Amendments to the Public Offering Act bring new duties for issuers

The Polish president has just signed into law a statute amending the legislative Act regarding public offering; most of its provisions are set to come into force 14 days following official publication.

In the first order of sequence, we would like to bring to your attention the new rules of greatest relevance to securities issuers – ones which will entail drawing up additional documents and/or decisions by the shareholders. We also summarise the new rules governing de-listings and squeeze-outs.

Further amendments, the enforcement tools placed at the disposal of the Polish Financial Supervision Authority, and amendments to the legislative Act regarding trade in financial instruments will be discussed in future issues of our Newsletter.

Remuneration policies

Further to our previous comments to the anticipated legislative changes in Newsletter No. 96 from June 2019, we note that, in the final version of the new rules, remuneration policies are mandatory. In other words, one attempt at having the remuneration policy adopted by the general meeting will not suffice – the debate, and successive ballots, must continue until successful passage of a remuneration policy has been secured. Any material amendment to the remunerations policy at a later date must likewise be approved by the general meeting. The interim provisions set the deadline of 30 June 2020; after this date, remuneration disbursements to members of a company’s governing bodies must proceed on the basis of remuneration policies complying with the Act. As regards the remunerations report to be drawn up by the Supervisory Board, the new law stipulates that reports for the years 2019 and 2020 shall be drawn up jointly, and that such reports must be audited. An issuer which fails to draw up and publish a report on remunerations or to make available a resolution on its remuneration policy – or which presents inaccurate information in this context – is liable to a fine. The legal duty to adopt a remuneration policy applies only to issuers whose securities are traded on the regulated market.

Protection for whistleblowers

Issuers of securities will be bound by new duties concerning protection of whistleblowers. Issuers (also ones whose securities are traded on the NewConnect market) must have in place a procedure enabling employees to anonymously notify the Management Board – or, where circumstances warrant, with the Supervisory Board – of suspected improprieties, especially within the ambit of the Public Offering Act and of the Prospectus Regulation (EU 2017/1129).

Transactions with related parties

Issuers of securities traded on the regulated market will be obligated to publicly announce material transactions with affiliates and to describe their interests / objectives motivating that transaction. For these purposes, a “material” transaction will be one of a value exceeding 5% of the asset total, with transactions involving the same affiliate performed in the space of the past 12 months taken on an aggregate basis. Issuers will also need to put in place a procedure for periodic assessment by its Supervisory Board whether transactions with affiliates are effectuated on arm’s length terms and within the ordinary course of business. In like spirit, a material transaction will require approval in the form of a Supervisory Board resolution, unless the given company’s articles of association have been amended so as to vest such authority in the General Meeting.

Delisting

The present raft of legislative amendments affects, among other issues, mandatory dematerialisation of shares and – not unrelatedly – a new definition of the public company: a corporate entity of which at least one share has been admitted to trading on the regulated market or in an alternative trading system in Poland. This entails changes to the procedure and terms of delisting. The new laws define the main effect of delisting as reversal / revocation of the effects of admission of the given security to trading in the regulated market or of its introduction to the alternative trading system. The new procedure will require obtainment of KNF permission for withdrawal or exclusion of the shares from trading – rather than for restoration of the shares’ documentary form, as was hereuntil the case.

The amendments also introduce new rules governing definition of the price for compulsory share buy-back in the context of delisting from NewConnect. The Polish legislature has abandoned the fair price model applied to companies delisted from the main floor in favour of one where the price of shares being pulled from the NewConnect system will be defined in reference to average market value for 3 or for 6 months.

Higher squeeze-out threshold: 95%

The new laws increase, from 90% to 95%, the aggregate number of votes which a majority shareholder must control in order to announce a squeeze-out. The idea is to bring art. 82 of the Polish Act in line with European Parliament and Council Directive 2004/25/EC of 21 April 2004, and also with the threshold set for non-public entities in the Polish Commercial Companies and Partnerships Code. At the same time, the same threshold has been introduced for requests to sell by minority shareholders (art. 83 of the Public Offering Act).

Procedure for share buy-back upon exclusion from public trading

The changes also affect the procedure for buy-back of shares from a minority shareholder (holding less than 5% of the company’s shares) in the event of those shares’ exclusion from trading. Such a shareholder may now request buy-back of his shares within 3 months following the exclusion, and the company concerned then has 3 months to effectuate a buy-back from all shareholders who had come forward with such a request. The price of such buy-back cannot be less than the price calculated for purposes of the tender, and the shares bought back shall be subject to compulsory redemption promptly upon adoption of the relevant resolution by the Management Board (with no need for a General Meeting resolution on this matter).