Poland | New anti-crisis package
Poland | New anti-crisis package – M&A screening procedures ultimately lifted for investors from OECD including the US, Canadians, Japanese and Koreans
Investors from the United States, Canada, Israel, Japan or South Korea can breathe a sign of a relief that the new Polish M&A restrictive measures will not influence their plans with regard to investment in Poland. In the last round of amendments to the new COVID-19 related anti-crisis package in the Polish Senate (the upper chamber of the Polish parliament), an amendment was introduced which broadened the geographical origins of foreign investors excluded from the newly introduced M&A screening procedure. Investors from locations such as China, South Africa or Brazil will need to take a few additional steps to complete an M&A transaction in Poland.
On June 23, 2020 the Polish President signed the COVID-19 related anti-crisis package of regulations in the form of the so-called – Shield 4.0. From an M&A perspective, key provisions provide for a new regulatory screening process related to M&A transactions, involving some of the protected sectors of the Polish economy. The screening process does not wipe out the possibility of a transaction itself, but simply adds a few steps to be taken by the potential buyers.
Similar regulatory measures have been introduced in a number of other EU states and are to a large extent based on Regulation (EU) 2019/452 establishing a framework for screening of foreign direct investments into the European Union.
The scope of the restrictions
The screening process of a potential transaction will be undertaken by the Polish competition authority, i.e. the President of the Office of Competition and Consumer Protection (the President of the OCCP). Any transactions involving “non-member states” within the meaning of the new law, leading to acquisition of significant participation or dominance in a Polish company under protection will require such a screening.
The term “member state” has been initially defined in the bill as a state of the European Union (EU) or the European Economic Area (EEA). As a consequence of the initial scope of this definition, transactions involving buyers from among others the United States, Canada, Israel, Japan or South Korea were meant to be subject to a compulsory screening process. Nevertheless, during the legislative process on June 18, 2020 the Polish Senate introduced an amendment to the initial bill broadening the scope of definition of a “member state” to not only EU/EEA but also OECD members. As a result, the OECD membership will, for at least the next 2 years, draw a line with regard to the way in which the Polish regulatory authorities respond to M&A transactions involving foreign capital from outside of the European Union (EU).
Consequently transactions involving companies from a number of key Polish investment partners such as the US, Canada, Israel, Japan or South Korea were excluded from this compulsory screening.
The screening process deals with investments leading to the acquisition of significant participation or acquire dominance in a given entity. Significant participation is to be understood as a situation enabling impact on the entity’s activities by:
- holding shares or stocks representing at least 20% of the total number of votes, or
- holding a capital share in a partnership with a value of at least 20% of the value of all contributions made to that partnership, or
- having a share in the profit of another entity amounting to at least 20%.
The new law states that the following entities are subject to protection:
- public companies within the meaning of the Act of 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organized trading, and on public companies,
- entities possessing critical infrastructure, in accordance with the Act of 26 April 2007 on crisis management,
- companies from the IT industry providing software used in the energy, water supply, and wastewater treatment, telecommunications, public transport and logistics, cashless payments, data processing as well as hospitals and laboratories, medical devices and the sale of prescription drugs,
- companies that operate in the electricity, natural gas, oil and other fuels sectors (e.g. production, storage, transport, and trading),
- companies that produce rhenium,
- companies that produce chemicals, fertilizers, and chemical products,
- companies that produce or sell explosives, weapons, ammunition or other products intended for the army and police, or to this purpose extract and process metal ores,
- companies from the telecommunications industry,
- companies dealing in transshipment of goods in seaports in Gdynia, Gdańsk, Szczecin, and Świnoujście as well as inland ports,
- entities producing medical equipment or producing medicines and other pharmaceutical products,
- entrepreneurs from the food sector dealing in the processing of meat, milk, cereals, fruit, and vegetables.
Moreover, the state supervision is to cover transactions concerning the above mentioned companies, under the condition that their revenues on the territory of the Republic of Poland had exceeded EUR 10 million in any of the two financial years preceding the notification.
Steps to be taken to ensure a successful M&A transaction:
An entity that intends to acquire significant participation or to acquire dominance will be required to submit a prior notification to the President of the OCCP.
With reference to well-known regulations regarding the anti-trust clearance in M&A transactions under the EU Merger Control Regulation, the new law assumes the introduction of a procedure consisting of two phases. The initial screening (Phase I), is intended to separate the cases into those, which do not require any further control activities (so called “non-controversial cases”), and those, which require further investigation (Phase II).
- With respect to the duration of the proceedings before the President of the Office of Competition and Consumer Protection, the Act provides that: a preliminary screening (Phase I) shall last up to 30 days,
- A proper investigation proceeding (Phase II) – up to additional 120 days, conducted if the preliminary screening does not give rise to the issuance of a no-objection decision to the investment, and taking into account public security or order public concerns, further investigation is required.
The above mentioned periods may be extended by periods of related correspondence between the President of the OCCP and the notifying party, as these periods are effectively suspended until the party submits the required information or documents (“clock-stop”).
Also, with reference to the solutions adopted under the merger control regulation, the entities submitting the notification are obliged to refrain from performing actions covered by the notification until the issuance of the decision of the President of the OCCP or the expiration of the deadline for its issuance.
In addition, the acquisition or achievement of significant participation or the acquisition of dominance without prior notification or doing so despite a decision of objections is – according to the new law – null and void.
According to the new law, there are also penalties for infringements thereof. Everyone acquiring or obtaining significant participation or dominance without giving notification is subject to a fine of up to PLN 50,000,000 or imprisonment from 6 months to 5 years, or both.
The same punishment shall be imposed on anyone who commits this act acting on behalf or in the interest of the given entity.
Persons who, being obliged by law or contract to deal with the affairs of a subsidiary, having knowledge of acquisition, and having not submitted a notice, will be subject to a fine of up to
PLN 5 million or imprisonment from 6 months to 5 years, or both.
Authors: Michał Będkowski-Kozioł, Dr. Iur, Partner; Jacek Kozikowski, PhD, Counsel; Michał Giżewski, Junior Associate
Michał Będkowski-Kozioł, PhD
Partner, Head of Competition & Antitrust Law Practice
M: +48 883 323 477
Jacek Kozikowski, PhD, LL.M.
Counsel, Head of Asian Desk
M: +48 660 765 914
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