Energy & Infrastructure M&A 2024 Comparisons

Introduction

While the following legal practice section is focused on public companies, it is important to note that the vast majority of transactions in the energy and infrastructure market in Poland are not, in fact, conducted by public companies. The most common vehicle for these transactions is the spółka z ograniczoną odpowiedzialnością (sp. z o.o.), which is the Polish limited liability company. Almost every photovoltaic (PV) or onshore wind transaction involves the non-public acquisition of this type of company, excluding some particularities such as asset deals.

The sp. z o.o. offers several advantages, including limited liability for shareholders, flexibility in management and governance structures and tax benefits. This makes it an attractive option for both domestic and foreign investors looking to enter the Polish energy and infrastructure sectors.

There are, of course, also transactions involving public companies, such as the quite recent landmark acquisitions of Lotos and PGNiG by Orlen. These transactions are usually stand-out cases involving the largest players on the market and are less common compared to the numerous non-public acquisitions. These high-profile deals often attract significant attention and set precedents in the industry, but they are the exceptions, rather than the rule.

In summary, while public company transactions do occur and are significant when they do, the bulk of activity in Poland’s energy and infrastructure market revolves around the acquisition of sp. z o.o. companies. This focus allows for a more streamlined and flexible approach to deal-making, which is well-suited to the dynamic and evolving nature of these sectors.

Current Market

The current energy and infrastructure M&A market in Poland is moderately active, despite the challenges posed by the COVID-19 pandemic, the inflationary trends, the changes in the financing market and the geopolitical tensions in the region. Deal activity in Poland is similar to the global pace, as Poland is an attractive destination for both domestic and foreign investors, due to its stable economic growth, its strategic location, its large and diversified market, its skilled workforce and its EU membership. Post-COVID-19 activity recovery is visible, especially on the renewables market, where transactions, especially on PV portfolios, are showing a continued rise in numbers.

New start-up companies are typically incorporated in Poland, as the process is relatively simple, fast and inexpensive. The most common form of entity for start-ups is a limited liability company (spółka z ograniczoną odpowiedzialnością, or sp. z o.o.) as it offers limited liability for the shareholders, flexibility in the management and governance structure, and tax benefits. An sp. z o.o. can be incorporated online, through a notary public or through a simplified procedure using a standard template of the articles of association. The online registration takes few days in practice, while the other methods take about two weeks. The minimum share capital for an sp. z o.o. is PLN5,000 (approximately EUR1,100), which must be fully paid up before registration. The sp. z o.o. must also register with the National Court Register, the tax office, the statistical office and the social security office.

Entrepreneurs are generally advised to incorporate in Poland, unless they have specific reasons to choose another jurisdiction, such as the availability of more favourable tax regimes, access to foreign markets, the protection of intellectual property rights or the attraction of foreign investors. However, incorporating in another jurisdiction may also entail additional costs, complexities and risks, such as compliance with different legal and regulatory frameworks, exposure to foreign exchange fluctuations, potential double taxation and difficulties in enforcing contracts or resolving disputes.

As mentioned in 2.1 Establishing a New Company, the most common type of entity for start-ups in Poland is an sp. z o.o., which is a separate legal entity that can conduct business activities, enter into contracts, own assets and incur liabilities. An sp. z o.o. is governed by its articles of association, which can be tailored to the specific needs and preferences of the shareholders, and by the provisions of the Polish Commercial Companies Code. An sp. z o.o. has a two-tier management structure, consisting of a management board, which represents the company and manages its affairs, and a shareholders’ meeting, which is the supreme decision-making body of the company. An sp. z o.o. may also have a supervisory board, which oversees the management board and exercises control over the company, or an audit committee (in lieu of supervisory board), which performs similar functions (but is rarely seen). The shareholders of a sp. z o.o. are not liable for the obligations of the company.

The early-stage financing (seed investment) for start-ups in Poland is typically provided by various sources, such as local investors, government-sponsored funds or foreign investors. On the energy and infrastructure market, however, true VCs are very rarely seen. Start-ups or new entities on the market usually have the financing secured upfront.

The typical source of venture capital in Poland is a venture capital fund – a collective investment scheme that raises capital from various investors, such as institutional investors, high net worth individuals, family offices or government-sponsored funds and then invests it in start-ups with high growth potential in exchange for equity, debt or hybrid instruments. A venture capital fund is usually structured by using Luxembourg-based vehicles (some local alternatives exist, but they are not very popular). In addition, significant market share belongs to public VC funds (eg, PFR Ventures).

Home country venture capital is fairly available to start-ups in Poland, as there are many domestic venture capital funds that invest in various sectors, stages and regions of the Polish market. According to the Polish Private Equity and Venture Capital Association, the total value of venture capital investments in Poland in 2020 was EUR477 million.

Home country venture capital is also available from government-sponsored funds offering various forms of co-financing, co-investing or fund-of-funds to support the development and innovation of start-ups. The government-sponsored funds also implement various programmes and initiatives, such as Start in Poland, Scale Up, Bridge Alfa and the Smart Growth Operational Programme, which aim to foster the entrepreneurial ecosystem, facilitate access to capital and markets and promote co-operation between start-ups, research institutions and corporations.

Foreign venture capital firms are actively providing financing in Poland, although their activity is arguably less dynamic than that of the domestic firms.

There are some fairly developed standards for venture capital documentation in Poland, based on the best practices and recommendations of the Polish Private Equity and Venture Capital Association, the European Venture Capital Association and the International Venture Capital Association. The venture capital documentation in Poland typically consists of the usual agreements, such as the SHA, investment agreement, subscription agreement and loans. However, no model documents have been adopted, like the ones recommended by British Private Equity & Venture Capital Association.

Start-ups in Poland may continue to stay in the same corporate form and in the same jurisdiction as they advance in their development, or they may decide to change their corporate form or jurisdiction, depending on their strategic goals, operational needs and market opportunities. The main reasons for changes would be growth and expansion opportunities and taxation issues. Still, the Polish limited liability company (sp. z o.o.) usually remains a feasible vehicle for operations for a fairly long period in the lifetime of the company. On the other hand, there is a visible tendency to incorporate holding companies in US and/or UK (in spite of the operational company being in Poland) in order to have better access to the local market, including to investors.

When investors in a start-up in Poland are looking for a liquidity event, they, at least theoretically, may consider an initial public offering (IPO) or the sale of the company, depending on various factors, such as the market conditions, valuation expectations, growth prospects, regulatory requirements, transaction costs and timing.

It should be noted, however, that on the Polish energy and infrastructure market (especially where renewables are concerned) only the largest or most successful players tend to decide to enter the stock exchange and it is relatively uncommon for start-ups to achieve such a position within the first few years of their activity. Speaking more generally, the IPO market tends to be very cyclical, with relatively short windows of opportunity to list on favourable terms and long periods of subdued activity in between; as a result, the periods when conditions for M&A are more conducive tend to be longer.

A dual-track process, while possible, is not something that could be called a trend. In general, IPOs are rarely perceived as a real alternative to a classic M&A configuration, especially mid-market.

If the company decides list, it may pursue a listing on a home country exchange, a foreign exchange or both, depending on its strategic goals, operational needs and market opportunities. Nevertheless, Polish companies from the energy and infrastructure sectors are significantly more likely to enter the Warsaw Stock Exchange than pursue any foreign exchange.

If the company chooses to list on a foreign exchange, it may affect the feasibility of a future sale, depending on the laws and regulations of the foreign jurisdiction and the home jurisdiction, as well as the structure and terms of the transaction. The corporate law of the home country can interact in unexpected ways with capital markets law in the host country, potentially even deactivating protective mechanisms. However, Polish corporate law rules concerning squeeze-outs continue to apply to Polish companies that list in other jurisdictions instead of Poland.

If the sale of the company is chosen as a liquidity event, the sale process may be run either as an auction or as a bilateral negotiation with the chosen buyer, depending on various factors, such as market conditions, valuation expectations, growth prospects, regulatory requirements, transaction costs and timing. An auction is a process of soliciting bids from multiple potential buyers that allows the seller to create competitive tension among the bidders, to maximise the valuation and the terms of the transaction, to reduce dependence on a single outcome and to retain the flexibility and optionality of the exit strategy. A bilateral negotiation is a process of engaging with a single potential buyer that allows the seller to establish a closer and more trustful relationship with the buyer, to expedite the valuation and the terms of the transaction, to avoid the leakage of confidential information and to minimise the disruption and the distraction of the business.

The current trend in Poland, especially on the renewables market, is to conduct a sale process as an auction, as it is generally perceived as a more efficient and effective way of achieving a successful exit, especially in a highly competitive and dynamic market. However, a sale process may also be run as a bilateral negotiation, if the seller has a clear and strong preference for a specific buyer, or if the seller faces some challenges or constraints that limit the feasibility or attractiveness of an auction, such as the lack of interest or availability of multiple buyers, the complexity or sensitivity of the transaction, the urgency or confidentiality of the exit, or regulatory or contractual restrictions.

The typical transaction structure in Poland for the sale of a privately held energy and infrastructure company that has a number of VC investors is a share deal. This is a transfer of the ownership and control of the company by selling the shares in the company to the buyer. A share deal may involve the sale of the entire company or the sale of a controlling interest, depending on the objectives and preferences of the seller and the buyer, as well as the rights and obligations of the VC investors. A share deal may offer several advantages, such as the simplicity and speed of the process, the continuity and stability of the business, the transfer of all the assets and liabilities of the company, as well as the tax efficiency and optimisation of the transaction. However, a share deal may also entail some disadvantages, such as the due diligence and warranty risks, issues involving minority shareholders, regulatory and contractual approvals or consents, and potential disputes or claims arising from the transaction.

For VCs, the current trend in Poland is to sell the entire company, as it allows the seller and the VC investors to exit completely, to realise their return, to avoid the risks and challenges of running the company and to benefit from the synergies and opportunities of the buyer. Nevertheless, such VCs are barely seen on the energy and infrastructure market in Poland.

Most transactions in Poland are done as the sale of the entire company for cash, as this is the simplest and most straightforward form of consideration and allows the sellers to receive an immediate and certain payment, to avoid the risks and fluctuations of the market, and to have the flexibility and liquidity to use or reinvest the proceeds.  Cash is permissible and typically used in both a share deal and an asset deal, as well as in both an auction and a bilateral negotiation.

A stock-for-stock transaction, or a combination of stock and cash may be considered in some rather specific situations, such as when the buyer is a public company or a strategic partner, when the sellers have a long-term or synergistic vision for the company, when the market conditions or the valuation expectations are favourable or challenging, or when the tax implications or the financing options are advantageous or limited. This does not happen often on Poland’s energy and infrastructure market.

The VC structure is generally not seen as the most suitable vehicle for the development and subsequent sale of energy or infrastructure projects. A large proportion of transactions on this market are mid or upper market transactions relating to renewables (predominately PV and onshore wind), where the projects are sold while in the ready-to-build phase where the earn-out mechanism is of key importance. In any case, VCs backing the representations and warranties are rarely seen.

In principle however, it is expected that the seller stands behind the representations and warranties. Depending on the structure, its liability may be secured with parent guarantees rather than escrow/holdbacks (which does not seem to be a preferred scenario, also taking into the account the ineffective tax implications).

W&I policies are more and more common in Poland, including in particular on the energy and infrastructure market. One may see a growing number of policies being placed, in particular in the auction/bilateral process with sophisticated financial investors. Also, many auctions run in Poland and concerning PVs/onshore/offshore require the purchaser to obtain a W&I policy, securing at least non-fundamental warranties.

Spin-offs are not very customary in Poland in the energy and infrastructure space, as they may involve some challenges or constraints such as the complexity and cost of the process, the regulatory and contractual approvals or consents, the tax and accounting implications, as well as the potential disputes or claims arising from the transaction. However, spin-offs may also occur in certain situations, such as when the company has a strategic or financial reason to separate a part of its business, in order to focus on its core activities, for example, or to unlock the value or potential of the business, to attract new investors or partners, to comply with legal or regulatory requirements, or to facilitate a future sale or merger.

Spin-offs in Poland can be structured as a tax-free transaction at the corporate level and at shareholder level, if they meet the key requirements for a tax-free spin-off under the provisions of the Polish Corporate Income Tax Act and the Polish Personal Income Tax Act, as well as on the basis of the EU Merger Directive. The key requirements for a tax-free spin-off are as follows.

• Legal form – the company and the business must have the same legal form, which must be a corporate form, such as an sp. z o.o. or an S.A.
• Share exchange – the shareholders of the company must receive the shares of the business in exchange for their shares in the company, and the share exchange ratio must reflect the net asset value of the company and the business.
• Continuity of ownership – the shareholders of the company must retain their shares of the company and the business for at least two years after the spin-off, unless they sell them to another shareholder of the company or the business, or unless they are subject to a mandatory offer or a squeeze-out.
• Continuity of business – the company and the business must continue to carry on their respective activities for at least two years after the spin-off, unless they are subject to a merger, a division, a transformation or a liquidation.
• Business purpose – the spin-off must have a valid business purpose and must not have as its main or one of its main objectives the avoidance or reduction of tax.

If the spin-off does not meet the key requirements for a tax-free spin-off, it may be subject to tax at the corporate level and shareholder level, as follows.

• Corporate level – the company and the business may be subject to corporate income tax at a rate of 19% or 9% (for small taxpayers and start-ups in the first year of activity) on the difference between the market value and the book value of the assets and liabilities transferred in the spin-off, unless they can prove that the market value is equal to or lower than the book value. The company and the business may also be subject to value added tax at a rate of 23%, 8%, 5% or 0% on the supply of goods or services in the spin-off, unless they can apply the exemption for the transfer of an enterprise or an organised part of an enterprise.
• Shareholder level – the shareholders of the company may be subject to personal income tax or corporate income tax at a rate of 19% or 0% (for qualified investors) on the difference between the market value and the book value of the shares in the company and the business received in the spin-off, unless they can prove that the market value is equal to or lower than the book value. The shareholders of the company may also be subject to capital gains tax at a rate of 19% on the sale of the shares of the company or the business after the spin-off, unless they can benefit from the participation exemption or the double taxation treaty.

A spin-off followed by a business combination is possible in Poland if it meets the key requirements for a tax-free spin-off and a tax-free business combination, which are based on the provisions of the Polish Corporate Income Tax Act and the Polish Personal Income Tax Act, as well as under the EU Merger Directive.

The typical timing for a spin-off in Poland may vary, depending on the complexity and the size of the transaction, the legal and regulatory requirements, the contractual and operational arrangements, as well as the co-operation and co-ordination of the parties. However, a general estimate of the timing for a spin-off in Poland would be between six months and a year.

The parties may apply for a tax ruling before or after the spin-off, but it is advisable to apply before the spin-off, as it may provide more benefits and security for the parties. The parties may apply for a tax ruling jointly or separately, depending on their objectives and preferences. The parties may apply for a tax ruling to the relevant tax office or the Ministry of Finance, depending on the type and the level of the ruling. The parties may apply for a tax ruling by submitting a written application, which must contain the identification and the representation of the applicant, the description and the documentation of the factual situation or transaction, the legal basis and the justification of the tax treatment or the tax consequences, and the payment of the stamp duty. The tax authority should issue the ruling within three months from the date of the application, or within six months if the application is incomplete or complex. The tax authority may issue a positive, negative or conditional ruling, depending on the assessment and the evaluation of the application. The tax authority ruling is binding on the tax authority and the applicant, as long as the factual situation or transaction is consistent with the application and the tax law is not changed or interpreted differently by the courts or the legislature.

The reporting thresholds for the acquisition of an interest in a public company in Poland are 5%, 10%, 15%, 20%, 25%, 33%, 33 1/3%, 50%, 75% or 90% of the total voting rights in the company, according to the provisions of the Polish Act on Public Offerings, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies (the “Act on Public Offerings”). The reporting obligation applies to both direct and indirect acquisitions of an interest in a public company, as well as to acquisitions of an interest in a public company through financial instruments that grant the right to acquire or dispose of the shares in the company. The reporting obligation also applies to both domestic and foreign acquisitions of an interest in a public company, as well as to acquisitions of an interest in a public company by individuals, legal entities or other entities. If the acquirer has more than 10% of votes, then every 2% change needs to be reported, and if it has 33% of votes, then every 1% of change is reportable.

The timing of the reporting obligation is within four business days from the date of acquiring an interest in a public company, or from the date of the change in circumstances that affect the calculation of the interest in a public company. The reporting obligation is made by submitting a notification to the Polish Financial Supervision Authority and to the public company, as well as by publishing the notification in the manner specified for the transmission of current reports by the public company. The notification must contain the identification and the representation of the acquirer, the number and the percentage of the shares and the voting rights in the public company, the date and the method of acquiring the interest in the public company, and the purpose, as well as the intention of the acquisition of the interest in the public company.

The bidder does not need to state the purpose of the acquisition of the stake or the bidder’s plans or intentions with respect to the public company. The bidder is required to launch a mandatory tender offer for all shares if the bidder acquires a stake of 50% or more of the total voting rights in the public company, within three months from the date of the acquisition of the stake.

The mandatory offer threshold in Poland is 50% of the total voting rights in a public company, according to the provisions of the Act on Public Offerings. The mandatory offer obligation applies to both direct and indirect acquisitions of an interest in a public company. The mandatory offer obligation also applies to both domestic and foreign acquisitions of an interest in a public company, as well as to acquisitions of an interest in a public company by individuals, legal entities or other entities.

The most common transaction structure for the acquisition of a public company in Poland is a tender offer.

A merger (or a similar structure) is available in Poland for acquisitions of public companies, but it is rarely used. Public company mergers and other similar structures are most often used when the surviving entity and the absorbed entity are both listed on the stock exchange – this has been seen especially in the banking sector when two banks combine, or when a “healthy” segment is carved out from a bank, which is then left as a “bad bank” with legacy assets. Public company mergers involve some challenges and constraints, such as the complexity and cost of the process, the regulatory and contractual approvals or consents and the tax and accounting implications, which means that these structures are typically only used when the alternatives are even more problematic.

Public company acquisitions in Poland are more typically structured as cash transactions with tender offers. For a merger, the cash component of the consideration cannot exceed 10%, so there are no real all-cash mergers in Poland (though equivalent results can be obtained with additional structuring).

There is a minimum price requirement for a tender offer in Poland. If any of the company’s shares are traded on a regulated market, the price cannot be lower than:

• the average market price:
1. from the three-month period before the notification of the intention to announce the tender was sent, during which these shares were traded on the main market;
2. from the six-month period before the notification of the intention to announce the tender was sent, during which these shares were traded on the main market; and
• the average market price from a shorter period – if the shares of the company were traded on the main market for a shorter period than specified in the second sub-bullet point above.

If it is not possible to determine the price according to the above mechanism, it cannot be lower than fair value.

The price of the shares offered in the tender cannot also be lower than:

• the highest price that the bidder or its affiliates paid or agreed to pay in the 12-month period before the notification of the intention to announce the tender was sent; or
• the highest value of things or rights that the bidder or its affiliates gave or agreed to give in exchange for the shares subject to the tender in the 12-month period before the notification of the intention to announce the tender was sent.

There is no minimum price requirement for a merger in Poland, as the price is determined by the valuation and allocation of the assets and liabilities of the entities, and by the share exchange ratio of the entities, which are based on the net asset value of the entities and which are subject to the approval of the shareholders of the entities.

It is not typical to use contingent value rights or other mechanisms to bridge value gaps between the parties in transactions with high valuation uncertainty in Poland, as they may involve some challenges or constraints, such as the availability and reliability of the information, the measurement and verification of the events or conditions, the enforcement and protection of the rights and the accounting and reporting of the payments or benefits.

The conditions for a tender offer in Poland include minimum acceptance conditions, regulatory approval conditions (most commonly merger control) and certain corporate actions by the target company. The list of permissible conditions is stipulated by law.

It is customary in Poland to enter into a transaction agreement in connection with the tender offer or the business combination, which is a binding contract that governs the terms and conditions of the transaction, such as the price, the structure, the form, the timing and the closing of the transaction. The transaction agreement may also include representations and warranties, indemnities and covenants from the bidder and the seller, as well as conditions precedent, termination rights and dispute resolution mechanisms. The target company typically does not stand behind representations and warranties; this would be done by the sellers. If sellers are unwilling, members of the management board may sometimes provide this purely for the purposes of W&I insurance.

The obligations that the public company can undertake in the transaction agreement may vary, depending on the type and the stage of the transaction, as well as on the negotiation and agreement of the parties. The law explicitly stipulates that a tender offer may be conditional upon the target’s board or shareholders passing a specified resolution, or the target entering into a specified contract.

The minimum acceptance conditions must be lower than 50% and may be waived or modified by the bidder, subject to public notification.

Squeeze-out mechanisms in Poland are based on the provisions of the Act on Public Offerings, as well as on the regulations of the Polish Financial Supervision Authority and the stock exchange. The main squeeze-out mechanism is as follows (squeeze-out following a tender offer): a bidder who holds at least 95% of the total voting rights in a public company, as a result of a successful tender offer, can acquire the remaining shares of the minority shareholders, within three months from the date of the acquisition of the stake, by offering a fair price for the shares, which must not be lower than the price offered in the tender offer, and by publishing and announcing the squeeze-out in the manner specified by the law and the regulations. A squeeze-out following a tender offer entails the delisting of the public company from the stock exchange.

The required ownership threshold to buy out minority shareholders is 95%.

The announcement of the tender offer is made after securing in favour of the intermediary entity a security in the amount of not lower than 100% of the value of the shares that are to be the subject of the tender offer. The established security ensures the possibility of satisfying oneself from the subject of the security immediately after the expiry of the deadline for acquiring the shares covered by the subscriptions made in response to the tender offer. The establishment of the security is documented by a certificate of the bank or another financial institution providing the security or intermediating in its provision.

The types of deal protection measures that a target company can grant in Poland may include non-solicitation clauses and, under certain conditions, a break-up fee. Matching rights or force-the-vote are not frequently used.

Domination and profit-sharing agreements are not common in Poland. However, in practice, holding around 50% of voting rights in a company is normally sufficient to establish full control over appointments to management and supervisory boards, and to adopt most resolutions at the shareholders’ meeting.

Irrevocable commitments are quite common in Poland and are generally perceived as a reasonable instrument.

They can sometimes provide an “out” for the principal shareholder of the target company, if a superior offer is made by another potential bidder during the period of the tender offer.

A tender offer is subject to review by the securities regulator, which may demand that changes are introduced if it feels that the tender offer is non-compliant. The regulator has ten business days to make the review, which can be extended up to 15 business days. The tender offer cannot be published if the regulator’s demands are not met.

The price itself is not subject to approval, unless it is below the statutory floors. Buyers can apply to the regulator to approve a lower-than-floor price in the case of demergers, an extraordinary deterioration of the target’s results, or the risk of the target’s insolvency.

The subscription period in a voluntary tender offer can be extended by the time necessary to obtain the required permit or consent, or the time necessary for the non-objection right of the competition authority (UOKiK). However, this extension cannot exceed 120 days if the specified period in the tender offer for obtaining the permit or consent or for the non-objection has expired without result.

Since merger control notifications are published by the Polish competition authority, typically buyers initiate merger control after the tender offer has been launched to ensure undisturbed pricing on the market.

Setting up and starting to operate a new company in certain sectors of the energy and infrastructure industry in Poland is subject to specific regulations, as these sectors are considered as strategic, sensitive or regulated by the Polish law and the EU law, and as they may affect the public interest, national security, market competition, environmental protection or social welfare. The specific regulations may vary depending on the sector and the activity of the company, but they may include the following.

• Licensing and authorisation – the company may need to obtain a licence or permit from the relevant authority or regulator, such as the Energy Regulatory Office, the Office of Electronic Communications, the Office of Rail Transport, the Civil Aviation Authority, the Maritime Office, the Road Transport Inspection, the Ministry of Climate and Environment, the Ministry of Infrastructure, the Ministry of Development, Labour and Technology, or the Polish Financial Supervision Authority, to conduct the activity of the company, such as the generation, transmission, distribution, trade or supply of electricity, gas, heat, oil or renewable energy, the provision of telecommunication, postal, rail, air, maritime or road services, the construction, operation, maintenance or management of energy or infrastructure facilities or networks, or the issue, trade or settlement of financial instruments related to energy or infrastructure. The licence or permit may require the company to meet certain criteria and conditions, such as legal form, share capital, ownership structure, management and governance, technical and financial capabilities, quality and safety standards, or environmental and social obligations, and may be subject to the supervision and inspection of the authority or regulator.
• Foreign investment clearance – the company may need to obtain clearance from the Ministry of Development, Labour and Technology, or from the President of the Office of Competition and Consumer Protection, if the company is subject to the foreign investment screening regime, which applies to the acquisition of a significant stake or a significant influence in a company that operates in a strategic or sensitive sector, such as energy, telecommunications, transport, water, health, defence or public order, or which owns or uses a strategic or sensitive asset, such as a critical infrastructure, a critical technology, land or a building of strategic importance, or classified information. The foreign investment screening regime may require the company to notify and obtain the approval of the authority or the regulator, before or after the acquisition of the stake or the influence, and may allow the authority or the regulator to block, restrict or impose conditions on the acquisition, if the acquisition poses a threat to public order, public security or public health.
• National security clearance – the company may need to obtain clearance from the Internal Security Agency or the Military Counterintelligence Service, if the company is subject to the national security screening regime, which applies to the access or use of classified information or classified materials by a company that operates in a sector or an activity that is related to the national security or the national defence, such as energy, telecommunications, transport, defence or public order sector or activity. The national security screening regime may require the company to obtain a security certificate or a security clearance confirming that the company and its personnel meet the requirements and the standards for the protection of classified information or classified materials, and which may be subject to the verification and revocation of the authority or the regulator.

The time it takes to obtain the necessary permits and approvals may vary depending on the sector and the activity of the company, the type and level of the permit and approval, the authority and the regulator that issues the permit and approval, and the co-operation and co-ordination of the parties. However, a general estimate of the time it takes to obtain the necessary permits and approvals may be as follows.

• Licensing and authorisation – this may take about one to six months, depending on the complexity and the scope of the licence or permit, the criteria and the conditions of the licence or permit, the process and the procedure of the licence or permit, and the availability and the readiness of the company and the authority or the regulator.
• Foreign investment clearance – this may take about one to four months, depending on the sector and the activity of the company, the stake or the influence of the foreign investor, the notification and approval of the authority or the regulator and the assessment and evaluation of the authority or the regulator.
• National security clearance – this may take about one to six months, depending on the level and the category of the classified information or the classified materials, the security certificate or the security clearance of the company and its personnel, the verification and revocation of the authority or the regulator, and the co-operation and co-ordination of the company and the authority or the regulator.

The securities regulator in Poland is the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, PFSA), which is a public administrative body that supervises and regulates the financial market, including the securities market, the banking market, the insurance market, the pension market and the payment market.

There are some restrictions on foreign investments in Poland, based on the provisions of the Polish Act on the Control of Certain Investments, the Polish Act on the Protection of Classified Information, and the EU Regulation on the Screening of Foreign Direct Investments. The restrictions on foreign investment in Poland may apply to the acquisition of a significant stake or a significant influence in a company that operates in a strategic or sensitive sector, such as energy, telecommunications, transport, water, health, defence or public order, or which owns or uses a strategic or sensitive asset such as critical infrastructure, critical technology, land or a building of strategic importance, or classified information. The restrictions on foreign investment in Poland may also apply to the access or use of classified information or classified materials by a company that operates in a sector or an activity that is related to national security. These usually apply to EU entities.

There is no general national security review of acquisitions in Poland, but certain sectors are subject to specific regulations that may require prior approval or notification of the relevant authorities. These sectors include defence, energy, telecommunications, banking, insurance, media, aviation and railways. There are also export control regulations that apply to the export, import, transit and transfer of dual-use items, military equipment and technology, and certain goods and services related to weapons and arms.

The basic antitrust filing requirement in Poland is to notify the Office of Competition and Consumer Protection (OCCP) of a concentration that meets the following thresholds: (i) the combined turnover of the bidder together with its affiliated entities and the target together with its subsidiaries exceeded, in the preceding financial year, EUR50 million in Poland or EUR1 billion worldwide; and (ii) the turnover of the target together with its subsidiaries for any of two preceding financial years exceeded EUR10 million in Poland. The notification must be made before the implementation of the concentration. The OCCP has 30 days to issue a decision, which can be extended by an additional four months if the concentration raises serious doubts as to its compatibility with the competition rules.  The OCCP can impose remedies or prohibit the concentration if it finds that it would significantly impede effective competition in the relevant market.

Poland’s labour law regulations are generally similar to those in other European jurisdictions. However, when an employer transfers a work establishment or part of it to another employer, there are some specific regulations that acquirers need to be aware of: (i) if there are no trade unions at the employers’ establishments, both the existing and the new employer must inform their employees in writing in advance of the expected date, reasons, economic and social consequences of the transfer, and any planned actions affecting the employees’ employment conditions; (ii) if there are trade unions at the employers’ establishments, the employers must notify all the trade unions in writing in advance of the information listed in point (i) instead of informing the employees directly; (iii) if the existing or the new employer plans to take actions that affect employment conditions, they must negotiate with the representative trade unions to try to reach an agreement on this matter (the trade unions’ demands are not binding on the employer); and (iv) informing and consulting the works council about the transfer may be required, if there is a works council at the employer.

Acquirers should also remember that: (i) the new employer who becomes the employer as a result of the transfer must respect the terms and conditions of the employment contracts and the declarations of intent made by the previous employer to the transferred employees (including internal regulations such as work or remuneration rules); (ii) if the new employer wants to change the content of the employment relationship, it must use the legal tools available to modify the mutual rights and obligations of the parties to the employment relationship (by terminating or changing the employees’ terms and conditions of employment or pay, or by reaching a mutual agreement); and (iii) the employer must follow the rules on collective redundancies, if they apply.

Please note that transferring shares (stock) does not change the employer and is not considered a transfer of a work establishment.

Poland does not have currency control regulations or require central bank approval for an M&A transaction. However, certain transactions involving foreign exchange or foreign entities may be subject to reporting obligations to the National Bank of Poland (NBP) for statistical purposes.

One of the most significant legal developments in Poland in the past three years related to energy and infrastructure M&A has been the adoption of the Act on the Promotion of Electricity Generation in Offshore Wind Farms in January 2021. This act provides a legal framework and incentives for the development of offshore wind energy projects in the Polish Exclusive Economic Zone of the Baltic Sea. The act introduces a support scheme based on a two-stage contract for difference mechanism, whereby investors can obtain a guaranteed price for the electricity generated by the offshore wind farms for 25 years. The act also sets out the rules and procedures for obtaining permits, grid connection, environmental protection, spatial planning and public procurement for offshore wind energy projects.

Quite recently, a draft amendment to the Act on Investments in Wind Farms of 20 May 2016 (the “Wind Farm Investment Act”) was introduced. The proposal also includes changes to other laws, including the Act on Renewable Energy Sources of 20 February 2015. The amendment proposes mechanisms aimed at easing current regulations regarding the location of wind farms, the process of passing local planning laws, and settlements of the negative balance under the auction subsidy scheme. This would also revoke the much-loathed distance principle and would set a new minimum distance between wind farms and residential buildings at 500 metres, representing a further liberalisation from the current 700-metre minimum distance. This 500-metre minimum distance will also be taken into account by authorities issuing environmental permits for wind farms. This is much anticipated by the market and can lead to a new surge of onshore wind projects and, subsequently, transactions on this market.

A public company can provide due diligence information to bidders in Poland, subject to the principles of equal treatment, confidentiality and the protection of insider information. The level of due diligence that the board of directors can allow depends on the nature and scope of the transaction, the interests of the company and its shareholders, as well as the applicable legal and regulatory requirements.

Usually, however, energy and infrastructure companies are not public and so are generally free to form the due diligence process as they please.

Polish data privacy rules are based on the EU General Data Protection Regulation (GDPR) and the Polish Act on Personal Data Protection. The main restrictions include: (i) the obligation to obtain the consent of data subjects or rely on another legal basis for the processing of their personal data; (ii) the obligation to inform data subjects about the purposes, scope, recipients and rights of the data processing; (iii) the obligation to ensure the security and confidentiality of personal data and prevent any unauthorised access, disclosure or transfer; and (iv) the obligation to comply with data protection principles, such as data minimisation, accuracy, storage limitation and accountability.

The bidder has to notify the PFSA 17 business days before the public announcement of the tender offer, and within 24 hours of that notification must publish in the press details of the proposed price and number of shares covered by the offer. Crossing the 50% threshold triggers a mandatory offer. Until the decision to launch an offer or cross the threshold is made, the bidder does not have such disclosure obligations.

This does not concern – for the avoidance of any doubt – transactions of not public nature (ie, not involving public companies).

Stock-for-stock business combinations structured as a merger are exempt from prospectus requirements under EU Regulation 2017/1129 which applies in Poland and other EU member states. A special merger document must be published to facilitate shareholder decision-making. If the surviving entity is not listed on a regulated market or multilateral trading facility in the EU, the merger must be cleared by the regulator similarly to a delisting process.

In a cash transaction, the bidder generally does not need to produce financial statements (pro forma or otherwise) in its disclosure documents.

In a stock-for-stock transaction, the bidder needs to produce a merger proxy statement or a merger prospectus, which typically includes financial statements and financial information pro forma.

Parties have to file copies of certain transaction documents with the PFSA and competent courts in Poland, as well as publish them on their websites and in the press. Documents subject to disclosure include, depending on the transaction, the bid (tender offer) document, the (de)merger plan, the prospectus, the fairness opinion, the board’s opinion concerning the bid price and the shareholders’ resolutions. The investment agreement or share purchase agreement does not need to be published nor filed with the regulator.

The information-sharing obligation does not concern, for the avoidance of any doubt, transactions of not public nature (ie, not involving public companies).

The principal duties of directors (concerning the zarząd – the management board) in a business combination in Poland are to act in the best interests of the company and its shareholders, to exercise due care and diligence, to avoid conflicts of interest, to comply with the law and the company’s articles of association, and to disclose any material information to the shareholders and the public. Directors’ duties are owed primarily to the company and its shareholders, but they must also take into account the interests of other stakeholders, such as employees, creditors, customers and the public.

Apart from the management board, Polish companies may have a supervisory board. It is appointed by the general meeting of shareholders, following the articles of association or statute. In a limited liability company, the supervisory board is only mandatory if the share capital exceeds PLN500,000 and there are more than 25 shareholders. In joint stock companies, the appointment is mandatory regardless of the number of shareholders. Only joint stock companies may be public. Supervisory board members are obliged to act in the best interests of the company, which means making decisions that consider the interests of all the shareholders. This includes ensuring transparency in the management board’s actions and monitoring the company’s strategic goals. The role of the supervisory board has been strengthened in recent legislation (2022), obliging the management board to inform the supervisory board on a wide array of issues and to get consent for some transactions.

It not common for boards of directors to establish special or ad hoc committees in business combinations in Poland, unless there are specific circumstances that require such committees, such as conflicts of interest, complex transactions or sensitive issues.

The board is expected to be actively involved in negotiations and to defend the company’s interests in a business combination in Poland, unless the shareholders decide otherwise. The board’s role is not limited to recommending in favour of or against the proposed transaction, but it also includes providing information, opinions and reports to the shareholders and the public, seeking independent advice, supervising the due diligence process and ensuring compliance with legal and regulatory requirements. It is not common to have shareholder litigation challenging the board’s decision to recommend an M&A transaction in Poland.

It is customary for a board of directors to seek independent outside advice in connection with a takeover or a business combination in Poland, especially if the transaction is complex, contested or involves conflicts of interest. The independent outside advice may include legal, financial, tax, accounting, valuation, technical or environmental advice, depending on the nature and scope of the transaction.