Further reporting obligations of the issuers are coming

Previous year was full of many important legal changes relating to the reporting obligations of issuers. In addition to having to adjust to the changes resulting from the entry into force of the MAR Regulation and the implementation of Transparency II Directive into the national legislation, a part of the public companies will be required to disclose more information about their activities.

Corporate Social Responsibility

In connection with the implementation into the Polish law of provisions of Directive of the European Parliament and of the Council 2014/95/EU of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups (the so-called non-financial directive) the scope of non-financial information required in the annual management reports was extended. Changes have been introduced by amendment to the Act on accounting, adopted by the Sejm on 15 December 2016, the provisions of which entered into force on 26 January, provided, however, that the obligation to extend the management reports applies to reports prepared for the financial year beginning on 1 January 2017.

Changes will apply to the reporting obligations of certain companies in terms of providing information on their activities in the area of the so-called Corporate Social Responsibility (CSR). This concept applies to conducting the activity of entities, taking into account not only the “hard” issues, such as financial results or activity development, but also those associated with effects on the environment or social and workers’ issues.

New obligations of the issuers in terms of non-financial reporting

Under the new regulations, also some public companies will be required to present non-financial information in a separate report, or in the form of a separate statement being a new item of the management report. A statement or an additional report will be posted on the websites and will be a component of the annual report of public companies.

The new obligations will apply to entities that achieve relevant thresholds during two financial years – in the financial year for which the report should be prepared, and in the year preceding that financial year. These thresholds are the average annual employment in excess of 500 people per FTE and exceeding the amount of PLN 85 million of the total assets in the balance sheet at the end of the financial year, or PLN 170 million of net revenue from the sale of goods and products for the financial year.

Under the new regulations, a statement on non-financial information will include specific information, such as a description of the business model of the company, key non-financial performance indicators related to its activities, a description of the applicable policies in regard to social issues, labour, the environment, respect for human rights and tackling corruption and bribery, as well as a description of the results of the application of those policies and procedures put in place to ensure their compliance. In addition, the company should include a description of the significant risks associated with its activity which may have an adverse effect on the CSR area. Non-financial information should be presented to the extent necessary for the assessment of development, results and the situation of the company, and if it affects the financial results, it should also show the relationship that exists between the given information.

In the case of non-compliance with the policy in relation to CSR issues, the company should provide justification, in accordance with the principle of comply or explain known from the good practice for WSE listed companies. It is also acceptable to omit certain information, in the case of negotiations or with the consent of the Management Board and the Supervisory Board of the company, if omission of this information will not make the message concerning the activity conducted misleading. It should be noted, however, that such omission must also be described in the statement itself.

CSR – yes! …

Referring to the new regulations of the Accounting Act it is worth pointing out that the very concept of the promotion of conducting activity in accordance with the directives of corporate social responsibility is not new. WSE, which leads and updates the Respect Index, i.e. the stock exchange index of responsible companies that in their activities apply the principles of CSR, has actively engaged in the dissemination of this idea. Interest in participating in this index, and also its success, is evidenced by the fact that in 2016 its composition was announced already for the tenth time, and access to it is annually declared by the recognized and respected companies, including companies that make up the WIG30.

… but not this way…

You cannot force anybody to conduct its activity in a responsible manner and you also cannot require or impose any obligations related with that. Information about conducting activity in a responsible manner should be voluntary and left to the discretion of the companies.

Pushing changes through new legislation is not the right way, and we can only hope that there will not be any more changes in the field of CSR. It only remains to wish the issuers perseverance in adapting to future changes, and hope that the reporting obligations revolution is coming to an end… At least for a while.

Krzysztof Marczuk

legal advisor, partner in GESSEL Law Firm

Wojciech Nowosad

lawyer in the Capital Markets Team at GESSEL Law Firm