Restrictions on transactions in strategic sectors
Notification of oversight authority (for strategic company)
In transactions involving companies operating in strategic sectors of the economy, it must also be examined whether the Act on Oversight of Certain Investments of 24 July 2015 is applicable.
The act requires notification of the oversight authority (currently the minister responsible for the Treasury, or with respect to energy companies, the Minister of Energy) of an intended transaction which the authority may object to.
What entities are subject to protection?
The Act on Oversight of Certain Investments introduces special restrictions on acquisition of shares or enterprises belonging to “protected entities.” The list of these entities is set forth in a regulation of the Council of Ministers. It includes companies operating in key sectors of the economy (e.g. telecommunications, energy, chemicals, and defence) which require special protection in light of their significant market share, scale of operations, and fundamental interest to society.
Significantly, a protected entity need not be controlled by the State Treasury, but can be a private company.
Thus if a transaction involves companies operating in the industries indicated in the act, whether the entity is protected should be verified at each stage of the transaction, as the regulations issued by the government under this act have generally entered into force the day after publication in the Journal of Laws.
When does the oversight authority have to be notified of a transaction?
The duty to notify the oversight authority applies to asset deals and share deals resulting in:
- Acquisition or achievement of a major stake, meaning acquisition of rights enabling exercise of 20%, 25% or 33% of the votes at the meeting of shareholders, or acquisition of the enterprise or an organised part of the enterprise of a protected entity, or
- Acquisition of control, understood to mean reaching or exceeding 50% of the votes in the authority establishing the entity or in its share capital, by acquiring or taking up shares or rights to shares
The act also applies to indirect acquisition (e.g. by
a subsidiary) or secondary acquisition (e.g. as a result of division or merger of a protected company or redemption of its shares).
Proceeding before oversight authority
The intention of carrying out a transaction resulting in acquisition or achievement of a major stake or control of a protected entity must be notified in each instance to the oversight authority.
The notification must generally be submitted before taking any action resulting in acquisition or achievement of a major stake or control, that is, before conclusion of the agreement on sale of the shares or the enterprise, or before the meeting of shareholders is held to adopt a resolution on increase of the share capital or merger of the companies.
The required content of the notice is set forth in the act. Apart from a description of the transaction subject to notification, detailed information about the entity filing the notice must be provided, such as:
- A description of its economic activity (nature, location and history)
- Information about the education held by the persons who are members of the management and supervision authorities (or the applicant himself, if it is an individual)
- Information about the capital group which the applicant belongs to (or if the applicant is not
a commercial company, information about the entities entitled to decide on the membership of its management and supervision authorities, entities entitled to receive distributions from its assets, and entities entitled to receive its assets in the event of dissolution or other termination of its existence)
- A description of its economic and financial condition
- A description of the applicant’s intentions with respect to the protected company, in terms of investment plans, long-term operating plans, anticipated changes in organisation, in particular any mergers, the financing of its operations, dividend policy and employment policy.
The oversight authority has 90 days to consider the notification and issue a decision objecting to the transaction. In practice, this period can be prolonged significantly, as the authority may summon the applicant to submit additional information.
The authority will issue a decision objecting to the transaction where justified by one of the following considerations:
- Ensuring protection of independence and territorial integrity, human and civil rights and freedoms, safety of citizens, or environmental protection
- Preventing actions or social or political phenomena preventing or hindering performance of NATO obligations
- Preventing actions or phenomena that could interfere with foreign relations
- Ensuring public order and state security, and meeting essential needs for protection of human life and health
or if the applicant failed to cure formal defects in the notification or failed to submit additional written information within the time specified by the authority.
Actions taken contrary to an objection by the authority, or without filing the notification, are invalid.
In addition, failure to file notification is subject to a fine of up to PLN 100 million. This fine may be imposed not only on the entity required to file the notification, but also on persons carrying out the transaction for the entity (management board members, proxies). These individuals may also be sentenced to up to 5 years’ imprisonment.