Similar to numerous initiatives in Western Europe, Poland adopted legislation amending the Act of July 24, 2015, on The Control of Certain Investments, thus introducing fully-fledged foreign direct investment control in Poland (the “Law”
). The legislation was announced on 23rd June and will enter into force on 24th July 2020. It will apply for a period of two years.
In a nutshell, it will be more difficult for the foreign investors from outside the OECD to take over more than 20% in Polish businesses deemed to be providing critical infrastructure, goods or services. The new law imposes an obligation of prior notification to the Polish Competition Authority (“UOKiK
”) of the intention to make an investment resulting in acquisition or achievement of more than 20% of shares in protected businesses.
What type of companies will require consent of the regulator?
The Law introduces a wide scope of investments in Polish companies which will be subject to the restrictions, provided that their annual turnover for each of the last two years exceeds Eur 10 million, which will include:
- public listed companies,
- companies owning strategic infrastructure,
- companies developing crucial IT software, such as software for power plants, water plants, communication, payments, hospitals, transportation, food supplies etc.
- companies operating in strategic sectors such as electricity, oil and gas, chemicals, defence telecommunication, medical, food etc.
The screening procedure foreseen in the Law is modelled on the current procedure for anti-monopoly clearance. As a rule, UOKiK must be notified prior to an acquisition and give its consent otherwise the transaction is null and void.
UOKiK may raise objections to the contemplated acquisition if it determines that the proposed transaction may cause potential danger to public order, safety or health (taking into account provisions of the Treaty on Functioning of the European Union).
The Law says that UOKiK may raise objections if:
a) there is a potential threat to public policy or public security of Poland, or public health in Poland,
b) it may have a negative impact on projects and programs of the European Union interest.
Additionally, the regulator may raise objections when it is not able to determine if the buyer is from the EEA or the OECD or when the notifying entity does not respond to the UOKiK's request for information or explanations.
UOKiK’s decision will be subject to a complaint (a type of appeal) to the administrative court.
Why is this happening?
Polish shares are particularly popular with investors from Asia. The Polish Government does not want Polish companies to be bought cheaply by funds, especially from outside the EU. Noteworthy is that many member states, as well as the European Commission, have emphasized the need for regulations which protect valuable core European assets from take-over at lowered prices in the wake of the COVID-19 epidemic.
Who does it affect?
The Law introduces certain restrictions in relation to investments contemplated by investors from outside the OECD. The restrictions do not apply to companies based in the EU or the European Economic Area or the OECD. In practice, the restrictions will apply to countries such as China, Russia and India.
Top 5 takeaways
- Polish regulator (UOKiK) will have the power to block foreign takeovers of Polish companies if the investor is from outside the OECD,
- Restrictions refer to companies which operate in strategic sectors such as electricity, oil and gas, chemicals, defence telecommunication, IT, medical, food etc.
- The threshold is annual turnover of the target company in Poland for the last two years; if its annual turnover in Poland is below Eur 10 million, the restrictions do not apply and the transaction can be carried out without consent of the regulator,
- If the annual turnover of the target company in Poland for any of the last two years exceeded Eur 10 million, the transaction will be allowed only after obtaining consent of the regulator,
- UOKIK may raise objections to the contemplated acquisition if it determines that the proposed takeover may cause potential danger to public order, safety or health (taking into account provisions of the Treaty on Functioning of the European Union).
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