuation of these companies may be particularly low.
The so-called Shield 4.0 introduces changes to the Act of 24 July 2015 on control of certain investments. The Act gives the President of UOKiK (the Office of Competition and Consumer Protection) additional powers in the scope of controlling acquisitions of Polish companies.
Which transactions will be subject to control?
Under the new provisions, the control will cover:
- the acquisition or achievement by an entity without citizenship or a registered office in the European Union, a country that is a party to the agreement on the European Economic Area or a country belonging to the Organization for Economic Cooperation and Development (OECD) of:
- significant participation (acquisition of shares giving at least 20% of votes, acquisition of a capital share in a partnership with a value of at least 20% of the value of all contributions made to that company, acquisition of a share in profits of at least 20%),
- dominance (obtaining the status of parent entity within the meaning of the Act on control of certain investments).
- including also the so-called subsequent acquisition, i.e. as a result of, among other things redemption of shares or stocks, division of the protected entity or merger with another entity, amendment of the contract or statute of the protected entity in terms of the preference for shares or stocks, and profit sharing.
- including also the so-called indirect acquisition, including by a subsidiary or acquisition on its own behalf, but at the request of another entity.
Also, if an acquisition is made by a company based in an EU, EEA or OECD country, notification may be needed. The Act contains anti-circumvention provisions covering in particular cases in which the acquiring entity does not actually conduct business on its own behalf other than activities related to the acquisition of significant participation, or does not have a permanent enterprise, office or staff in the territory of a member state. In addition, subsidiaries of an entity not established in an EU, EEA or OECD country, as well as its branches and representative offices are to be considered as entities not having their registered office in the territory of a member state.
In the event of suspected abuse or circumvention of the law, the President of UOKiK may initiate the proceedings ex officio.
Which entities will be protected?
The protection will apply to:
- public companies within the meaning of the Act on public offering,
- entities with critical infrastructure within the meaning of the Act on crisis management,
- IT companies providing programmes used, among others in energy, telecommunications, non-cash payments, public transport, hospital service, sales of prescription drugs,
- companies operating in strategic sectors, including electricity, natural gas, crude oil, chemical products, telecommunications industry, medical equipment production, medicines, food processing.
The new regulation will apply to companies whose revenues in Poland have exceeded the equivalent of EUR 10 million in any of the two preceding financial years.
How does the new regulation affect the obligations of entrepreneurs?
The basic obligation under the new provisions will be the obligation to notify the President of UOKiK in advance of the intention to acquire or achieve significant participation or acquire dominance. In the case of a subsequent acquisition, the notification should be submitted by the protected entity.
As a result of the notification, initial screening will be initiated. After the initial screening (within 30 days), the President of UOKiK will issue either 1) a decision refusing to initiate control proceedings and confirming no objection to the acquisition or achievement of significant participation or acquisition of dominance, or 2) a decision to initiate a control proceedings.
Control proceedings may be initiated in the event of formal errors in the notification or failure to provide information or documents at the request of the authority or if the authority finds that there are circumstances justifying further examination of the notified acquisition in terms of public security or public order.
The President of UOKiK objects, by way of a decision, to the acquisition or achievement of significant participation or acquisition of dominance over the protected entity if:
- it finds that in connection with the acquisition there is at least a potential threat to public order or public security of the Republic of Poland or public health in the Republic of Poland,
- it is not possible to determine whether the buyer has citizenship or the registered office in the territory of a member state,
- the acquisition may have a negative impact on projects and programs of EU interest,
- the entity submitting the notification has not corrected formal errors or provided additional information and documents at the request of the authority.
The decision will be subject to an appeal to the administrative court.
What will be the sanctions for violation of the new rules?
The acquisition without notification or despite the objection of the President of UOKiK will be invalid and may result in serious financial penalties. Failure to submit the notification may result in a fine of up to PLN 50 million, or imprisonment from 6 months to 5 years, or both.
How can we help?
We can offer our support in the process of identifying notifiable transactions, as well as with submitting a notification, should it be necessary. Our competition law lawyers have extensive experience in proceedings before the President of the UOKiK, including with notification of concentrations of companies. OECD members: Australia, Austria, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Mexico, New Zealand, Norway, Poland, Portugal, Republic of Korea, Slovakia, Slovenia, Spain, Sweden, Switzerland, the Netherlands, Turkey, United Kingdom and United States.