M&A | In Principle

According to the applicable regulations, in order to transfer the ownership of shares, it is necessary to have a tangible element in the form of transfer of possession of registered shares or delivery of bearer shares. The transfer of ownership of registered shares additionally requires the conclusion of an agreement between the seller and the buyer (either on the share document itself or in a separate document), while the transfer of bearer shares may take place even without the conclusion of a formal agreement, through the mere delivery of the shares. Considering the significant legal consequences of delivering a bearer instrument, it is necessary to consider how to understand the term “delivery of shares”.

Representations and warranties are a common feature in M&A transactions and derive from common law systems. The fundamental aim of representations and warranties is to properly divide risk between the seller and the buyer. In countries with an Anglo-Saxon legal system, statements made regarding the object of sale are in fact explicitly an element of ex delicto liability, as misrepresentation, and contractual liability as breach of warranty. The significance of statements of this kind in contracts governed by Polish law is not entirely clear and has been widely discussed in case law and legal literature. The conclusions reached are summarised below.

A guarantee agreement is the most widely accepted and common basis for a number of solutions used in M&A transactions. Therefore, its correct application is of fundamental importance for this practice. Meanwhile, judgments issued in recent years by the Supreme Court of Poland on the nature and normative sources of such obligations have caused doctrinal controversies and uncertainty among trade participants. It is therefore worth briefly summarising where the case law stands and the conclusions that can be drawn from it.

Recent difficult investor experiences have led to proposals for further regulatory changes aimed at increasing security and strengthening supervision of the financial market. Currently in a Sejm committee, a government bill is being read for the first time which would amend several acts, redefine the Polish Financial Supervision Authority, and impose an obligation to dematerialise some financial instruments.

A bill currently being processed by the Sejm significantly limits the right of a management board member to resign from office at any time.

As of 1 October 2018, companies will no longer prepare paper financial statements. After more than six months of implementation of the new regulations, we can make an initial assessment of their application in practice.

The proposed Act on Succession Management in Sole Proprietorships will offer new solutions for business owners. It is intended to allow the heirs to continue operating an individual business after the owner’s death.

A gap in legal provisions might mean criminal liability for management board members for not filing financial statements on time.

Amendments to the National Court Register Act which came into force on 15 March 2018 make it compulsory to register addresses for correspondence of persons associated with Polish companies with the National Court Register.

Three repealed acts, 189 amended acts, and five new acts, one containing recitals, form the Constitution for Business—the comprehensive legislative package regulating business activity in Poland.

On 30 April 2018 new laws take effect bringing to an end the long dispute over the types of businesses allowed to appoint commercial proxies. Ultimately, businesses that are natural persons will be able to appoint commercial proxies.

From 30 April 2018 the main guidelines concerning regulated business activity can be found in the new Business Act. The number of regulatory provisions affecting business activity in Poland will not decrease, but they will be spread more widely across industry-specific regulations. There are also changes favourable to business.