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Getback - reform of Polish corporate bond market

A recent corporate failure leading to unpaid corporate bond repayments has led to calls for a reform of Polish corporate bond laws. The reforms are good news for banks as they will make it more difficult for issuers to issue bonds without a bank or broker intermediary.

Trouble lurking beneath

GetBack S.A. (GetBack) is a Polish listed company operating in the debt management business. Until recently, GetBack looked like it had overtaken its competitors, with large volumes of acquired debt, significant growth in profits and a successful listing on the Warsaw Stock Exchange in July 2017. However, in April this year GetBack filed for restructuring proceedings. It transpired that each quarter over the last few years, GetBack had issued dozens of series of bonds, the majority of which were placed in private offerings. The bonds sold very well as the coupons were often much higher than interest on traditional bank deposits. However, when these bonds started to mature, GetBack failed to make the repayments.

The recent developments surrounding GetBack, including the arrests of most of its former management board members, and new evidence that has come to light, suggest that GetBack’s management might have been involved in the manipulation of financial instruments and that the company’s difficult financial condition had been concealed for a long time using sophisticated accounting techniques.

The GetBack case has significantly and negatively affected the corporate bond market in Poland, leading to calls for regulatory reform.

Impact on the corporate bond market in Poland

After several months of intense discussions prompted by the GetBack case, at the beginning of September 2018 the Ministry of Finance put forward a new draft law aiming to increase regulatory oversight and protection of investors on the financial market (the Draft Law). As at the beginning of October 2018, the Draft Law has been assessed and commented on by the Public Finance Commission within the lower house of the Parliament.

Three major proposals were included in the Draft Law that could significantly affect the bonds market in Poland.

No more securities in ‘document’ form

Currently, securities can exist in the form of a document as long as they are not intended to be traded on a regulated market or in an alternative trading system. Under the Draft Law, all Polish corporate bonds issued after 30 June 2018 should be dematerialised, ie registered in a securities depositary operating in Poland. The main aim of this change is to increase the transparency of trading and prevent counterfeiting of documents representing bonds. However, the key concern that has been raised over this requirement is that the National Depository of Securities (KDPW), a sole Polish CSD, may not be operationally or technically capable of registering a significant number of new bonds issues in satisfactory timeframes.

It is difficult to assess the extent to which this argument is valid, given that it is uncertain how many new bonds series will be issued in the future and what technical measures KDPW will introduce to address the increased volume of applications. It should also be noted that other EU CSDs may be willing to step in and offer their depositary services using their CSD passport under Regulation 909/2014 (CSDR).

Prohibition on issuers offering their own bonds

Currently, an issuer can execute private placements of bonds directly to investors without the intermediation of an investment firm or a bank. Under the Draft Law, all new issues would be carried out through an issue agent which must be a MiFID II investment firm authorised to maintain securities accounts or a Polish custodian. An issuer would be obliged to enter into an issue agent agreement before it commences the placing of its bonds. An issue agent’s obligations would include, among others, performing a compliance check on the relevant issuer in relation to a particular issue and placing of bonds, maintaining a register of bondholders (until the bonds are dematerialised) and intermediating in registering bonds with KDPW (or other securities depositary).

The key concern that has been raised over the mandatory intermediation of an issue agent is that it will increase the costs of offering new bonds in private placements and will effectively limit small issuers’ access to this type of funding. While it is certain that the overall cost of issuing new bonds will increase as issuers will need to cover fees of their issue agents, at this point it is unknown whether it will be significant and whether it will indeed deter issuers from choosing corporate bonds as instruments of financing. Should the requirement to appoint an issue agent be enacted, investment firms and custodians will need to find a proper balance in their fee levels to ensure that the bonds market continues to grow.

Increased regulatory reporting requirements

Under the Draft Law, issuers of bonds which are not redeemed by 30 June 2019 or registered with a securities deposit will be obliged to report to KDPW by the end of the first quarter of 2020 on all their bond issues, including the number of bonds, their nominal values and the amounts to be repaid. If there are any changes to the reported information, issuers will also be required to update the data within 15 days following the end of each calendar month. Failure to fulfil these obligations will expose the persons authorised to represent the relevant issuer to a fine of up to PLN 2 million (approx. EUR 500,000).

Financial education for consumers

Finally, under the Draft Law, a Financial Education Fund is to be established. The purpose of the Fund would be to increase financial market knowledge among Poles. The Fund would be financed from penalties imposed by the Polish FSA and certain other Polish regulatory bodies.


The GetBack case has had a big impact on Poland’s securities market. The proposals included in the Draft Law aim to address some of the most important issues relating to corporate bonds offerings that have come to light: insufficient transparency of their private placements. Although the Draft Law has already been subject to some critique among market participants, it is hoped that their key concerns will be properly addressed by the legislator and the corporate bonds market will regain its pre GetBack strength.

Further information

This article is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication.  For more information please contact Karen Birch –, or tel +44 20 3088 3710.

Legal and Regulatory Risk Note

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