Contributed by SK Legal Stokłosa & Kot.
1. Market Overview
The Warsaw Stock Exchange (WSE) remains the biggest exchange in Central and Eastern Europe that organizes trade on one of the fastest-growing capital markets in Europe. However, due to the pandemic and post-pandemic implications as well as hostilities in the territory of Ukraine, the growth significantly slowed down. In 2021, the WSE celebrated the 30th anniversary of the Warsaw Stock Exchange
Investors are now looking more cautiously at the Polish capital market. It should be emphasized, however, that investor sentiment is volatile, and changes are currently occurring quickly and often today, so it is impossible to point to one general or universal trend. April 2022 turned out to be particularly difficult for the WSE. Despite the outflow of part of foreign capital from the WSE, however, the Polish stock exchange remains a stable, well-managed, and reliable market. A significant part of small investors is currently looking for investment alternatives on the WSE, which is related to the high level of inflation in Poland.
As of March 10, 2023, a total of 416 companies are listed on the WSE, of which 373 are domestic companies and 43 are foreign companies. Of this number, 318 companies are listed on the Main Market and 98 companies on the Parallel Market. According to data published by the WSE, the total capitalization of companies listed on the WSE as of May 10, 2023, (in PLN million) is PLN 1,280,212.58. It should be emphasized that throughout 2022, which turned out to be a very difficult year for the WSE, a total of eight companies debuted on the stock exchange. In turn, since the beginning of 2023, there have been four stock exchange debuts. In the same period, throughout 2022, 22 companies were delisted from the WSE. In 2023, one company has been delisted so far.
Importantly, 359 companies are currently listed on the alternative stock market operated by the WSE, i.e., NewConnect (Alternative Trading System – ATS; Alternative Trading Market – jATM), of which 4 companies are foreign companies. The capitalization of the ATS market in Poland amounts (in PLN million) to PLN 14,380.22. Throughout 2022, 16 companies debuted on NewConnect and 17 companies were delisted. In turn, in 2023, 1 debut has taken place on NewConnect so far, and 21 companies have been withdrawn from trading, with some companies switching from ATS to the WSE.
The most represented sector on NewConnect remains the video games sector. On the WSE, on the other hand, companies with State Treasury participation have a strong position. An important part of the stock market in Poland in 2022 was biotechnology companies and companies related to the arms sector. This trend continues to a large extent in 2023.
According to WSE data, corporate bonds issued by 84 issuers are listed on the Catalyst market (as of March 10, 2023), operated by the WSE. In 2022 total issuance value was PLN 1,150,062 million, according to the WSE data. In March 2023, the growing belief in further tightening of monetary policy in the US and Europe causes an increase in the yields of bonds of eurozone countries, which are approaching multi-year highs again.
It is unclear what impact the Silicon Valley Bank (et al.) case will have on the Polish capital market, especially the stock market in 2023. It shall be noted, however, that the Polish capital market remains susceptible to investors’ emotions, related to, among others, war events beyond the eastern border, which contributed to a significant outflow of foreign investors from Poland. This market is thus subject to constant fluctuations, notwithstanding its mature legislative and regulatory side.
2. Overview of the local stock exchange and listing segments (markets)
The WSE, remaining the only Polish stock exchange, organizes the trade of financial instruments on both a regulated market (i.e., the WSE) and a non-regulated market (i.e., NewConnect), as mentioned above. In addition to that, there is also a part of a debt financial instruments market that is organized by BondSpot S.A. (BondSpot), a company that is a member of the WSE’s Capital Group.
2.1. Regulated market
In the field of ECM, the said regulated market is operated by the WSE and has two segments, i.e.: the so-called Main Market (rynek podstawowy) and the Parallel Market (rynek rownolegly). The Main Market is also regarded as the “official exchange (listing) market” in Poland within the meaning of Article 16(2) of the Polish Financial Instruments Trading Act of July 29, 2005. This is the market designed and organized for companies that meet certain requirements as issuers, in particular about their (high) capitalization, dispersion of stock ownership (which refers to the minimum number of free-float shares), and disclosure of certain financial information. In other words, this is a regulated market, which fulfills requirements additional to the minimum requirements laid down for the regulated market for issuers of securities and securities that are the subject of trading on this market. On the other hand, the listing requirements applicable on the Parallel Market are more “liberal” if compared to the Main Market, meaning that the Parallel Market is designed and organized for the trading of financial instruments of issuers with lower capitalization and lesser free-float requirements. Both the Main Market and the Parallel Market are commonly known as “the Main Market of the Stock Exchange” (Rynek Glowny GPW/Glowny Rynek GPW).
The WSE (regulated) market has been operating since the launch of the Exchange on April 16, 1991. It is also a regulated market subject to the supervision of the Polish Financial Supervision Authority (both the Main Market and the Parallel Market). The subject of trading on the said market are shares, bonds, pre-emptive rights, rights to shares (PDAs), investment certificates, structured products, ETFs, warrant options, and derivatives.
According to WSE data, in 2022 the value of IPOs conducted on the WSE amounted to PLN 39.66 million. The value of SPOs in the same period amounted to 8.7 billion.
2.2. Non-regulated market
Simultaneously, next to the regulated WSE market, since 2007, the ATS market is being developed. It remains the WSE that established, develops, and organizes the trade of financial instruments on the so-called NewConnect market. This market is operating as a multilateral trading facility – MTF within the meaning of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (MIFID II). In July 2019 NewConnect received an SME Growth Market status within the meaning of EU laws. This means, inter alia, that listed companies can use regulatory facilitation about certain disclosure requirements under European Union regulations (EU prospectus regulation No. 2017/1129, for instance). NewConnect has been designed specifically for small companies whose listing opens genuine opportunities of raising capital by issuing shares while the acceptance of disclosure standards applicable to public companies and resulting experience open the door to listing on the WSE’s Main Market. A significant part of the companies listed on NewConnect is companies from the IT sector and video games sector. It is quite common practice, that NewConnect companies usually contemplate entering the Main Market or the Parallel Market upon achieving the required capitalization and meeting other requirements, and some of them in fact move to the WSE after some time from their debut.
NewConnect is supervised by its organizer – the WSE. The conditions of access for market participants, matching offers to buy and sell financial instruments, and providing market information are the same as on the Main Market of the Exchange described above.
According to WSE data, in 2022 the value of IPOs conducted on the NewConnect amounted to PLN 87.12 million. The value of SPOs in the same period amounted to 245.29 million.
In the field of DCM, the Polish capital market comprises a debt financial instruments market, operating under the name of “Catalyst” (Catalyst). Catalyst is the first organized market of debt financial instruments in Poland, which was established in 2009. In the Catalyst structure, there are in fact two retail markets operated by the WSE. Financial instruments such as corporate bonds, municipal bonds, and mortgage bonds are listed on these markets. However, within Catalyst, in fact, four segments have been developed and operate: two of them being “regulated markets” within the meaning of MIFID II, and two of them are operated as MTFs. The WSE operates two segments designed for retail investors (i.e., one of them is in the form of the regulated market and one as an MTF) and BondSpot operates the remaining two segments, which are designed for wholesale investors only.
3. Key Listing Requirements
3.1.1. WSE Regulated Market
There are certain legal provisions, both in EU and Polish laws, according to which specific requirements must be met for a company’s shares to be admitted for listing on the WSE. Some of them vary, depending on whether the shares are to be listed on the Main Market or on the Parallel Market. Generally speaking, the requirements for listing on the Parallel Market are lighter in comparison to requirements on the Main Market. The said listing requirements are related to the company’s legal (corporate, organizational) form, shareholding (ownership) structure, and capitalization. In some instances, the adoption of certain resolutions by the company’s general meeting may be required. As a rule, the preparation of a prospectus or other information document is required. This document shall be approved by a competent authority, i.e., Polish Financial Supervision Authority (or other foreign competent authority when applicable or required), and published by a company in a prescribed manner. Each new WSE listing requires also formal consent from the WSE’s management board, expressed in a form of a resolution. This resolution is adopted on the admission of the shares to trading on the WSE and the introduction of shares to listing on the WSE.
The key requirements for listings on the WSE, both on the Main Market and the Parallel Market include inter alia:
(i) legal (corporate, organizational) form of the company: it is required that the company to be listed must operate in the form of a joint-stock company (including European Company – SE) or in the equivalent form applicable for foreign issuers; this means that if the company operates in any other form, it must first undergo a transformation (conversion) process into a joint-stock company (including European Company – SE),
(ii) minimum capitalization of the company: it is required that the capitalization of the company (understood as the product of the number of all shares of the company/issuer and the forecasted market price) is at least PLN 60 million or the PLN equivalent of EUR 15 million (except for issuers whose shares of at least one issue have been traded for a period of at least six months on another regulated market or on NewConnect, whose capitalization may be at least PLN 48 million or the PLN equivalent of at least EUR 12 million),
(iii) non-limited transferability of the shares of the company: it is required that the transferability of the shares may not be restricted anyhow. This requirement applies both to existing shares and to new shares to be listed,
(iv) minimum free-float in the company: it is required that the company’s shareholders, each of whom is entitled to exercise less than 5% of votes at the general meeting of the company, hold at least: 15% of the shares covered by the application for admission to stock exchange trading, and 100,000 shares covered by the application for admission to stock exchange trading with a value of at least PLN 4 million or the PLN equivalent of at least EUR 1 million, calculated at the last sale or issue price,
(v) potential liquidity of shares: it is required that the company’s shares are held by such several shareholders creates the basis for the formation of liquid stock exchange trading,
(vi) general good financial standing of the company: it is required that the company is not in a process of bankruptcy or liquidation, and bankruptcy or liquidation proceedings are not foreseeable,
(vii) an appropriate information document (e.g., prospectus) has been drawn up, and approved by the competent supervisory authority (i.e., the Polish Financial Supervision Authority) unless the preparation or approval of the information document is not required.
According to the WSE regulations, there are also certain requirements that apply to companies considering listings on the Main Market. Those companies, in addition to the requirements set forth above, must follow the following rules:
(i) the application for admission to trading on the Main Market must apply to all the shares of the same type issued by the company,
(ii) the product of the number and forecast market price of the shares covered by the application or, where that price cannot be determined, the company’s equity, amounting to at least the PLN equivalent of EUR 1 million,
(iii) minimum free-float: there is a sufficient dispersion of shares covered by the application, i.e. shareholders each of whom hold no more than 5% of the total number of votes at the company’s general meeting, there are at least 25% of the shares covered by the application for admission or shareholders, each of which holds no more than 5% of the total number of votes at the company’s general meeting, there are at least 500,000 shares of the company with a total value in PLN of at least EUR 17 million. Shares may be admitted despite failure to meet this condition if the WSE Management Board considers that the number of shares covered by the application and the manner in which they were subscribed or sold allows it to be considered that trading in these shares on the main market will be sufficient to provide liquidity or that at least 25% of the shares of the same issuer covered by the application and shares already traded on this market are held by shareholders, each holding no more than 5% of the total number of votes at the company’s general meeting or the dispersion of the shares covered by the application has been obtained on another official exchange market in one or more EU Member States,
(iv) the company has published the financial statements together with the opinion of the entity entitled to audit them for at least three consecutive financial years preceding the application for admission or there is a legitimate interest of the company or investors, and the company has made public information enabling investors to assess its financial and economic situation and the risks associated with the acquisition of the shares covered by the application.
When considering an application for admission of securities to exchange trading, the WSE Management Board takes into account: the financial position of the company and its forecast, in particular profitability, liquidity and debt sustainability, as well as other factors affecting the company’s financial results prospects for the company’s development, in particular the assessment of the feasibility of implementing investment plans, taking into account the sources of their financing, experience, and qualifications of members of the company’s management and supervisory bodies conditions under which securities were issued and their compliance with the principles of public trading on the stock exchange, specified in joint resolutions of the WSE Supervisory Board and the WSE Management Board security of exchange trading and the interest of its participants.
It must be emphasized, that the requirements for listing on NewConnect are significantly more liberal than those designed for the WSE-regulated market listings. This is justified by the need to ensure access to capital for smaller companies that would not be able to raise it on a regulated market while ensuring a sufficient level of investor protection. The main differences between listing on NewConnect listing and the WSE-regulated market refer to the minimum required capitalization of the company of PLN 500,000 and the minimum free-float requirement. According to NewConnect internal regulations, at least 15% of the shares referred to in the application for admission to listing on NewConnect must be held by no fewer than ten shareholders, and each of such shareholders may hold no more than 5% of the total number of the votes exercisable at the company’s general meeting. The company applying for admission to listing on NewConnect is required to publish the audited financial statements for the year prior to the date of the application for admission. It shall be noted, that NewConnect is a place for new issuers, i.e., companies that are going public through the IPOs and for companies that want to become public without issuing new shares. After a NewConnect debut, the company shall be also supported by the so-called Authorized Advisers for at least two years to ensure that, inter alia, the company performs the listed company’s duties in a proper manner.
The introduction of bonds to listing on the Catalyst, which is a debt financial instruments market in Poland, requires the satisfaction of similar requirements as with respect to shares. This means the following: (i) only certain entities may issue bonds (including limited liability companies, joint-stock companies, limited joint-stock partnerships, and municipalities); (ii) all new bonds must be in dematerialized form; (iii) the publication of an applicable information document is required (i.e., prospectus or an information memorandum), which, subject to numerous exceptions, shall be approved by the Polish Financial Supervision Authority; (iv) the transferability of the bonds may not be restricted or excluded; and (v) no bankruptcy or liquidation proceedings may be pending with respect to the bond issuer. It is also required that for purposes of the introduction of debt financial instruments for trading in the alternative system total nominal value of the debt financial instruments covered by applications at the date of its submission, taking into account the maximum number of applications specified in the application, subject to the same ISIN code, is at least PLN 5 million. This requirement shall not apply in the case of introducing debt instruments to the alternative trading system financial funds to be identified by the same ISIN code as the instruments already listed. When the issuer applies for the first time for the introduction of debt financial instruments for trading in the alternative system – the issuer presents the financial statements in the information document, or consolidated financial statements for the last financial year, prepared and examined in accordance with the provisions of Polish ATM Regulations. However, some exceptions from that requirement are established.
4. Prospectus Disclosure
4.1. Regulatory regime (EU Prospectus Regulation or similar) – equity
The general legal rules defining the regime and basic scope of the disclosure, both for the equity capital and debt securities offerings in Poland, are regulated on the European Union level. The key legal act in this field is the 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” (Prospectus Regulation). The Prospectus Regulation has been supplemented by lower-rank legislations over the last years, mainly with delegated acts adopted by European Commission (inter alia, Delegated Regulations No. 2019/980 and No. 2019/979). All those legal acts are applicable directly throughout the European Union and as such, they not only define the specific requirements to be complied with when preparing a prospectus (as well as other offering documents that may be required in concreto), or the requirements related to their approval by the competent local authorities but also making them available to the public. Those rules are set to converge approaches within the EU Member States in the field of prospectus regulation and approval, as well as to ensure investor protection and market efficiency while enhancing the internal market for capital in the EU. All the types of prospectuses that can be prepared and approved in Poland are defined expressly in the Prospectus Regulation. Polish (local) legal acts define, however, other types of documents that shall be drafted up for purposes of public offerings. Those documents are less elaborate than a standard prospectus.
Notwithstanding the said EU legal acts, certain additional requirements within the scope not regulated by the Prospectus Regulation and the delegated regulations under the Prospectus Regulation are also included in national regulations. In Poland it is mainly the Polish Act on Public Offerings, Conditions Governing the Admission of Financial Instruments to Organized Trading and Public Companies of 29 July 2005 as amended (Act on Public Offering). It must be noted, that in addition to those regulations, the guidelines, recommendations, and standards established by the European Securities and Markets Authority (ESMA) relating to the prospectus, being temporality updated as well as guidelines issued by the Polish Financial Supervision Authority or even certain market practice do affect the prospectus preparation process and prospectus disclosure.
It must be emphasized that the Prospectus Regulation shall be applicable to the offers of securities to the public as well as to admissions of securities to trading on the regulated market.
According to Article 2(d) of the Prospectus Regulation, an “offer of securities to the public” means 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 definition also applies to the placing of securities through financial intermediaries. In other words, offers addressed to one person/entity are not considered public offerings within the meaning of the Prospectus Regulation and therefore this Regulation shall not apply to them.
The general obligation of preparation (drawing up), approval, and dissemination of a prospectus approved by a competent authority for purposes of public offerings or admissions of securities to trading on the regulated market has certain exemptions that are defined in Article 1 of the Prospectus Regulation. For instance, the Prospectus Regulation shall not apply to certain types of securities, e.g., units issued by collective investment undertakings other than the closed-end type or non-equity securities issued by a Member State or by one of a Member State’s regional or local authorities, by public international bodies of which one or more Member States are members, by the European Central Bank or by the central banks of the Member States, or shares in the capital of central banks of the Member States. Moreover, the Prospectus Regulation shall not apply to an offer of securities to the public with a total consideration in the EU of less than EUR 1 million, which shall be calculated over a period of twelve months.
The prospectus obligation is not applicable to certain offers, inter alia to offers addressed solely to qualified investors; offers addressed to fewer than 150 natural or legal persons per Member State other than qualified investors; offers of securities whose denomination per unit amounts to at least EUR 100,000; offers of securities addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor, for each separate offer; shares issued in substitution for shares of the same class already issued, if the issuing of such new shares does not involve any increase in the issued capital; securities offered in connection with a takeover by means of an exchange offer, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2) of the Prospectus regulation, containing information describing the transaction and its impact on the issuer; securities offered, allotted or to be allotted in connection with a merger or division, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2) of the Prospectus Regulation, containing information describing the transaction and its impact on the issuer; securities offered, allotted or to be allotted to existing or former directors or employees by their employer or by an affiliated undertaking provided that a document is made available containing information on the number and nature of the securities and the reasons for and details of the offer or allotment (e.g., for the purposes of the so-named ESOP programs).
Moreover, the prospectus obligation is not applicable to certain admissions of securities to trading on the regulated market, inter alia to securities fungible with securities already admitted to trading on the same regulated market, provided that they represent, over a period of twelve months, less than 20% of the number of securities already admitted to trading on the same regulated market; shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities, where the resulting shares are of the same class as the shares already admitted to trading on the same regulated market, provided that the resulting shares represent, over a period of twelve months, less than 20% of the number of shares of the same class already admitted to trading on the same regulated market (subject to the second subparagraph of Article 1(5) of the Prospectus Regulation); shares issued in substitution for shares of the same class already admitted to trading on the same regulated market, where the issuing of such shares does not involve any increase in the issued capital; securities offered in connection with a takeover by means of an exchange offer, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2) of the Prospectus Regulation, containing information describing the transaction and its impact on the issuer; securities offered, allotted or to be allotted in connection with a merger or a division, provided that a document is made available to the public in accordance with the arrangements set out in Article 21(2) of the Prospectus Regulation, containing information describing the transaction and its impact on the issuer; securities offered, allotted or to be allotted to existing or former directors or employees by their employer or an affiliated undertaking, provided that the said securities are of the same class as the securities already admitted to trading on the same regulated market and that a document is made available containing information on the number and nature of the securities and the reasons for and detail of the offer or allotment (e.g., for the purposes of the so-named ESOP programs).
It shall be noted, however, that as a rule, the above-mentioned exemptions set out in Article 1(4) and (5) may be combined together (i.e., may be applied jointly). However, certain exemptions shall not be combined together if such combination could lead to the immediate or deferred admission to trading on a regulated market over a period of twelve months of more than 20% of the number of shares of the same class already admitted to trading on the same regulated market, without a prospectus being published.
It shall be emphasized that where an offer of securities to the public or an admission of securities to trading on a regulated market is outside the scope of this Regulation in accordance with Article 1(3) of the Prospectus Regulation, or exempted from the obligation to publish a prospectus in accordance with Article 1(4), 1(5) or 3(2), an issuer, an offeror or a person asking for admission to trading on a regulated market shall be entitled to voluntarily draw up a prospectus in accordance with the Prospectus Regulation. However, such voluntarily drawn up prospectus shall be approved by the competent authority of the home Member State, as determined in the Prospectus Regulations, and shall be subject to all provisions of this Regulation, under the supervision of that competent authority.
As a rule, a prospectus may be drawn up in the form of a single document or a set of documents comprising a registration document, an offer document, and a summary. The most common practice in Poland, depending on the case, however, is to prepare a prospectus in the form of a single document. All the prospectuses approved by the Polish competent authority may be found on the Polish Financial Supervision Authority’s website.
The basic scope of the disclosure for the capital securities offerings/ admissions in Poland is regulated on the European Union level, mainly in the Prospectus Regulation and delegated legal acts hereto, including inter alia Delegated Regulations No. 2019/980. The crucial parts of the prospectus for debt securities are: a detailed description of securities, a description of risk factors specific to the issuer, and the securities and terms of the offering.
4.2. Regulatory regimes (EU Prospectus Regulation or similar) – debt
The general legal rules defining regime and basic scope of the disclosure, are common for the capital and debt securities offerings in Poland, and as such are regulated on the European Union level, mainly in the Prospectus Regulation and delegated legal acts hereto, including inter alia Delegated Regulations No. 2019/980. The crucial parts of the prospectus for debt securities are: a detailed description of securities, a description of risk factors specific to the issuer and the securities, terms of the offering, and the guarantees.
4.3 Local market practice considerations
The Prospectus Regulation expressly allows EU Member States to be exempt from the prospectus obligation offers of the value between EUR 1 million and 8 million. In Poland this exemption relates to offers under EUR 2.5 million).
According to Article 37a of the Act on Public Offering, an offer of securities to the public as a result of which the assumed gross proceeds of the issuer or offeror within the territory of the European Union, calculated at their issue or sale price at the date of its determination, is not less than EUR 100,000 and less than EUR 1 million, and together with the proceeds which the issuer or offeror intended to obtain from offers of such securities to the public, made in the previous twelve months, will not be less than EUR 100,000 and will be less than EUR 1 million, requires that a document containing information about this offer be made available to the public. The said document shall be drawn up in Polish and shall contain at least: 1) basic information about the issuer of the securities, including financial information, information about the securities offered and the terms and conditions of their offer; 2) basic information on the planned use of funds obtained from the issue of securities; 3) basic information on relevant risk factors; 4) a statement of responsibility/ liability by the issuer for the information contained in this document. This issuer’s statement shall contain a statement that, to the best of its knowledge and with due diligence, the information contained in the document is true, reliable, and consistent with the facts. The issuer or the offeror shall notify the Polish Financial Supervision Authority of its intention to conduct a public offer no later than seven working days before the date of availability of the document mentioned above.
According to Article 37b of the Act on Public Offering, the prospectus shall not be required for purposes of an offer of securities to the public, as a result of which the assumed gross proceeds of the issuer or offeror in the territory of the European Union, calculated at their issue price or the sale price on the date of its determination, are not less than EUR 1 million and less than EUR 2.5 million, and together with the proceeds which the issuer or offeror intended to receive from such offers to the public of such securities made during the previous twelve months, shall not be less than EUR 1 million and shall be less than EUR 2.5 million, provided that an information memorandum is made available. The said information memorandum shall be drawn up in the form of a single document in Polish. The provisions of Article 19 of the Prospectus Regulation shall apply mutatis mutandis to that information memorandum. The issuer or the offeror is obliged to set the validity date of the information memorandum, no longer than twelve months from the date of its disclosure. The issuer or the offeror notifies the Polish Financial Supervision Authority of its intention to conduct a public offer no later than seven working days before the date of making the information memorandum available. The issuer or the offeror shall make the information memorandum available at the latest on the date of commencement of subscriptions for the securities which are the subject of the offer to the public. The information memorandum shall be made available by the issuer or the offeror in a manner that ensures adequate protection of investors’ interests and, in the case of an offer to the public addressed to an unspecified addressee, shall be made available by publication on the website of the issuer, the offeror or the investment firm intermediating the offer of those securities to the public.
According to Article 37c of the Act on Public Offering, an offer of securities to the public through a crowdfunding service provider shall require the availability of a key investment information sheet. The crowdfunding service provider shall provide the key investment information sheet to the Polish Financial Supervision Authority at least seven working days before the date on which it is made public. An issuer may make the key investment information sheet available on its website no earlier than after the crowdfunding service provider has made it publicly available, stating that participation in the public offer is only possible through a crowdfunding service provider designated by the issuer. It shall be mentioned, that currently in Poland operate several crowdfunding service providers. Some of them are quite new, and some of them are quite experienced. It is expected that new crowdfunding service providers will be established soon since crowdfunding has been becoming more and more popular in Poland over the last few years.
Marketing of offers is generally regulated in Article 22 of the Prospectus Regulation and in a Delegated Regulation No. 2019/979. According to Article 22(1), any advertisement relating either to an offer of securities to the public or to an admission to trading on a regulated market shall comply with the principles contained in Article 22(2) to (5). However, Sections 2. to 4. and point (b) of Section 5. shall apply only to cases where the issuer, the offeror, or the person asking for admission to trading on a regulated market is subject to the obligation to draw up a prospectus. Article 22(2) and (3) of the Prospectus Regulation expressly state that advertisements shall state that a prospectus has been or will be published and indicate where investors are or will be able to obtain it. Advertisements shall be clearly recognizable as such. The information contained in an advertisement shall not be inaccurate or misleading and shall be consistent with the information contained in the prospectus, where already published, or with the information required to be in the prospectus, where the prospectus is yet to be published. Polish Act on Public Offering additionally states in Article 53, that the advertisement of an offer to the public referred to in Article 1(4)(b) of the Prospectus Regulation may only be distributed to fewer than 150 persons on the territory of one Member State and may not be made available to an unspecified addressee. Moreover, where the provisions of the Prospectus Regulation do not require the disclosure of a prospectus, the advertising content should be consistent with the information contained in the information memorandum or other document required by the provisions of the Polish Act on Public Offering or the Prospectus Regulation, made available to the public, or with the information that should be included in such a memorandum or document in accordance with the provisions of the Act on Public Offering, the Prospectus Regulation and delegated acts and implementing measures issued on the basis thereof where the information memorandum or document has not yet been made available to the public, and must not mislead investors as to the issuer’s situation and the assessment of the securities. Where a prospectus is required to be available, advertising shall not start before the application for approval of the prospectus (or its respective part, as stated in Article 6(3) and Article 7 of the Prospectus Regulation) has been submitted to the Polish Financial Supervision Authority.
4.4. Language of the prospectus for local and international offerings
According to Article 27(2) of the Act on Public Offering, a prospectus subject to the approval of the Polish Financial Supervision Authority shall be drawn up in Polish. However, if the securities offered to the public or admission to trading on a regulated market is to take place only in a Member State other than the Republic of Poland – in Polish or English, at the choice of the issuer or offeror.
Moreover, according to Article 35a of the Act on Public Offering, in the case of a public offer or admission to trading on a regulated market in the territory of the Republic of Poland as a host Member State within the meaning of Article 2(n) of the Prospectus Regulation, a prospectus drawn up in Polish or English or translated into one of these languages, at the choice of the issuer or offeror, shall be made available to the public. However, if the prospectus is made available to the public in English, at the same time, the summary of the prospectus shall be translated into Polish.
5. Prospectus Approval Process
5.1. Competent authority/regulator
As a rule, a prospectus or other offering/information document of a Polish issuer subject to approval based on EU or national regulations must be submitted to the Polish Financial Supervision Authority through the intermediation of an investment firm (e.g., a brokerage house chosen by an issuer). This is the only authority in Poland competent in that respect, being a “competent authority” within the meaning of the Prospectus Regulation.
5.2. Timeline, review, and approval process
The process of drawing up a prospectus and the basic rules related to its publication and approval is regulated by the Prospectus Regulation. Other matters related to prospectus and IPO/SPO are regulated in Polish acts: the Polish Financial Instruments Trading Act of July 29, 2005, and the Polish Act on Public Offering.
A prospectus may be approved at the issuer’s request filed together with the prospectus and other required documents.
In each case, a prospectus (or another required document, depending on the case) submitted to the Polish Financial Supervision Authority must be signed and complete, i.e., must include all of the relevant information, schedules, financial statements, auditor’s report as well as representations required under applicable laws. In each case, it is an issuer or the offeror that is liable for the full content of the prospectus. The Polish Financial Supervision Authority is not involved in the preparations of the said documents, but to avoid any doubts it is possible to discuss with the Authority the structure of the prospect offering, its timeline, or some information to be revealed in the required document. It is worth mentioning, that the Polish Financial Supervision Authority is known for exhibiting significant scrutiny in terms of the details of the prospectus disclosure. Experience shows that there are certain matters particularly examined by the Polish Authority, which may result in detailed questions addressed to the issuer/offeror or demand for changes to the content of the prospectus.
The whole prospectus approval process takes a few months (usually approximately two to three months, depending on the type of offering, i.e., IPO or SPO or the industry/sector of the issuer. However, in some specific instances, it may take much longer.
As mentioned above, prior to the approval of the prospectus, during the prospectus administrative procedure, the Polish Financial Supervision Authority may provide comments or demand modifications to the prospectus or additional disclosure (usually there are a few rounds of comments from the Authority, i.e., three to five). Finally, the Polish Financial Supervision Authority issues an administrative decision on the approval of the prospectus, or alternatively, refuses to approve it. As a rule, and according to the Prospectus Regulation, each prospectus shall be published, and thus the offer of securities in Poland can be commenced, only after obtaining the approval of the prospectus by the Polish Financial Supervision Authority. Alternatively, notification to the Polish Authority by the competent foreign regulatory authority approving the prospectus in a different jurisdiction (under the EU passporting procedure) is required. According to the Prospectus Regulation, each prospectus shall be made available to the public in different ways, but the most common practice in Poland is its publication on the issuer’s/offeror’s website.
It shall be emphasized that the Prospectus Regulation and delegated acts connected therewith as well as the ESMA’s recommendations and guidelines intended to unify the disclosure regimes in the EU, with respect to offering documents being subject to the approval of the Polish Financial Supervision Authority, there are still some differences or additional requirements resulting from the market practice established by the Polish Authority. They are not significant, but it is always worth examining the current recommendations and opinions from the Polish Authority, which are regularly published on their website (knf.gov.pl).
The regime of civil liability for the information contained in a prospectus and the supplement thereto is regulated in Article 98 of the Polish Act on Public Offering. According to these provisions, as a rule, the entity responsible for the accuracy of the information contained in the prospectus, information memorandum, and other documents prepared and made available in connection with a public offering of securities, admission of securities, or financial instruments other than securities to trading on a regulated market or applying for such admission, and for the fact that these documents do not omit anything that could affect their meaning, in particular for the fact that this information is true, reliable and complete. That entity is obliged to repair the damage caused by making information inconsistent with the factual state available to the public, or information that could affect the meaning of the documents made available, including untrue, unreliable, or incomplete information unless neither that entity nor the persons for whom that entity is responsible are at fault. Moreover, the information contained in the summary of the prospectus as well as in the specific summary of the EU Growth prospectus, including their translations, are not the basis for civil liability, unless, read together with the other parts of the prospectus, they are misleading, untrue, imprecise, inconsistent with the relevant parts of the prospectus or do not provide key information to help investors in making an investment decision. The prospectus summary shall contain a clear warning in this regard.
The above-mentioned liability rests on, inter alia:
(i) the issuer – and relates to all information in a prospectus (or other applicable documents, including supplements),
(ii) the offeror,
(iii) another entity or natural person preparing or participating in the preparation of information – and relates to the information that entity or person has prepared or in the preparation of which participated (for instance: the legal advisor to the issuer within the prospectus preparation process is responsible for the parts relating to a description of the legal environment/matters).
The liability of the said entities shall be joint and several and may not be limited or excluded. This does not exclude, however, the possibility of concluding an agreement setting out the mutual obligations of these entities in respect of this liability.
In any case, the scope of civil liability depends on: (i) the fault of the abovementioned entities; and (ii) the investor proving loss and the link between such loss and the omission or inaccuracy of information. This is why the regime of prospectus liability in Poland remains strict for both parties, i.e., the investor and the liable entity or person.
Each prospectus must indicate the responsible entities together with their declarations that, to the best of their knowledge, the information contained in the prospectus is consistent with the state of facts and the prospectus does not omit anything that could affect its meaning and, in particular, that the information included therein is true, accurate and complete.
For entities obliged to prepare a prospectus for purposes of public offerings or admission to the public market, the Polish Financial Supervision Authority prepared a useful tool: the “prospectus guide” which is temporally updated and available on its website (knf.gov.pl). In this publication potential issuers and securities offerors may find important guidance on how to properly prepare a prospectus, which will then be reviewed by the Polish Financial Supervisory Authority.
6. Listing Process
6.1. Timeline, process with the stock exchange
As a rule, the listing of securities on the regulated market in Poland requires their admission to trading by the relevant market operator. All the securities shall be dematerialized. In particular, the dematerialization of any shares (both public and private companies) is mandatory in Poland.
Standard documents that shall be submitted directly following the final allocation of the shares to investors in Poland are the applications for admission to trading and introduction to listing on the WSE. Those applications are to be submitted to the WSE, i.e., the Management Board of the WSE. It is mandatory to attach to the said applications with certain documents, inter alia: a prospectus or other information/offering document and a resolution/statement of the National Depositary of Securities (Krajowy Depozyt Papierow Wartosciowych) on the registration of the shares with the depository operated by the National Depositary of Securities as well as the opinion of the so-called WSE participant (e.g., an investment firm being a WSE member).
In 2021, the WSE made changes to stock exchange regulations as part of the IPO process optimization project, which aims to shorten the time from the allocation of shares to the date of debut on the regulated market. Thanks to the introduced changes, issuers debuting on the WSE Main Market (both the Main Market and Parallel Market) submit one combined application to the WSE, instead of the previous two separate applications for admission and introduction. This change significantly simplified the formalities related to the admission of shares and PDAs to stock exchange trading. The required scope of an investment firm’s opinion on the debuting company and its securities has also changed, which is a mandatory element of the documentation submitted to the WSE by each company intending to debut on the WSE Main Market. Issuers’ applications may be submitted in paper form, with the handwritten signatures of authorized persons. As an equivalent form of submitting an application, an application sent by e-mail, in PDF format, with qualified electronic signatures or trusted signatures is also admissible.
It shall be emphasized that all the shares of the WSE-listed company shall be registered in the National Depositary of Securities. It is also worth mentioning that the conditional trading of shares on the WSE, i.e., prior to the first listing day, is unacceptable. However, before newly issued shares are listed (i.e., created and admitted to WSE listing/trading), it is possible and very common to list on the WSE rights to shares (PDA), that are securities representing rights to newly issued shares, before their registration by the respective registry court competent for a particular issuer. It usually takes a few weeks to obtain a resolution from the WSE Management Board on admission to trading and introduction to listing on the WSE for the first time, starting from the date of submission of the application by the issuer.
Following the satisfaction of all the listing requirements described in Section 3., the company being an issuer may apply for the admission and introduction to trading of securities on the chosen marker or markets. With respect to shares to be admitted to trading on the regulated market operated by the WSE (both the Main and Parallel Market), following the formal application of the issuer, the WSE issues its decision by way of the adoption of one resolution or two resolutions, depending on a case. The first resolution is on the admission, and then on the introduction of securities to trading which sets the first listing date within approximately seven days of the submission of the application by the issuer (within approximately 10 days after the pricing of the offering). If the securities of the same type issued by the issuer are already listed on this market, the single resolution is issued, both on admission and introduction, setting the first listing date. In particular, the WSE resolution on the introduction of shares to trading is conditional, i.e., is adopted subject to the fact that the National Depositary of Securities on the date of the first listing of shares will register these shares and mark them with a dedicated ISIN code, uniform for all other shares of that issuer.
It shall be emphasized that investors acquiring shares are obliged to pay for the shares prior to the final share allocation. Subsequently, all the shares allocated to investors are registered on their securities accounts ca. one week upon payment, and prior to the first listing day on the WSE. This is the reason why in some instances it is worth considering listing also PDAs, before the shares may be listed. The detailed timing for admission and introduction of shares to trading is usually pre-agreed by the issuer with the WSE. Especially, in the application for admission and trading, the issuer shall provide the expected date of the first listing (proposed share introduction date/PDA (company debut)).
On the Polish market, it is the Catalyst market that is used to trade bonds. Individual series of bonds (specific debt issues of a given entity) are listed on it. Each series of corporate bonds listed on Catalyst has a document describing parameters such as interest rate, frequency of interest payments, and period to maturity. Similarly, as in the case of the shares stock market, the listing of bonds requires the submission of an appropriate application and the adoption of a resolution by the WSE Management Board or the Management Board of BondSpot S.A. on their admission and introduction to trading, depending on which market is chosen by issuer (regulated or alternative market). All the listed bonds need to be in a dematerialized form and shall be registered in the National Depositary of Securities. As a rule, the resolution regarding the admission of bonds to trading on the regulated market is taken by the management board of the company operating the regulated market (i.e., the WSE or BondSpot S.A.) within fourteen 4 days from the date of submission of the application. Convertible bonds, pre-emptive bonds (or subscription warrants) may be admitted to trading on an official listing market, provided that the shares issued for the exercise of the rights conferred by those securities are at the same time the subject of an application for admission to trading on that market or are already listed on the same or another official listing market or on a regulated market in another EU Member State.
7. Corporate Governance
7.1. Corporate governance code/rules (independent director, board and supervisory composition, committees)
WSE-listed companies, both listed on the Main Market and on the Parallel Market, shall comply with the corporate governance code designed for listed companies. The WSE Supervisory Board in its Resolution No. 13/1834/2021 of March 29, 2021, approved the new principles of corporate governance for companies listed on the WSE Main Market, the co-called Best Practice for WSE Listed Companies 2021 (Best Practice 2021/Best Practice). It shall be emphasized that it is a new edition of the code of corporate governance for companies listed on the GPW Main Market, originally approved in 2002. The Best Practice 2021 came into force on July 1, 2021. It must be noted that listed companies’ compliance with the principles of corporate governance stipulated in the Best Practice is optional, according to the “comply or explain” general rule. Notwithstanding its optional or voluntary legal nature, listed companies are required to disclose compliance with the Best Practice in accordance with the WSE Rules. WSE-listed companies are therefore required to publish their disclosures of compliance with the Best Practice 2021 as a part of their annual financial statements to be published in a form of periodic reports.
NewConnect issuers shall comply with a similar code. It is the Best Practice for NewConnect Market of 2010 adopted by the WSE Management Board.
According to the Best Practice 2021, WSE listed company’s members of the management board act in the interest of the company and are responsible for its activities. The management board shall be responsible for, in particular, managing the company, involvement in setting its strategic goals and their implementation, and ensuring the company’s efficiency and security. Members of the supervisory board within the scope of their function and duties in the supervisory board are guided in their conduct, including decision-making, by the independence of their own opinions and judgments, and acting in the interest of the company. There is no separate “independent director” required, however, there can be if the company operates in a form of a European Company (SE) with one-tier corporate bodies.
Management Board and Supervisory Board composition
According to the Best Practice 2021, the WSE company should have a diversity policy towards the management board and the supervisory board, adopted respectively by the supervisory board or the general meeting. The diversity policy defines the objectives and criteria of diversity, inter alia in such areas as gender, the field of education, specialist knowledge, age, and professional experience, as well as indicates when and how the achievement of those objectives will be monitored. In terms of gender differentiation, the condition for ensuring the diversity of the company’s bodies is the participation of minorities in a given body at a level not lower than 30%.
The composition of the Management Board and Supervisory Board of every listed company is generally regulated in Polish Commercial Companies Code. The management board shall be composed of at least one member. The supervisory board shall be composed of at least five members. The exact composition or the number of members of each of those corporate bodies shall be always defined in the Articles of Association.
According to the Best Practice 2021, at least two members of the supervisory board meet the independence criteria set out in the Polish Act of May 11, 2017, on statutory auditors, audit firms, and public oversight, and there shall be no real and relevant relations with a shareholder holding at least 5% of the total number of votes in the company.
Each WSE-listed company is obliged to appoint the audit committee as a body within the supervisory board, consisting of members of the supervisory board. NewConnect-listed companies may appoint an audit committee, but it is not mandatory. For purposes of audit committee establishment, according to the Act on statutory auditors, audit firms, and public oversight, the WSE listed company, as a company from the regulated market, is named a “public interest entity.”
A listed company shall maintain effective systems of internal control, risk management, and compliance supervision activities with the law (compliance), as well as an effective internal audit function, appropriate to the size of the company and the type and scale of the activities for which the management board is responsible. However, where an audit committee is in place within the company, it also shall monitor the effectiveness of the said systems and functions, even though this does not exempt the supervisory board from making an annual assessment of the effectiveness of these systems and functions.
The audit committee shall consist of at least three members. At least one member of the audit committee shall have knowledge and skills in accounting or auditing. Most of the members of the audit committee, including its chair, are independent of the company concerned. A member of the audit committee shall be considered independent if he or she meets the criteria defined in Article 129(3) of the Act on statutory auditors, audit firms, and public oversight. Among others, the audit committee shall be considered independent if he or she:
(i) does not belong to or in the last five years from the date of appointment did not belong to senior management, including is not or was not a member of the management board or other management body of the relevant listed company or an entity affiliated with it,
(ii) is not and has not been in the last three years from the date of appointment an employee of a given listed company, or an entity affiliated with it, except when the member of the audit committee is an employee not belonging to senior management, who was elected to the supervisory board or other supervisory or control body of a given company as a representative of employees,
(iii) does not receive or has not received any additional remuneration, in a significant amount, from the listed company concerned or an entity affiliated with it, except for remuneration received as a member of the supervisory board or other supervisory or control body, including an audit committee.
WSE listed company’s supervisory board may itself perform functions of the audit committee.
The Polish Financial Supervision Authority monitors compliance with the provisions concerning the appointment, composition, and functioning of the audit committee or the supervisory board or other supervisory or control body if they are entrusted with the function of the audit committee. This rule applies to WSE-listed companies, i.e., companies listed on the regulated market only.
Notwithstanding the audit committee, there may be other committees that can be appointed in the listed companies. According to the Best Practice 2021, the WSE-listed company may appoint, within the supervisory board, a remuneration committee and nomination committee. Those committees are voluntary and therefore not many listed companies in Poland have appointed them so far.
7.2. Any other ESG considerations
According to the Best Practice 2021, in order to ensure proper communication with stakeholders, the WSE-listed company may publish the scope of the adopted business strategy on its website, information on the assumptions of its strategy, measurable goals, including in particular long-term objectives, planned activities and progress in its implementation, determined by means of measures, financial and non-financial. Information on ESG strategies should, inter alia:
(i) explain how the decision-making processes in the company and its group entities take into account related to climate change, pointing to the resulting risks,
(ii) present the value of the equal pay index paid to its employees, calculated as the percentage difference between the average monthly salary (including bonuses, awards, and other allowances) of men and women for the last year, and provide information on the measures taken to abolish possible inequalities in this area, together with the presentation of the risks associated with it and the time horizon, in which it is planned to bring about equality.
Moreover, according to the Best Practice, at least once a year, the WSE-listed company shall disclose the expenses incurred by it and its group to support culture, sport and institutions charities, media, social organizations, trade unions, etc. If, in the year covered by the report the company or its group incurred expenses for such purposes, the information contains a statement of these expenses. These are only best practices, so not every WSE-listed company complies with them nowadays.
It shall be noted that ESG is becoming more and more popularized in Poland. However, today, it is quite impossible to assess the real impact of the ESG concept on investors’ decisions and their perception of a particular company. It has been shown that some companies use ESG as a greenwashing tool, and as such, it has been widely criticized by the public.
8. Ongoing Reporting Obligations (Life as a Public Company)
8.1. Annual and interim financials
Issuers from WSE regulated market (both Main Market and Parallel Market) as well as issuers from the ATM, i.e., NewConnect market, are obliged to perform the so-called information duties (information obligations) that are imposed after the offering of equity securities (continuing obligations). These duties relate to financial information, which shall be revealed mainly in a form of periodic reports, and current information, which is revealed in a form of current reports. Current reports shall be published under the EU Market Abuse Regulation (No. 596/2014) or, depending on the case, based on the Polish regulation of the Minister of Finance on current and periodic reports of March 29, 2018. NewConnect issuers perform the said duties based on internal market regulations, i.e., the rules adopted by the WSE Management Board for ATM. Each listed company, both WSE listed and NewConnect listed, shall provide information on dates of periodic reports to be published in each calendar year – this information shall be provided by the end of January each calendar year, in a form of a periodic report (the so-called ESPI report or EBI report). This allows investors and the market per se to get to know when exactly particular issuers are going to reveal periodic reports containing historical financial information. Each listed issuer is obliged to publish, in a form of a periodic report, an annual financial statement together with certain appendices or reports (e.g., a report on complying with the Best Practice 2021), which can be standalone or consolidated, when prepared for the issuer’s capital group. Each issuer shall also publish quarterly periodic reports, i.e., for the first and third quarters and the report for the first half of the year. In some instances, issuers may resign from the publication of quarterly reports for the last quarter of the year. It is mandatory to have each annual financial statement audited by an independent audit firm. On the regulated market, financial statements for the first half of the year (i.e., financial year) shall be also examined by the auditor, but the scope of the said examination is narrower than the scope of the annual audit. The required scope of each periodic report is strictly regulated in the applicable legal provisions (for issuers from the regulated market) or inapplicable internal market regulations, i.e., the rules adopted by the WSE Management Board for ATM. It shall be noted, that periodic reports should not contain any inside information within the meaning of Article 7 of the MAR Regulation.
Similar information duties are imposed for the issuers from the Catalyst market that are obliged to perform the so-called information duties after the offering of debt securities (continuing obligations). Issuers are obliged to provide periodic reports, i.e., annual financial statements, semiannual and quarterly, in accordance with applicable internal market regulations, i.e., the rules adopted for Catalyst or with applicable laws for issues from the regulated market. Similarly, as in the case of the stock market (ECM), each Catalyst listed company shall provide information on dates of periodic reports to be published in each calendar year – this information shall be provided by the end of January each calendar year, in a form of a periodic report (the so-called ESPI report or EBI report). This allows investors and the market per se to get to know when exactly particular issuers are going to reveal periodic reports containing historical financial information. The required scope of each periodic report is strictly regulated by the applicable legal provisions.
8.2. Ad hoc disclosures
Each listed company is obliged to disclose material information, i.e., the so-called inside information within the meaning of Article 7 of the MAR Regulation, in a form of a current report (the so-called ESPI report). Inside information of that type is to be published based on Article 17 of the MAR. This duty is imposed both on issuers from the regulated market and ATM. Inside information shall be disclosed without any delay. Notwithstanding that duty, issuers are obliged to perform other information duties based on applicable regulations: ATM internal regulations or on Polish regulation of the Minister of Finance on current and periodic reports of March 29, 2018. Other information duties are based directly on other MAR Regulation’s provisions or on other regulations applicable to certain issuers, depending on the specific sector that issuers may belong to (e.g., financial institutions).