Category: Legal alert

Prospectus Regulation (no. 2017/1129) takes effect – changes and transition period for capital markets

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC applies from 21 July 2019 (“Regulation 2017/1129”).

It is worth noting that works on adjustment of the provisions of the Polish Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies (the “Public Offering Act”) have not been completed. In case of any discrepancies between Regulation 2017/1129 and the Public Offering Act, the former shall prevail.

The Polish Financial Supervision Authority (“UKNF”) has published an interpretation of regulations in the transition period, i.e. until amendments to the Public Offering Act are implemented.

Below is a summary of key changes.

1) Changes to the “public offer” definition

Pursuant to Regulation 2017/1129, the “offer of securities to the public” is a “communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities.” This means that each offer will be public in nature, irrespective of the number of recipients at which it is addressed. UKNF notes that an offer intended for a single investor will not be regarded as a public one. The current version of the Public Offering Act will apply nonetheless to securities which are not covered by the scope of Regulation 2017/1129 (e.g. offers of some public benefit organizations).

2) Prospect as a general rule (with some exceptions)

Pursuant to Regulation 2017/1129, securities shall only be offered to the public in the European Union after prior publication of a prospectus. However, there is a range of exceptions to that rule. The aforesaid obligation will not apply to: (i) an offer of securities addressed solely to qualified investors; (ii) an offer of securities addressed to fewer than 150 natural or legal persons per Member State, other than qualified investors; (iii) an offer of securities whose denomination per unit amounts to at least EUR 100,000; (iv) an offer of securities addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor, for each separate offer; or (v) securities offered, allotted or to be allotted in connection with a merger or division, provided that a document is made available to the public, containing information describing the transaction and its impact on the issuer.

The current thresholds will continue to apply.

An offer of securities with the issuer’s or seller’s expected gross consideration, together with proceeds from the past 12 months, is at least EUR 100,000 but below EUR 1,000,000, will continue to entail an obligation to publish a prospectus.

That obligation does not apply if the total gross consideration over a 12-month period in the European Union is below EUR 100,000.

An offer of securities with the issuer’s or seller’s expected gross consideration, together with proceeds from the past 12 months, is at least EUR 1,000,000 but below EUR 2,500,000, can still be based on the memorandum discussed in article 41 of the Public Offering Act.

3) Bonds

Offering of bonds will be governed by Regulation 2017/1129, which – to the extent requiring publication of a prospectus – supersedes the Public Offering Act’s provisions referred to in article 33 item 1 of the Bonds Act of January 15, 2015 (Dz. U. / Journal of Laws of 2018, item 483). In case of some “offers of securities to the public” (as defined in Regulation 2017/1129), a prospectus might not be required. However, in the transition period, the Public Offering Act’s provisions imposing the obligation to make an information memorandum might apply (e.g. in case of an offer of up to EUR 2,500,000, addressed to over 150 non-qualified investors).

For certain public offers (e.g. one listed in article 1 section 4 item b of Regulation 2017/1129, i.e. an offer of securities addressed to fewer than 150 natural or legal persons per Member State, other than qualified investors), the obligation to prepare a prospectus and have it approved does not apply. The Public Offering Act’s provisions requiring the publication of a memorandum will not apply, either. In such case, bonds can be offered on the basis of a purchase proposal.

4) (Non-)mandatory intermediation

Despite a wider definition of an “offer of securities to the public,” until the definition used in domestic regulations is adjusted to Regulation 2017/1129, the mandatory intermediation of an investment firm will not be required in case a given offer is considered as public (as defined in Regulation 2017/1129) but does not match the definition of the “offer of securities to the public,” as included in the previous regulations.

5) Certificates offered by non-public closed-end investment funds

According to UKNF, an investment fund, as discussed in article 15 section 1a of the Investment Funds and Management of Alternative Investment Funds Act of 27 May 2004 (Dz. U. / Journal of Laws of 2018, item 1355, as amended), should (as a closed-end fund) apply the provisions of Regulation 2017/1129 if it addresses the offer to more than one recipient. Non-public funds, which are not intended for a single investor (acquirer of investment certificates), are subject to general rules for public offering, as specified in Regulation 2017/1129. UKNF notes that offers aimed at fewer than 150 recipients in a given Member State do not entail an obligation to prepare any information document.

6) New prospectus types

Regulation 2017/1129 also discusses new prospectus types: a universal registration document for frequent issuers whose securities are admitted to trading on a regulated market or MTF, and a simplified prospectus for secondary offers. There is also a EU prospectus intended for the growth of small and medium enterprises. The idea is for the new documents to simplify and speed up the process of capital-raising. The structure of the prospectus is also about to change, becoming shorter and more comprehensible to investors.

7) Regulations concerning pending procedures and offers

In case of prospectuses that have been approved before 21 July 2019, the public offer and its promotion should be based on the previous regulations (even after 21 July 2019). The same applies to offers based on a memorandum that was approved or published before 21 July 2019. If the procedure has not been completed until 21 July 2019, and Regulation 2017/1129 specifies that in case of a public offer or admission to trading, no information document (that is subject to approval of a supervisory authority) is required, the administrative procedure should be discontinued. In all other cases, the document will need to be adjusted to new regulations, while promotion-related activities will be governed by Regulation 2017/1129.

Although the aim of the new regulations is to make it easier to raise capital, streamline administrative procedures and enhance investor protection, it might be difficult at the beginning to get used to the new legal situation, especially given the fact that Polish laws are not adjusted to the EU ones, and the supervisory authority needs to develop practices for application and interpretation of new regulations. It is necessary to follow amendments to the Public Offering Act and the supervisory authority’s practice, incl. UKNF’s position. All of them will have an impact on the extent to which objectives will be fulfilled.

In case of any questions about the issues presented herein, please feel free to get in touch with us.

Contact

Piotr Wojnar
Attorney-at-law | Managing Partner
piotr.wojnar@actlegal-bsww.com
+48 22 420 59 59

Piotr Smołuch
Attorney-at-law | Managing Partner
piotr.smoluch@actlegal-bsww.com
+48 22 420 59 59

Małgorzata Stefaniak
Legal counsel | Senior Associate
malgorzata.stefaniak@actlegal-bsww.com
+48 22 420 59 59

The Central Register of Beneficial Owners (hereinafter referred to as the “Register”) is supposed to be implemented in Poland on October 13, 2019. This is related to the Anti-Money Laundering and Counter-Terrorism Financing Act, which came into effect as of July 13, 2018 (the “AML Act”).

The establishment of the Register will entail additional obligations for partnerships and companies, as well as the possibility to impose a financial penalty for failure to meet those obligations.

Below you will find key assumptions related to the Register:

1. Partnerships and companies (except for professional partnerships [PL: spółki partnerskie] and public companies, as defined in the Act of July 29, 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies) will be obliged to become listed in the Register.

2. Relevant submissions can be made by individuals authorized to represent partnerships/companies.

3. Entities which entered the National Court Register until October 13, 2019 will have to apply for an entry in the Register until April 13, 2020. Entities which entered the National Court Register after October 13, 2019 will have to apply for an entry in the Register within 7 business days of becoming listed in the National Court Register.

4. Submissions need to include the following:
a) the applicant’s own details, i.e. business name, legal form, registered office, KRS (National Court Register) number, and NIP (tax identification number); and
b) details of the beneficial owner and member of a corporate body or shareholder authorized to represent the partnerships/companies listed in article 58 of the AML Act, i.e. first and last name, nationality, country of residence, PESEL or date of birth (if no PESEL number has been assigned), and information about the shares or interest held by the beneficial owner.

5. In order to simplify the definition of the “beneficial owner,” provided in the AML Act, and for the purposes of this legal alert, we can assume that the beneficial owners of partnerships/companies are individuals who directly or indirectly hold over 25% shares/voting rights (incl. as a pledgee or user, or on the basis of arrangements with other holders of voting rights). In case it is impossible to determine (or there are doubts as regards) the identity of beneficial owners (e.g. due to a dispersed shareholding structure), and there is no suspicion of money laundering or financing of terrorism with respect to a given entity, it is presumed that the beneficial owners are individuals who hold senior management positions.

6. Along with the registration application, it is necessary to file a statement of accuracy of the data submitted with the Register. Such statement is subject to criminal liability for fraudulent misrepresentation.

7. The person submitting information about beneficial owners and updates to such information bears liability for damages resulting from publication of inadequate data with the Register.

8. The Register will be publicly available. The data included in it will be covered by the presumption of truthfulness. Information about beneficial owners can be obtained free of charge.

9. A partnership’s/company’s failure to meet the obligation to apply for an entry in the Register carries a fine of up to PLN 1,000,000.00.

Objectives of the Register:
1. Ensuring greater transparency of commercial transactions in Poland and across EU.
2. Identifying potential criminals or those who evade taxation by hiding behind complex corporate structures.
3. Offering access to comprehensive information about potential business partners.
4. Boosting the society’s trust in the reliability of the financial system and financial transactions.

It seems, however, that the Register will not be established until the deadline specified in the AML Act. As of the alert date, the Ministry of Finance released an announcement that the expected start date of the public tender for the Register’s implementation is Q4 2019.

In case of any questions about the issues presented herein or other AML or counter-terrorism financing matters, please feel free to get in touch with us.

Contact
Rafał Smolik
Associate
rafal.smolik@actlegal-bsww.com
+48 22 420 59 59

On 9 May 2019, the upper house of the Polish parliament (the Senate) adopted, without revisions, the Act of 26 April 2019 on Amendments to the Agricultural System Act and Selected Other Acts (the “Amendment”). The Amendment was subsequently signed by the Polish President on 27 May 2019.

It will come into force on 26 June 2019.

We have prepared an overview of key changes brought – in our opinion – by the new legislation, which will relax the restrictions on agricultural land transactions.

1. The list of cases to which the provisions of the Agricultural System Act do not apply was expanded to include, among others, agricultural land situated within the administrative boundaries of cities/towns, with respect to which a resolution on location of a residential project (as defined in the Facilitation of Preparation and Implementation of Residential Projects and Auxiliary Projects Act of 05 July 2018), or a resolution on location of an auxiliary project (as defined in the aforesaid Act) has been passed.

2. In accordance with the Amendment, agricultural land may be acquired by persons/entities other than individual farmers if the area of such farmland is below 1 ha.

3. The period over which agricultural land has to be used by its acquirer for agricultural purposes has been reduced from 10 to 5 years.

4. The definitions of ‘farm’ and ‘relative’ have been rephrased. Pursuant to the Amendment, a ‘farm’ should be understood to mean a “farm’ defined in the Polish Civil Code, in which the area of agricultural land or the total area of agricultural land lots is no less than 1 ha. As far as a ‘relative’ is concerned, the definition will now include stepchildren and parents’ siblings.

5. The Amendment names new entities entitled to apply for an agricultural land acquisition approval to the Director General of the National Support Centre for Agriculture. These include, among others:

– public higher education institutions – if the property is necessary for educational, research or development purposes, and will be put to agricultural use;

– those acquiring agricultural land for public purposes, as defined in the Property Management Act.

The requirements applicable to entities named in the Act before the Amendment, i.e. sellers of agricultural land and individuals intending to set up a family farm, have also been modified.

6. The Amendment elaborates on the procedure of and conditions for agricultural land acquisition approval (expressed in an administrative decision issued by the Director General of the National Support Centre for Agriculture) by setting forth the requirements that an application for approval needs to satisfy, and listing documents to be attached.

7. There are also changes to the right of first refusal and the acquisition right held by the National Support Centre for Agriculture.

8. The Amendment provides for the establishment of a system designed for free publication of agricultural land sale advertisements and responses to them, while also setting the rules of publication and basic requirements which such advertisements and responses should satisfy.

The changes outlined above reflect the general trend to make the rules applicable to agricultural land transactions more lax for certain entities and in specific cases.

If you have any questions about the issues discussed above or other changes to the Act, please feel free to get in touch with us any time.

Contact person
Michał Sołtyszewski
Attorney-at-law / Partner
michal.soltyszewski@actlegal-bsww.com
+48 22 420 59 59

From 1 July 2019 the largest employers will have to enable their employees to enrol in employee capital plans.

Employee capital plans (referred to by their Polish acronym “PPK”) were introduced by the Employee Capital Plans Act of 4 October 2018 [Ustawa z dnia 4 października 2018 r. o pracowniczych planach kapitałowych](Dz.U./Journal of Laws of 2018, item 2215, referred to below as the “PPK Act”).

We have prepared a brief overview of key provisions of the PPK Act.

1. COMING INTO FORCE

The PPK Act came into force on 1 January 2019, however, employers (i.e. those hiring under employment contracts and contracts of mandate, as well as entities where supervisory board was appointed) do not have to apply its provisions right away.

The first to set up PPK, on 1 July 2019, will be employers who as of 31 December 2018 hire at least 250 individuals. Smaller businesses do not have to worry about PPK until later, with the next group required to introduce PPK on 1 January 2020 (employers with at least 50 employees as of 30 June 2019).

When determining the number of employees one needs to be wary of two different definitions of employee under the PPK Act and the Labour Code. In the case of the PPK Act, an employee is a broader term that encompasses individuals hired under agency contracts, contracts of mandate and service contracts, as well as supervisory board members who are compensated as such.

2. VOLUNTARY PARTICIPATION

Participation in PPK is voluntary, although, employees will be defaulted to the plan, with the option to opt out on the basis of a written statement. The decision to opt out is not permanent.

On the one hand, an employee who gave up saving can reenrol whenever they wish. On the other hand, if such employee sticks with their choice to resign, they will have to renew the opt out every 4 years. A different solution is provided by the PPK Act for those who are 55 years of age, but not yet turned 70. They can save through PPK, but their enrolment is not automatic – they need to apply. PPK, however, is not an option for those who turned 70 on their first day of work at the latest.

ATTENTION

Employers must not encourage employees to opt out of PPK. Such conduct exposes them to criminal liability (an employer may be fined up to 1.5% of its payroll fund in the preceding financial year).

3. PPK CONTRACTS

Apart from paying contributions, basic obligations of employers related to PPK include making two contracts which lay down the terms and conditions of saving and managing the funds. The first contract concerns the management of PPK and is made between an employer and a financial institution, the second contract concerns the operation of PPK and is made also between an employer and a financial institution, but for and on behalf of employees who decided to save for retirement through PPK.

Employers required to implement PPK on 1 July 2019 will have to execute the contract for the management of PPK no later than 26 September 2019, and the contract for the operation of PPK – 10 October 2019.

ATTENTION

An employer who failed to execute either of the above said contracts within the specified deadline faces criminal liability (the contract for the management of PPK – a fine up to 1.5% of the payroll fund of the employer in the preceding year, the contract for the operation of PPK – a fine between PLN 1,000 and PLN 1,000,000).

4. CONTRIBUTIONS TO PPK BY EMPLOYER AND PPK PARTICIPANTS

PPK contributions will be made by both employers and PPK participants (employees who sign up for the plan). The PPK Act provides for two types of PPK payments – a basic (minimum) contribution and an additional contribution, which is voluntary for both participants and employers. The basic contribution paid by the employer is 1.5% of the salary. The employer may choose in the contract for the management of PPK to pay additional contribution which, however, cannot be higher than 2.5% of the salary.

PPK participants make basic contributions equal to 2% of their salaries (lowered to 0.5% in special cases), with the option to make additional contributions up to 2% of their salaries.

In addition, participants will be subsidized by the Labor Fund. They will receive one-off welcome contributions and, if eligible under the PPK Act, annual contributions.

***

The above is only a brief overview of PPK. The PPK Act is extensive and covers an array of specific cases modifying the discussed general rules and providing more detail on individual issues.

If you have any questions, contact us:

Ewa Bieniak
Attorney-at-law/Of Counsel
+48 22 420 59 59
ewa.bieniak@actlegal-bsww.com