Act on the Control of Certain Investments - information on recent changes
06 July 2020
The act introduced a new set of provisions in the Act on Control of Certain Investments which imposed a notification obligation on non-EU foreign persons or entities which intend to acquire or achieve significant participation or dominance in certain Polish companies (Protected Entities). These persons and entities must notify the intention of the acquisition to the competent control authority, ie the President of the Office of Competition and Consumer Protection (President of the OCCP). The new provisions contain a broad catalogue of the different types of acquisitions that require notification (see section 4 below).
The above measures were adopted in connection with COVID-19. The purpose of these measures is to secure Protected Entities before acquiring or achieving significant participation or dominance in it (Acquisition) by the person who does not hold the nationality of an EU/EEA/OECD Member State (Member State) or, in the case of a legal person, does not hold or has not held a registered office on the territory of a Member State for at least two years from the date preceding the notification to the President of the OCCP (Acquiring Entity). According to the new law subsidiaries of an Acquiring Entity, its branches or representative offices shall be considered as not being established in the territory of a Member State.
Furthermore, in some cases, even an entity with its registered seat in a Member State may be subject to the control of the President of the OCCP in connection with the Acquisition, when there is a suspicion of an attempt to circumvent the new regulations, e.g. when an acquirer based in a Member State does not actually conduct business activity on its own behalf other than activities related to the Acquisition, or has no permanent establishment, office or staff in the territory of the Member State.
Below is an overview of the most important amendments introduced to the Act on Control of Certain Investments.
2. Protected Entity
A Protected Entity within the meaning of the amended Act on Control of Certain Investments is an undertaking which, as at the date when an Acquiring Entity pursues the Acquisition, satisfies at least one of the following criteria and whose amounts derived from the sale of products and the provision of services in any of the two financial years preceding the notification exceeded the equivalent of EUR 10 million:
(a) is a public company; or
(b) holds assets disclosed in the list of facilities, installations, devices and services comprising the critical infrastructure indicated in the Act on Crisis Management; or
(c) is an entity carrying out business activity in the specified strategic sectors listed in the amended Act on Control of Certain Investments, eg telecommunications, production of medical devices or energetics.
3.Notification and Control Proceeding
According to the amended Act on Control of Certain Investments, the Acquiring Entity must submit a prior notification of its intention to pursue the Acquisition to the President of the OCCP, unless this obligation lies with other persons or undertakings that participate in the Acquisition. This will occur, for instance, if the Acquisition is made by a subsidiary in which case it is the subsidiary that must submit relevant notification. The notification must include, amongst others, information regarding the Acquiring Entity’s investment long-term plans against the Protected Entity.
Furthermore, the President of the OCCP initiates the control proceeding that, in general, may last up to 150 days and is completed by issuing a decision by the President of the OCCP. The President of the OCCP in its decision may object to the Acquisition of a Protected Entity or in some cases may declare inadmissibility of exercising rights attached to the shares of a Protected Entity, amongst others, in the event when this Acquisition involves only even a potential threat to public order, health or safety of the Republic of Poland.
The Acquisition of a Protected Entity without prior notification to or an objection from the President of the OCCP shall be invalid.
The scope of the Acquisitions covered by the amended Act on the Control of Certain Investments is defined very broadly and encompasses, amongst others, exerting influence through the acquisition of shares, actual exercise of voting rights, gaining participation interest, indirect acquisitions, as well as any secondary acquisitions. Below is a short description of the different types of acquisitions covered by the amended Act on Control of Certain Investments.
4.1 Significant participation
Significant participation covers situations when an Acquiring Entity is able to affect the operations of the Protected Entity by, eg holding shares representing at least 20% of the total number of votes or an equity share in a partnership recognised as a Protected Entity of at least 20% of the value of all contributions made to that partnership.
Gaining significant participation in the Protected Entity may occur, amongst others, as a result of the purchasing or leasing of an enterprise or an organised part of it from a Protected Entity or reaching at least the thresholds of 20% and 40%, of the total number of votes in the decision-making body of the Protected Entity or an equity share in the Protected Entity.
4.2 Dominant position
The acquisition of dominance constitutes a situation when a dominant entity possesses the ability to decide on the directions of activities of the Protected Entity, in particular on the basis of an agreement providing for the management of it or the transfer of profit by it. It includes, amongst others, the acquisition of shares in the Protected Entity, or entering into an agreement for the managing of the Protected Entity or under which it transfers its profit.
4.3 Indirect Acquisition
The indirect Acquisitions encompasses cases specifically listed in the amended Act on Control of Certain Investments such as eg.: the acquisition made by a subsidiary of the Acquiring Entity or by an entity with which an agreement for the transfer of rights to exercise voting rights in the Protected Entity has been concluded or as a result of asset portfolio management. It also covers situations where, as a result of a transaction or event not listed in the amended Act on Control of Certain Investments, the Acquiring Entity obtains the status of a dominant entity for an entity having significant participation in the Protected Entity or for an entity having legal title to the enterprise or organised part of the enterprise of the Protected Entity.
In some cases the provisions of the amended Act on the Control of Certain Investments also apply to the indirect Acquisition pursued on the basis of legal actions governed by foreign law.
4.4 Secondary Acquisition
Secondary acquisition shall be understood as Acquisitions of a Protected Entity as a result of the redemption of shares in the Protected Entity or purchase of its own shares in it, dividing the Protected Entity, merging it with another entity, or amendments to the statute of the Protected Entity with respect to the preference of shares, participation in profits, establishment or change or abolition of rights vested in particular shareholders or participants of the Protected Entity. Secondary acquisitions are subject to prior notification which must be submitted by the Protected Entity itself.
5. Entry Into Force
The new provisions will enter into force on 24 July 2020 and will be valid for 24 months from that date