Package designed to ensure financial market development and investor protection in the market

#Public Offering Act

Changes regarding the tender offer to subscribe for the sale or exchange of shares in a company

Mandatory tender offer – 50% threshold

The most crucial changes that were proposed in the draft legislation aim at modifying the current tender offer regime. The legislator intends to implement the previously announced intentions (also proposed by the regulator) in respect of the mandatory tender offer and formally proposes to establish a threshold of 50% of the total number of votes at the general meeting as the threshold for acquiring control in a public company. This threshold will trigger the obligation to announce a tender offer for the sale or exchange of all remaining shares (the so-called mandatory tender offer). Currently, the regulations provide for a “control” threshold at the level of 66% of the total number of votes, despite the fact that – as practice shows – the acquisition of factual control oftentimes occurs already where a lower number of votes is held. The deadline for making a mandatory tender offer is to be three months after crossing the threshold.

Voluntary tender offer

The draft law also proposes, inter alia, to introduce the possibility of announcing a voluntary tender offer for all remaining shares in a public company, irrespective of the number of shares already held (this also applies to entities holding over 50% of the total number of votes). Announcement of a voluntary tender offer would release from the obligation to announce a subsequent mandatory tender offer connected with exceeding the threshold of 50% of the total number of votes. The legislator anticipates that the determination of the price in the tender offer, the possibility of withdrawal from the announced tender offer, the obligation to provide collateral, and the penalties related to violations of these provisions will be similar to those in the case of a mandatory tender offer.

Collateral to be provided in connection with a tender offer

It is also proposed that there should be a statutory indication of the conditions that the collateral to be provided in connection with a tender offer should meet. The clarification of this issue is intended to eliminate the risk of establishing a collateral that fails to guarantee the satisfaction of claims immediately after the end of the tender offer. 

Share price proposed in a tender offer

The legislator modified the provisions regarding the share price proposed in a tender offer (although, at the same time, it largely copied the regulations currently in force). Among other things, a standard will apply that in certain cases (trading done in a certain number of sessions and the occurrence of certain price differences), the minimum price should correspond to the value determined by an expert.

The most ground-breaking change, however, will probably be the formal and explicit obligation to determine the price proposed in the tender offer, taking into account the indirect acquisition of shares in a public company, the value of which will be determined by an independent audit firm selected by the offeror. So far, such a principle has been expressed in case law, while in earlier practice the opposite view has prevailed. Therefore, the legislator now intends to formally address this issue in the act. 

An intermediary and comments of the KNF

The intermediary will be obliged to notify the Polish Financial Supervision Authority (KNF) and the company operating the regulated market (WSE) of the intention to announce a tender offer, as well as to communicate the wording of the tender offer via the IT system before the tender offer is announced. The intermediary is also to communicate the wording of the tender offer to the news agency. In the current legal status quo, the originally published wording of the tender offer may not be the final wording. The proposed amendments assume that the published tender offer will be verified by the KNF and will contain the final wording. 

The draft will also clarify a number of technical obligations of the intermediary and certain timing issues related to the conduct of the tender offer, contained in the act.

Principles of liability for payment of the price offered in the tender offer

In the current legal status quo, claims for performance of obligations arising from the announcement of a tender offer may be directed only to the entity that announced the tender offer. The legislator proposed to introduce joint and several liability of all entities obliged to notify the tender offer.

Furthermore, the act is to explicitly provide that the offeror will be able to designate in the wording of the tender offer an entity from its capital group that will purchase the shares covered by the tender offer (this may also be another fund managed by the same management company). The offeror and the entity designated by the offeror shall be jointly and severally liable for payment of the share price proposed in the tender offer.

Extension of supervisory powers

Appointment of a superintendent by the KNF

The Act also seeks to extend the supervisory powers of the KNF. As an example, the draft provides for a special power for the KNF to appoint a superintendent for an issuer. By way of a reminder – the current legislation allows for an ex officio appointment of a superintendent only by a registration court, but this procedure is time-consuming and rarely used in practice.

The appointment of a superintendent will be made by way of a decision of the KNF, for a period not exceeding one year, with the possibility of its prolongation. The appointment decision will specify the scope of the tasks set for the superintendent and a deadline for their completion. The appointment of a superintendent will be possible only in strictly defined situations, which interfere with the normal operation of the company ((i) failure to perform or improper performance of disclosure obligations, despite the imposition of penalties on this account; (ii) absence of management or supervisory bodies or (iii) doubts as to the proper functioning of such bodies; and (iv) loss of contact with the issuer).

If the issuer has no governing bodies, the superintendent will be authorized to represent the issuer and manage its affairs. The superintendent will have the right to attend meetings of the bodies and to obtain the information necessary for the performance of his/her functions. If the issuer’s management board operates, decisions that exceed ordinary management will require the approval of the superintendent. 

Issuance of recommendations by the KNF

The authority of the KNF to issue recommendations will also be slightly expanded – the KNF will gain the authority to issue recommendations also to members of its management board or another managing body, the supervisory board or another supervisory body, the audit committee, their affiliates and related third parties (within the scope of its authority under the Act on statutory auditors).

Penalties for the members of governing bodies

The draft also proposes amendments to allow persons who are members of the governing bodies of entities that have committed certain violations of the act to be penalized, regardless of the prior penalty imposed on the entity itself. As the legislator indicates, this change is expected to result in greater efficiency in achieving supervisory goals.

Other changes

Special purpose auditor

The current legislation allows for the appointment of a special purpose auditor to examine a specific matter relating to the formation of a company or the conduct of its affairs. The new legislation would extend the auditor’s existing powers to subsidiaries of public companies as well. 

Notification of qualifying holdings on a dedicated form 

The proposed amendments will make it mandatory to submit notifications with respect to trading in qualifying holdings in public companies by means of a standardized electronic form (as indicated in the explanatory note on the draft act), in principle, using a special ICT system provided by the Authority. However, no change in the manner in which a similar notification is made by an issuer is anticipated.

Clarification of the rules for determining the minimum squeeze out and reverse squeeze out price for shares of companies listed in alternative trading system (ATS-listed companies)

The legislator proposed to clarify the rules for determining the minimum squeeze out and reverse squeeze out price for shares of ATS-listed companies by restoring the criterion of the highest price paid in a 12-month period and the highest value of tangible property or rights issued in exchange for shares in the 12 months prior to the announcement of the squeeze out or reverse squeeze out. In addition, the intermediate purchase price will be taken into account in determining the squeeze out and reverse squeeze out price.

Clarification of the manner and place of publication of a public offering addressed to an unspecified addressee

The legislator assumes that the issuer or offeror will make the document available to the public, in the absence of an obligation to make the prospectus available, in a manner that ensures adequate protection of investors’ interests. In the case of a public offering addressed to an unspecified addressee, the disclosure will be made through publication on the website of the issuer, the offeror, or the investment firm intermediating in the public offering of these securities.