Poland Takeover Guide

Transcription

1 Poland Takeover Guide Contacts Torsten Bogen and Natalia Marczuk Pietrzak Siekierzyński Bogen

2 Contents Page INTRODUCTION 1 THE REGULATION OF TAKEOVERS 1 THE REGULATORY MAZE BROAD CONCEPTS 2 MARKET BID 6 ELIMINATING THE MINORITY AFTER A TAKEOVER 9 THE REGULATORY MAZE IMPORTANT DETAILS 10 THE LIFECYCLE OF A TAKEOVER 12 DEFENDING A TAKEOVER WHAT CAN BE DONE? 13 THE REGULATORS _3_ takeover guide - poland

3 INTRODUCTION This guide gives an overview of the law relating to takeovers in Poland of shares in public companies listed on the Warsaw Stock Exchange (Warszawska Giełda Papierów Wartościowych S.A., the WSX ). This guide is intended as a source of information concerning takeover restrictions, permitted pathways to increase shareholdings and what a target company s board or the shareholder of a public company may do in response to a takeover. This guide deals with the main rules on takeovers as of July 16, Anyone involved in takeover action should, of course, seek specialist advice. THE REGULATION OF TAKEOVERS A takeover is a purchase of a certain amount of an enterprise s stocks, which would allow another firm to take over control of the enterprise. As a result, the purchased enterprise is included in the structure which is taking over. This results in a control of only the capital of a public company and generally does not affect its structure and further existence. A takeover in Poland is governed by public law and restricted solely to public companies. The provisions of the EU Directive on takeover bids have been introduced into the Polish Act on Public Offering, Conditions Governing the Introduction of Financial Instruments into Organised Trading, and Public Companies dated July 29, 2005 (the Act ). Special obligations, connected with gaining control over a public company, have been introduced in relation to purchases of large blocks of shares, and prior announcement must be made of tender offers to purchase the blocks, as well as a subsequent notification of this. This rule, on the one hand, protects the price of shares from unjustified extreme fluctuation (this applies to the purchase of a large number of shares in a short time span) and, on the other hand, protects small shareholders. The announcement of a tender offer enables equal treatment of all shareholders and a uniform price for shares and deadline for the decision, and also ensures equal conditions for investment in the company at the outset for all shareholders. Apart from the Act, the legislative framework for public takeovers is provided by the following: Commercial Companies Code, dated September 15, 2000; Act on Trading in Financial Instruments, dated July 29, 2005; Act on Capital Market Supervision, dated July 29, 2005; the Warsaw Stock Exchange Statutes; the Rules of the Warsaw Stock Exchange (the WSX Listing Rules ); Act on Financial Market Supervision, dated July 21, The main regulatory body with respect to public takeovers is the Polish Financial Supervisory Commission (Komisja Nadzoru Finansowego, the Commission ) _3_ takeover guide - poland page 1

4 THE REGULATORY MAZE BROAD CONCEPTS The regulatory map When large blocks of shares are purchased and a dominant position is achieved in companies as a result, there is an obligation to announce the tender offer to buy large blocks of shares and a notification obligation connected with the achievement of a certain threshold. This guide will, however, primarily deal with the legal aspects of announcing the tender offer. In a take-over of a company a tender offer must be made to the remaining shareholders, the contents of the tender will depend on the number of votes which the purchaser is to achieve as a result of the planned transaction. There are two main thresholds with regard to this matter. In particular: a shareholder may exceed 33% of the total vote in the public company only as a result of announcing a tender offer to acquire or exchange such number of the company s shares so that 66% of the total votes would be achieved; or a shareholder may exceed 66% of the vote only as a result of a tender offer to acquire or exchange all the remaining shares in the company. In addition to the above-mentioned obligations, the Act also regulates an acquisition as a result of which, certain other thresholds are exceeded in a public company. Pursuant to these provisions, an acquisition which increases a shareholder s share in the total vote by more than: 10% within a period shorter than 60 days in the case of a shareholder holding less than 33% of the total votes in the company; or 5% within a period shorter than 12 months in the case of a shareholder holding 33% or more of the total votes in the company, may occur only by way of a tender offer to acquire or exchange these shares in the amount of not less than 10% or 5% of the total votes respectively. The requirement to announce the tender offer does not arise for example, if the shares which are being purchased: are purchased within a capital group; are purchased under an agreement on establishing collateral; are purchased under the provisions on bankruptcy and rehabilitation or in execution proceedings; are encumbered with a pledge so that a pledgee can exercise his right to satisfy his claim by taking over the ownership of the subject of the pledge. Moreover, tender offers are not required where the 10% and 5% thresholds are exceeded in the following circumstances: by shares acquired in primary trading; by shares that are brought into a company as contribution in kind, and by merger or spin-off of companies _3_ takeover guide - poland page 2

5 When do the takeover rules apply? Takeover rules apply to public companies. Public companies are joint stock companies or limited joint-stock partnerships, in which at least one share has been dematerialised. The dematerialisation duty applies to shares: admitted to trading on a regulated market (meaning the stock market, operated by the WSX, and the over-the-counter market, which is conducted by MTS Centralna Tabela Ofert S.A.); being subject to public offering (while addressing the offer to at least 150 persons or to an unspecified addressee) but not admitted to trading on a regulated market unless the issuer or introducing entity decides otherwise, as well as; introduced to the alternative trading system (for example NewConnect market organized by the WSX) unless the issuer or introducing entity decides otherwise. Application of the takeover rules to foreign transactions The provisions apply to the acquisition of shares in public companies listed in Poland both when the transaction takes place within or outside Poland. Also if the shares in the public company were acquired outside Poland indirectly, that is, by purchase of shares in the parent company with its registered office abroad, this triggers Polish takeover legislation. Some important percentage thresholds 1) There is a duty to notify the Commission and company within four working days of the date of change of participation if: 5%, 10%, 15%, 20%, 25%, 33%, 33⅓%, 50%, 75% or 90%of the total votes in a public company has been achieved or exceeded; the shares held amounting to at least 5%, 10%, 15%, 20%, 25%, 33%, 33⅓%, 50%, 75% or 90%have been reduced to the next threshold of 5%, 10%, 15%, 20%, 25%, 33%, 33⅓%, 50%, 75% or 90% or less of the total votes; there is a change in the existing participation amounting to over 10% of the total votes by at least 2% of the total votes in a public company, whose shares have been admitted to trading on the official stock exchange listings; there is a change in the existing participation amounting to over 10% of the total number of votes by at least 5% of the total votes in a public company whose shares are admitted to trading on other regulated market; or changes in the currently held participation exceeding 33% of the total votes by at least 1%. 2) 5% of the total votes At the request of shareholder(s) in a public company holding at least 5% of the total vote, a general meeting may resolve to mandate an expert to review, at the company s expense, a specific issue related to the company s incorporation or the conduct of its business (special- purpose auditor). To this end shareholder(s) may request that an extraordinary general shareholders meeting be convened or the adoption of such a resolution be placed on the agenda of the next general shareholders meeting. 3) 5% of the total votes Shareholder(s) holding at least 5% of the total votes (1/20 of the share capital) may request that an extraordinary general meeting be convened, as well as certain matters be placed on the agenda, and if not successful, can also approach the court with such a demand. The company s Articles of Association may _3_ takeover guide - poland page 3

6 authorize shareholders representing less than 5% of the total votes (1/20 of the share capital) to request that the extraordinary general meeting be convened. 4) 20% of the total votes Shareholder(s) holding at least 20% of the total votes (1/5 of the share capital)may demand the election of the Supervisory Board members by a vote held in separate groups to appoint at least one member (as the Supervisory Board in public companies must be composed of no less than five members). 5) 50% of the total votes a voting control on the total shareholders meeting, as generally an absolute majority of votes must be obtained in order to adopt a resolution, unless the law or the Articles of Association provide otherwise 6) 2/3 share of the total votes a major change to the scope of activities of the target, merger or division of the company, transformation into a partnership (for example, a limited partnership). 7) 75% share of the total votes a convertible stock issue and a bond issue with a preemptive right to take up shares, amendment to the company s Articles of Association, redemption of shares, initial capital increase or reduction, transfer of an enterprise or organised part thereof, dissolution of the company. 8) 80% - delisting of the target or depriving the other shareholders of the pre-emptive right to take up new shares. 9) 90% - squeeze out. 10) Acquisitions of certain amounts of shares of companies operating in certain regulated businesses require permissions from the competent authorities (for example in the bank or insurance sector). What is caught? The regulatory trigger and its key concepts The obligations to make tender offers arise not only if the participation in the total votes increases as a result of purchase or sale of shares, but also if participation increases due to a legal event (for example, removing the privilege attached to shares as to voting rights, converting privileged shares to ordinary shares or redemption of part of the shares, establishing security (for example, a pledge) on shares which confer a voting right). These duties also arise for entities connected with those entities achieving or exceeding certain thresholds. The connection may be based on a relationship of dependency or domination, or an understanding on the joint purchase of shares, or an agreed exercise of voting rights. If there is a relationship of dependency or domination, the duty to make a tender offer applies to each entity in such a relationship. The relationship of dependency may exist either in a capital group or be a factual dependency of a capital group (under, for example, an agreement for management of such a company). When a dominant relationship arises, this may result in a situation where an entity which does not directly hold any shares in a public company is under an obligation to make a tender offer. If, for example, A (which is not a public company) holds 34% of shares in a public company and B purchases 100% of shares in A, then by achieving indirectly the status of a dominant entity over the public company, it will have to make a tender offer for the sale or exchange of shares in the public company, in the number required to achieve 66% of the total votes. Furthermore, when a dependent entity increases the number of votes, this results in the increase of votes held by the whole group. Therefore, the dominant entity must control the increase of shares in dependent entities so as to be able to make the obligatory _3_ takeover guide - poland page 4

7 tender offers if the number of shares the dominant entity holds (directly and indirectly) exceeds the next threshold under the law. For example, if A is the dominant entity in respect of B (100% control); A holds 57% of shares (and this number of votes) in a public company; B does not hold any shares in a public company but intends to purchase 11% of shares (entitling it also to this number of voting rights), then B should make a tender offer to purchase these 11% of shares and A should make a tender offer for the sale or exchange of all remaining shares in this public company. Often the structure of domination is more complex (that is, the same entity may at the same time be in a position of dominance in relation to one and of dependence in another). Therefore, the structure of the connections should be examined to determine what obligations each of the connected entities should carry out. Voting power As influence is measured by the number of votes which can be cast based on the shares held at a general shareholder s meeting, the obligations connected with purchasing large blocks of shares are not linked to the number of shares purchased, but to the number of votes to which these shares are entitled. In calculating subsequent thresholds, the total number of votes falling to all of the company s shares should be used as the basis, as well as the rights and privileges attached. One must bear in mind that despite the introduction of a prohibition to attach privileged voting rights to shares from January 1, 2001, in some public companies shares issued before this prohibition came in force still exist. Such shares can have privileged voting rights up to five votes for one share. One should note that the general view is that the privilege does not extinguish if the share is sold (unless the company s Articles of Association states otherwise). Moreover, the company s statute may prohibit voting to be exercised for example, above the number it defines. The total votes at a general shareholders meeting include the number of votes represented by all the public company s issued shares irrespective of whether they were the subject of a public tender or admitted to trading on a regulated market or voting rights attached may currently not be exercised (for example, own shares). Consequences of breach The acquisition will be valid if a necessary tender offer is not made. However, a shareholder will not be able to exercise the right to vote on a share in a public company which is the subject of a transaction resulting in a breach of a notification duty. The outcome is similar for failure to inform the Commission and the company of the purchase of large blocks of shares. There is a stricter sanction, however, for failure to make a tender offer if the threshold of 33% and 66% of the votes is exceeded. In these circumstances, a shareholder cannot exercise the right to vote both on the shares purchased in infringing the obligation and also on all shares they hold in the public company. Furthermore, in all cases the Commission may impose a financial penalty of up to 1 million PLN for each infringement. There are no criminal sanctions under Polish law for failure to carry out the obligation to make a tender offer _3_ takeover guide - poland page 5

8 MARKET BID Polish law provides that control of public companies is to be taken by means of a tender offer. In the event that a person, as a result of its own acquisition or the acquisition by persons acting in concert with him, reaches a certain percentage of the voting rights in a public company, such person is required to make a mandatory tender offer to acquire or exchange shares in such company. The tender offer cannot be made otherwise than by public announcement. Therefore, under the Polish law, an off market bid is not allowed. The threshold triggering the obligation to make the tender offer The Act determines the threshold which triggers the obligation to make the tender offer. Consideration The consideration offered under a tender offer may comprise cash, shares, other financial instruments, or a mixture of each. The share price offered in a tender offer: if any shares in the company are traded on a regulated market, may not be lower than: o o the average market price for the six months preceding the announcement of the tender offer in which the shares were traded on the main market; or the average market price for a shorter period, if the shares were traded on the main market for a period shorter than specified in the point above; if the price cannot be determined in accordance with either points above, and in the case of a company in relation to which arrangement or bankruptcy proceedings have been instigated, the price may not be lower than the fair value of the shares. Furthermore, the share price proposed in the tender offer as a consequence of 66% of the total votes in a public company being exceeded, may not be lower than the average market price for the three months of trade in the shares on a regulated market preceding the date on which the tender offer was made. However, where the average market price for the six months preceding the announcement is much lower than the fair value of the shares due to: pre-emptive shareholders rights, rights to dividends, rights to acquire shares of the acquiring company due to division of a public company by separation or other proprietary rights associated with the ownership of shares in a public company; a significant deterioration in the financial position or assets of the company as a result of events or circumstances that the company could not foresee or prevent; the risk of permanent insolvency, the entity announcing the tender offer may request the Commission for an authorization to offer a price which does not meet the criteria indicated in previous points. This rule applies as well to the share price proposed in the tender offer as a consequence of 66% _3_ takeover guide - poland page 6

9 of the total votes in a public company being exceeded. The share price proposed in a tender offer for the exchange of shares must be equal to the value of dematerialised shares in another company, whose ownership is to be transferred in exchange for the shares tendered in the tender offer. The value of the dematerialised shares referred to above shall be determined as follows: for shares traded on a regulated market: o o on the basis of the average market price from the six months preceding the announcement of the tender offer, during which the shares were traded on a regulated market; or on the basis of the average market price from a shorter period if the shares were traded on a regulated market for less than the period specified in the point above; for shares whose value cannot be determined pursuant to either point above, their value shall be determined on the basis of their fair value. Only the following financial instruments may be acquired in exchange for shares tendered in the tender offer to exchange shares in case of a tender (i) to increase a shareholding by more than 5% within 12 months or (ii) to increase a shareholding by more than 10% within a period shorter than 60 days or (iii) to exceed the threshold of 33%: dematerialised shares in another company, depository receipts, mortgage bonds; or treasury bonds. In exchange for shares tendered in the tender offer to exchange shares as a consequence of 66 % of the total votes in a public company being exceeded, only dematerialized shares in another company or other dematerialized transferable securities carrying voting right in the company can be offered. If the tender offer is made for the remaining shares in a company, the terms of a tender offer must include an option for the shareholders accepting the offer to sell the shares. Conditional tender offer Tender offers may be conditional or unconditional. The most common conditions are: Offer document acceptance of the tender offer at a minimum level (for example, while bidding for a 66% threshold, the bidder may make a reservation that it will not be bound by the tender offer unless a certain amount of shares will be subscribed); passing of a certain resolution by the competent organ of the target (for example, with respect to change of the statute). The bidder must publish an offer document which contains the information necessary to enable the shareholders of the target company to reach a properly informed decision on the tender offer. The offer document must, among other things, contain information on: the identity of the bidder and its registered office (place of residence); _3_ takeover guide - poland page 7

10 the securities covered by the tender offer and indication of the amount of votes one share carries; the percentage amount of votes from shares covered by the tender offer; the consideration offered for shares covered by the tender offer; the time allowed for acceptance of the offer; the bidder s intention with regard to the target company; the indication of the places where the subscription for shares will take place; the legal grounds for the tender offer; an indication whether the bidder is a parent company or subsidiary of the target company; and an indication whether the tender offer may be abandoned if another entity announces a tender offer for the same shares. Collateral A tender offer shall be announced after collateral is created for not less than 100% of the value of shares covered by the tender offer. The collateral should be documented with a certificate issued by a bank or another financial institution which granted, or intermediated in the granting of, the collateral. Time allowed for accepting the offer The subscription period regarding the shares under a tender offer connected with exceeding the 66% thresholds is at least 30 days and no longer than 70 days. The subscription period regarding the shares under the tender offer in other cases is at least 14 days and no longer than 70 days. In the period between the notification referred to above and the closing of the tender offer, the entity obligated to make the tender offer and its subsidiary or parent company: may acquire shares in the company whose shares are under the tender offer only as a part of the tender offer and in a manner defined therein; may not dispose of shares in the company whose shares are under the tender offer, or enter into any agreement under which they would be obliged to dispose of the shares, during the tender offer. A tender offer may not be abandoned, unless another entity announces a tender offer for the same shares after the first tender offer is announced. A tender offer for the remaining shares in a given company may be abandoned only if another entity announces a tender offer for the remaining shares in the company at a price not lower than the price of the first tender offer. Opinion of the target board In case of a subscription of shares under a tender offer connected with going over the 33% or 66% thresholds, the target company must, no later than two working days prior to the opening of the subscription, disclose to the Commission and the public the position of its Management Board on the announced tender offer and reasons for such a position _3_ takeover guide - poland page 8

11 The Management Board s position shall be disclosed simultaneously to representatives of employee associations active in the company, and if there are no such associations directly to the employees. The Management Board s position, based on the information that the entity under an obligation to announce the tender offer conveyed in the tender offer, must include in particular: its opinion on the effect of the tender offer on the company s interests, including employment within the company; the entity s strategic plans in relation to the company and their likely effect on the company s employment and location of the company s business; as well as its opinion on whether the price proposed in the tender offer reflects the company s fair value, with the proviso that such fair value may not be determined solely on the basis of the price at which the company shares were traded to that date. Other relevant provisions A tender offer must be announced and carried out through the agency of an entity conducting brokerage activities in Poland. This entity is obliged within no later than fourteen working days before the opening of the subscription period, to simultaneously notify the Commission and the company operating on the regulated market on which given shares are listed, of the intention to announce the tender offer. A copy of the tender offer must be attached to the notification. ELIMINATING THE MINORITY AFTER A TAKEOVER The Act provides for squeeze-out, enabling a shareholder in a public company who individually or jointly with its subsidiaries or parent companies has reached or exceeded 90% of the total vote in the company, has a right to demand within three months from reaching or exceeding this threshold, that the other shareholder(s) sell all the shares held in the company (mandatory buyout). An acquisition of shares in a mandatory buyout does not require the consent of any shareholder to whom the demand is addressed. A mandatory buyout is announced after collateral is created for not less than 100% value of the shares covered by the mandatory buyout. The collateral should be documented in a certificate issued by a bank or another financial institution which granted, or intermediated in granting of the collateral. A mandatory buyout must be announced and carried out through the agency of an entity conducting brokerage activities in Poland. This entity shall be obliged, not later than 14 business days prior to the commencement of the mandatory buyout, to simultaneously notify the Commission and the company operating on the regulated market on which given shares are listed, or if the company shares are listed on more than one regulated market all such companies, of the intent to announce the mandatory buyout. Information on the mandatory buyout must be attached to the notification. An announced mandatory buyout cannot be abandoned. The right to squeeze-out is combined with the right to sell-out enabling a shareholder in a public company to demand that its shares be acquired by another shareholder who reaches or exceeds 90% of the total vote in the company. Such demand shall be made in writing within three months from the date on which the threshold has been reached or exceeded by the shareholder. If the information on reaching or exceeding the threshold was not communicated to the public, the deadline for _3_ takeover guide - poland page 9

12 submitting the demand for the sell-out runs from the date on which the shareholder(s) knew or could have known if they had acted with due diligence that the threshold had been reached or exceeded. The obligation to respond, within 30 days from the date of the demand, rests jointly and severally on the shareholder who reaches or exceeds 90% of the total votes, as well as its subsidiaries and parent companies. The consideration for both the squeeze-out and sell-out share meets the requirements for consideration related to a tender offer referred to above, however if the 90% threshold has been reached as a result of a tender offer for the subscription for acquisition of shares or exchange of all remaining shares of the public company, the price of the mandatory buyout may not be lower than the price offered in the subscription. THE REGULATORY MAZE IMPORTANT DETAILS Pre-bid discussions with major shareholders and lock-up agreements Pre-bid agreements between a potential investor and the shareholders of the target are not explicitly regulated in Polish legislation. However, as freedom of contracts is a general rule in Polish civil law, it is feasible to conclude pre-bid agreements, as long as the contents or the purpose of the agreement do not contradict the nature of the relationship, statutory law and the social principles. In practice, agreements with the major shareholders placing them under an obligation to sell shares subject to the tender offer are common. Pre-bid discussions with target The pre-bid discussions between the target and the potential acquirer are not prohibited, although they are not explicitly provided by law. Due diligence and insider trading There are no legal requirements relating to due diligence enquiries that the bidder is obliged to make. However, it is strongly advisable to carry out a thorough and precise due diligence. Certain information is available to the general public, including basic corporate data (at the Register of Entrepreneurs of the National Court Register), information contained in the prospectus, obligatory current and periodical information provided by a public company (publicly available via the Polish Press Agency s website additional information is available at the WSX or the Commission s websites. Careful consideration should be given as to whether purchasing or increasing a stake in the target will result in an insider dealing offence under the Act on Trading in Financial Instruments. As "insiders" can also be shareholders, it is important for those holding such positions not to use secret information while increasing the participation in the public company. In particular, the use of price-sensitive information relating to the shares or their sale or purchase, until the information has been made public, is prohibited and is punishable by criminal sanctions and penalties under civil law. Implementation Agreement and break fees Although possible under the law, it is rare to have an implementation agreement understood as an agreement between the bidder and the target company on the public market. However, the bidder can be required by the target to enter into a confidentiality agreement to protect information obtained in the course of a due diligence conducted with the consent of the target _3_ takeover guide - poland page 10

13 Polish law does not currently regulate the break fees, which are fees paid by the target company to the bidder if the tender offer is not successful. Under the freedom of contracts rule their use is not generally prohibited. However, their use is not common practice. Pre-bid announcements and confidentiality The tender offer is announced and conducted through a brokerage house or a bank conducting brokerage activity (Intermediary), which must have informed the Commission and, depending on where the relevant shares are traded, either the WSX or the company conducting the over-the-counter market, of its intention to make an announcement. Having notified of this, the Intermediary must immediately but no later than within 24 hours disclose the contents of the offer to an information agency. The contents of the offer should also be published in at least one national newspaper. Furthermore, the Intermediary has a duty to disclose the contents of the tender offer in the locations where the subscription for the shares can be effected. The content of the offer is protected under the Act on Trading in Financial Instruments both as a professional secret and also as insider information. Disclosing such information and/or using this may result in criminal sanctions. Pre-bid purchases The share price proposed in the tender offer may not be lower than the highest price paid for the shares tendered in the tender offer by the bidder, its subsidiary or parent company within 12 months preceding the announcement of the tender offer. Purchases during offer period In the period between the notification to the Commission of the intent to make a tender offer and the closing of the tender offer (offer period), the bidder or its subsidiaries or parent companies may acquire shares in the company whose shares are under the tender offer only as a part of the tender offer and in a manner defined therein and may not indirectly acquire or sell shares in that company. Additional benefits to some shareholders Giving benefits to target shareholders during the tender offer is not allowed, although during the offer period the investor may carry out a minor correction to the price. Furthermore, a shareholder who, within six months from a tender offer made for all the remaining shares (in connection with the excess of 66%), acquires further shares in the company at a price higher than the price set in the tender offer otherwise than by way of a tender offer or as a result of a sell-out, must as a rule, within one month from the acquisition, pay the difference in the share price to all persons who sold the shares by accepting the tender offer. Competing bids Making a competing bid does not result in an alteration of the original tender offer. However, the bidder may withdraw its offer, if a counter offer has been made. The reservation of the withdrawal shall be made by the bidder in the original offer. Furthermore, a tender offer for the remaining shares in the target company may be withdrawn only if another entity announces an offer for the remaining shares in the company at a price not lower than the price of the first tender offer. Final and best offers It is possible to call the tender offer a Final and best offer as long as the statutory provisions regarding pricing are observed _3_ takeover guide - poland page 11

14 Selling down during an offer During an offer period neither the bidder nor its subsidiary or parent company may dispose of shares in the company whose shares are under the tender offer or enter into agreements which would oblige them to sell those shares during the offer period. Tax and accounting issues The sale of shares is not subject to VAT, nor subject to a transaction tax at the rate of 1% since transactions concluded through the brokerage house are excluded from this obligation. THE LIFECYCLE OF A TAKEOVER Timetable and documents for a Market bid Date Action 1 st August bidder s notification to the Polish Financial Supervisory Commission and the company operating on a regulated market on which given shares are listed of the intention to announce the tender offer disclosure to the information agency of the tender offer (no later than 24 hours from the notification) 2 nd August publication of the tender offer 16 th August deadline for the Polish Financial Supervisory Commission to request that within a specified period of not less than two days, the tender offer be amended or supplemented as necessary or that clarification on its wording be provided 19 th August deadline for the Management Board of the target company to disclose their position on the announced tender offer 21 st August earliest date on which the bidder may open the subscription period 23 rd September 4 th September 20 th September deadline for the bidder to open the subscription period earliest date on which the bidder may close the subscription period (opened on 21 st August) in case of an excess of 33% earliest date on which the bidder may close the subscription period (opened on 21 st August) in case of an excess of 66% 7 th October earliest date on which the bidder may close the subscription period (opened on 23 rd September) in case of an excess of 33% 23 rd October earliest date on which the bidder may close the subscription period (opened on 23 rd September) in case of an excess of 66% 30 th last day of the subscription period (opened on 21 st August) regardless of the _3_ takeover guide - poland page 12

15 October 2 nd December threshold being exceeded last day of the subscription period (opened on 23 rd September) regardless of the threshold being exceeded NOTE - the timetable assumes that: all days except Saturdays and Sundays are working days; all actions are taken on the earliest possible date. DEFENDING A TAKEOVER WHAT CAN BE DONE? What can be done? Polish law does not distinguish between hostile or friendly takeovers. Furthermore, taking defensive measures against a hostile bid is not explicitly regulated. It is a commonly accepted view that it is permissible to take any anti-takeover measures that are not illegal. In addition, the Management Board of the company are under a duty to take all the necessary measures to protect the company interests. Defensive takeover tactics fall essentially into two broad categories the pro-active kind, which operate as a deterrent to takeover attempts before they occur, and the reactive kind, which are adopted only after a tender offer is made or anticipated. Pro-active defences include: Commercial Companies Code allowing the company s Articles of Association to provide for a restriction of the voting right of a shareholder representing over onetenth of the total number of votes in the company. The votes a shareholder holds as a pledgee or usufructuary, or under another legal title shall be counted towards the total number of the votes controlled by a given shareholder. The limitation may also apply to other persons who control the votes as a pledgee, usufructuary or under another legal title. The limitation may apply only to the exercise of the voting right on shares above the limit of the votes provided for in the statutes. The Articles of Association may also provide for an accumulation of votes of the shareholders between whom a dominant or dependence relationship exists, and also provides for a reduction of such votes. In this case, the votes of the dependant company are added to the votes of the dominant company; Articles of Association may provide for personal rights to be conferred upon an individual shareholder (such rights may concern, in particular, the authorization to appoint or remove members of the Management Board or the Supervisory Board); issuing shares with special rights attached to them provided for in the Articles of Association (preference shares) or the conferring of personal rights upon an individual shareholder; statutory or contractual provisions restricting the selling of the shares; for example the Commercial Companies Code provides that a contract restricting the transferability of a share for a defined period is admissible. The period of restriction on the transferability may not exceed five years from the date of execution of the contract. Also contracts establishing the right of first refusal or other right of priority to acquire shares are admissible. The period of restriction on _3_ takeover guide - poland page 13

16 the transferability resulting from such contract must not exceed ten years from the date of execution thereof. Reactive defences include: In case of a subscription of shares under a tender offer connected with the excess of 33% or 66% thresholds, the target company must no later than two working days prior to the opening of the subscription, disclose to the Commission and the public the position of its Management Board on the announced tender offer and reasons for such a position. The Management Board s position is disclosed simultaneously to representatives of employee associations active at the company, and if there are no such associations directly to the employees. The status report of the Management Board, based on the information that the investor conveyed in the tender offer, must include in particular: its opinion on the effect of the tender offer on the company s interests (including the employment in the company); the entity s strategic plans in relation to the company and their likely effect on the employment and location of company s business; as well as its opinion on whether the price proposed in the tender offer reflects the company s fair value with the proviso that such fair value may not be determined solely on the basis of the price at which the company shares were traded to that date. The success of the planned or announced tender offer and, as a consequence, takeover of the target may be prevented in particular by: issuing new shares within the limits of the authorised capital, which results in an increase in the amount of shares that the entity announcing the tender offer must acquire in order to gain control over the company, and, as a consequence, makes the whole operation more expensive. The above means are especially effective if the issue of the new shares takes place by depriving the shareholders of their pre-emptive rights (upon the consent of the Supervisory Board) and it is addressed to the entity which the Management Board considers trustworthy; acquiring its own shares (shares issued by itself) so that the price proposed to the shareholder in the tender offer becomes less favourable; selling valuable items of the company enterprise or the assumption of a duty of considerable value in order to decrease the company s value to the entity announcing the tender offer; acquiring by the company shares or enterprises in the companies from the same sector as the bidder in order to create obstacles referred to in the anti-trust law (anti-trust defence); announcing the tender offer to the shareholders of the company which originally announced the tender offer; changing the management contracts (by the Supervisory Board acting together with the Management Board) by adding provisions granting the revoked members of the Management Board severance pay or compensation of considerable value. Defensive actions may also have another nature for example (negative advertising campaign) in order to discourage the shareholders of the company, from accepting the tender offer _3_ takeover guide - poland page 14

17 WSX Listing Rules The WSX Listing Rules do not provide for any measures to defend a takeover. Constraints on defensive conduct Where a bid is actually in progress, defensive tactics are restricted by lack of time, and by the application of Listing Requirements. Nevertheless a considerable array of defensive tactics is available. Fiduciary duties The general principle of loyalty in Polish corporate law expressly states that the Management Board must act in a manner consistent with the company s business. This means that in the case of a conflict of interests between the shareholders (who are interested in the maximal profit from the sale of shares) and the company, the Management Board must be guided by the company s interests. As a consequence, the Management Board can undertake any activities which could lead to the sale of shares. THE REGULATORS The Corporate Regulator The Commission is the main regulatory body with respect to public takeovers. The Commission s tasks include supervision of the activity of participants of trade on the capital market and to ensure these entities fulfill their obligations connected with participation. In particular, it is competent to supervise takeover offers and has the right to demand that necessary changes and supplements be made and for clarification of the tender offer. In these circumstances, subscription for sale or exchange of shares under the tender is suspended until the above demands are complied with. The Stock Exchange The WSX organises public trading in securities. However, the WSX has very limited competence in regulation and control of takeovers. The Takeovers Panel There is no private body designated by national law or expressly empowered by public authorities for the supervision of tender offers. The role of the Anti-Trust Regulator The Office of Competition and Consumer Protection ( OCCP ) is authorised to control concentrations in order to prevent a situation in which an entity dominating the market would be created or a present dominant position of an undertaking would be strengthened. For instance, the intention of taking control over an undertaking for example by way of acquisition of shares which grants a decisive influence over this undertaking is subject to the notification to the OCCP. The obligation to notify the concentration occurs in the case where combined turnover of the participating business exceeds a certain value (1,000,000,000 EUR worldwide or 50,000,000 EUR in Poland. However, as there are certain exemptions, the notification obligation should be investigated in detail in each particular case _3_ takeover guide - poland page 15