Shareholder activism has grown in popularity in recent decades due to leading law firms specialising in the implementation of available shareholder activism strategies, and the role of hedge funds and related services constitutes a significant niche in the legal services market. Under Polish legislation, various forms of shareholder activism can be applied.
By assumption, the process of merging capital companies is advantageous from the point of view of the merging companies and their shareholders. However, sometimes a shareholder may receive fewer shares in the acquiring company than he or she should have. In such a context, the question that arises is whether the protection of shareholders' interests against an unfavourable share exchange rate is possible under Polish law and, if so, how it can be accomplished.
To a large extent, the security and success of a transaction depends on the correct execution of the process preceding its finalisation. At the pre-contractual stage, a non-disclosure agreement (NDA) is the first agreement that regulates the mutual relationships of the parties involved in the negotiations. Concluding an NDA in Poland is of substantial significance as, in the case of a violation, it enables a party to seek damages to the fullest extent possible.
The company merger procedure is regulated by the Commercial Companies Code, which provides for the adoption of shareholder resolutions during company mergers. Similar to other shareholder resolutions during general meetings, the resolution may be challenged according to the principles set out in the code. However, certain exceptions to the general principles apply.
Under Article 180 of the Commercial Companies Code, the effective transfer of share ownership requires a transfer ownership agreement to be concluded in writing with a signature certified by a notary. However, not all legal regulations in force in EU member states require adherence to a special form. The question that therefore arises is whether adhering to a less restrictive form will suffice for the effective transfer of the legal title in the shares being disposed of.
The Polish president recently approved two new pieces of legislation enacted by Parliament which are aimed at incorporating EU Directive 2005/56/EC into Polish national law. Both acts will finally allow for cross-border mergers involving Polish limited liability companies, joint stock companies and joint stock limited partnerships.
The Polish Parliament is working on an amendment to the Commercial Company Code, which involves liberalizing the rules on a joint stock company's acquisition of its own shares. The amendment will introduce exemptions from certain restrictions which so far have thwarted leveraged buy-outs of joint stock companies in Poland.
In October 2005 Brussels responded to strong business demand to enable mergers between companies from different EU member states by passing Directive 2005/56/EC. The directive has remained a paper tiger in Poland to date, thwarted by Polish legal obstacles; however, this looks set to change as draft legislation designed to give it teeth has been put forward.
Cash pooling is an instrument that enables affiliated companies to minimize interest expense by offsetting debit positions on bank accounts of some of the companies participating in the cash pool with credit positions on the bank accounts of others. While popular all over the world, this process is still under-used in Poland due to a lack of clear regulations.
The concept of a warranty is not Polish by origin, and therefore is not automatically recognized by Polish law. The parties to an acquisition agreement must clearly explain how the warranties included in the contract should be construed and, more importantly, must expressly describe the manner in which the warranties will operate in the relationship.
The Supreme Court has ruled on the admissibility of a last-resort appeal against a decision regarding a company merger. The court emphasized that the key question was the legal character of the register entry of the merger, which took place by way of a transfer of all the company's assets to the acquiring company.
The government has considerably amended the regulations concerning public tenders to subscribe for or exchange shares in order to achieve harmonization with EU regulations. The new regulations set down two material thresholds which determine the scope of duties and types of published public tender.
A new package of three acts has replaced the Act on Public Trading in Securities. The new Act on Public Offering sets out statutory regulations concerning the squeeze-out right of shares in public companies, which amend the relevant provisions of the Commercial Company Code.
Key changes in the corporate income tax regulations have been passed by Parliament and include changes to taxation on capital gains that are a result of mergers, an increase on the existing tax rate on dividends and a reduction of the existing income tax rate.
This update discusses the main methods by which companies may merge and the ensuing tax consequences, including issues of tax identity numbers, stamp duty and depreciation write-offs.
Including: Merger Regulation; Acquisition Regulation; New Corporate Code; Foreign Investment Law; Law on Acquisition of Real Estate by Foreigners; Antimonopoly Law; Privatization Law; Other Statutory Restrictions
Amendments to the Joint Venture Act have resulted in tighter restrictions on foreign investment in Polish companies. Questions of interpretation are further addressed.