The amendment to the Act on the Control of Certain Investments (the “Act”) that came into effect on July 24, 2020 has vested the President of the Office of Competition and Consumer Protection – the UOKIK – with broad new powers. The new rules are temporary and will be in force for 24 months. On July 21, 2020, the UOKIK issued 50-page long, detailed procedural guidelines, which unfortunately are not available in English.
The new rules apply in parallel to the merger control regime, which is also administered by the UOKIK. It is possible that a transaction could require two different filings to the same State body. The UOKIK has declared that, if possible, such submissions would be handled by the same case handler.
Affected Investors
The draft of the Act was controversial at first, as it was not clear which investors would be bound by the new provisions. It was eventually clarified that it would apply to entities that are not from EU/EEA/OECD member states, which maeans it will mainly affect investors from such big economies as Brazil, China, India, and Russia. Also, as the Act refers to natural persons who do not have citizenship in a member state and companies that do not have, or did not have, their registered offices in the territory of a member state for at least two years from the day preceding the notification, it seems to also formally cover Polish companies (controlled by Polish investors) that were created not earlier than two years ago.
Risks
Failure to notify the affected transaction is punishable by a financial penalty of up to PLN 50 million (approximately USD 13.5 million) and imprisonment from six months to five years. What may be particularly important from a transactional perspective is that any transaction made without the required notification or made despite an objection will be invalid (such a sanction is not envisaged by the Polish merger control regime). In certain cases, a sanction limiting the exercising of voting rights will apply.
Transactions
In brief, the UOKIK must be notified about: (i) a direct or indirect acquisition or achievement of significant participation in a protected entity by, in brief, holding shares representing at least 20% of the total number of votes, or reaching or exceeding the thresholds of 20% and 40% of the total number of votes in the protected entity’s decision-making body, or the acquisition or lease of an undertaking or its organized part; or (ii) an acquisition of dominance through the acquisition of shares, or the conclusion of an agreement providing for the management of the entity or the transfer of profit by that entity.
Protected Entities
The Act protects the following entities with a Polish turnover exceeding the equivalent of EUR 10 million in any of the two financial years preceding the notification: (i) all public (listed) companies irrespective of the sector they are active in; (ii) all entities that (a) have property disclosed in a single list of the facilities, installations, equipment and services included in critical infrastructure (such as companies providing, for example, food, water, energy, or fuel supplies); (b) develop or modify software for strategic companies, including for the control of power plants or networks, the management and control of drinking water, or equipment or systems used for cash supply or card payments; or (c) conduct a specific business activity in one of 21 industries, including electricity generation, petrol chemicals production, or medicines or other pharmaceutical products production.
Procedure
Affected investors must submit a notification before the conclusion of any agreement or other legal transaction, and in the case of any invitation to subscribe for or exchange stocks in a public company, before publishing the public bid. The latter may be particularly problematic, if even possible, in practice.
As regards timing, the UOKIK should confirm within 30 business days that it does not raise any objections to the transaction, or, if there are reasons that justify a further examination of the acquisition in terms of public security, order, or health, initiate a screening procedure, which may take up to 120 days.
The notifying party and the scope of required information will depend on whether the acquisition is direct or indirect, or whether subsequent achievement has taken place. The notification requires submission of a long list of documents.
Finally, the UOKIK may initiate proceedings if it becomes aware that events covered by the Act have taken place within five years from the completion (in particular in order to prevent circumventions of the law).
By Mikolaj Piaskowski, Head of Competition and State Aid, Baker McKenzie Warsaw
This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.