Technology M&A 2024 Comparisons

During the first stages of the COVID-19 pandemic, the market initially stopped and slowed down, but later regained momentum. At the same time, the pandemic increased interest in, for example, the video games market.

It is difficult to assess to what extent the conflict in Ukraine affected the M&A market in Poland. Overall, it likely contributed to a slowdown in the entire region’s M&A market. Poland’s proximity to Ukraine, Belarus and Russia may have deterred some foreign investors, although its impact on technological M&A was smaller compared to other sectors. Moreover, as a result of the war, many IT professionals and IT firms relocated to Poland, mostly from Belarus and Ukraine.

In general, the technology M&A market appears to be more resilient to the adversities of war and pandemics than other, more traditional sectors. Over 25% of M&A transactions in Poland have been in the telecommunications (TMT) sector. However, a fear of slowdown can also be observed here. A key question is to what extent the anticipation of election results may have contributed to the postponement of potential investments in 2023.

Towards the end of 2023, the democratic opposition won the elections and replaced the previous right-wing government. While it is too early to gauge the relevant impact on foreign investments, the authors expect that this may be a positive signal to the market and to more investors interested in Poland.

Poland has a strong talent pool and a thriving start-up scene. Medium-sized tech M&As have been doing well lately. However, tech companies’ valuations have been slightly lower recently, and the transaction process has taken longer, often involving price adjustments.

Interest remains high in software companies and game development studios, exemplified by Tencent’s acquisition of Techland. However, the computer gaming market in Poland seems a bit cooler compared to 2022. Globally, there is growing interest in AI-related companies, with expectations of growth both in Poland and worldwide.

In 2023, the trend of a decrease in the number and value of IPOs compared to previous years continued, offset by a strong interest in smaller private transactions or the start-up market (often backed up by State-owned funds, PFR). Companies and investors often opted for several smaller acquisitions rather than one large transaction.

High costs of capital and, above all, lower valuations of technology companies may potentially contribute to slowdown in the near future.

Poland showed an increasing interest in renewable energy, leading to M&A activity in the green sector. Poland’s climate ministry has outlined plans for the country to generate around three quarters of its electricity from zero-emissions sources by 2040, with 51% coming from renewables and almost 23% from nuclear.

Predictions for 2024 may be influenced by the formation of a new government and its agenda. Global trends, prolonged war in Ukraine and a recent Isreali-Palestinian conflict make it difficult to predict future trends. Nevertheless, the technology sector is expected to remain popular, with companies continuing to invest in IT and technology, including development of AI-based solutions.

Thanks to its big domestic market and a wealth of exceptional IT talent, Poland is quickly becoming a European hub for new start-up companies. Start-up founders usually begin with a Polish limited liability company (LLC) (spółka z ograniczoną odpowiedzialnością). Later, when they need investors or want to go global, they often create another company in a more investor-friendly location, such as the USA, to attract more funding.

The process of registering an LLC is fast and cost-effective. The minimum share capital required is PLN5,000.

Simplified joint-stock companies (SJSCs) are also gaining popularity. This is a new type of company introduced in Poland in 2021, specifically designed for start-ups. Some of the distinctive features of SJSCs are as follows:

• low minimal share capital – PLN1;
• a flexible approach to corporate bodies, including the possibility of appointing a board of directors (new in Poland);
• simple procedures and greater freedom for adopting resolutions by remote procedure; and
• flexible by-laws and share rights, including possibilities to grant shares for work or services.

While limited partnerships are popular, LLCs or SJSCs are often preferred for investors and capital acquisition. With limited partnerships, transactions usually entail converting into an LLC or adopting an asset acquisition strategy, which involves acquiring either the entire business or its specific components.

Due to higher costs and a more complex and formal organisational structure with advanced corporate governance mechanisms, joint-stock companies (JSCs) (in Polish, SAs) are much less frequently chosen by early-stage start-ups. JSCs are a company form primarily designed for large businesses with a substantial number of passive shareholders, who have limited individual control over the management board. Only JSCs can be publicly listed, and they require a minimum share capital of PLN100,000.

Because it is easy to set up, is cost-effective and limits the liability of partners, the LLC is undeniably the most popular business structure. Moreover, attracting investors is straightforward and operational expenses are comparatively low. There is also significant flexibility in modifying the company’s agreement(s), including the formation of shareholders’ agreements.

The shareholders of an LLC, SJSC or JSC are not liable for its obligations (in practice, they bear financial risk only up to the value of their contributions). However, management board members may be liable for a company’s liabilities if execution against the company proves ineffective, unless they have filed a motion for bankruptcy in due time.

The process of registering an LLC in Poland is easy, affordable and swift, taking anywhere from two days to four weeks, depending on the registration method – ie, either online (enabling a ready-made company in two days) or traditionally through a notarial deed. Purchasing ready-made shelf companies is also a popular option.

Opening a bank account for a company is relatively easy, inexpensive and quick in Poland. Tax registrations may take up to two weeks, so it should be possible to have a fully operational company within three weeks. There are no restrictions on foreigners serving on the boards of Polish companies. It is crucial to note that a share transfer agreement must be notarised; otherwise, it would be considered null and void.

In Poland, early-stage financing (seed investment) to a start-up is typically provided by either domestic or international seed venture capital funds. Recent years have witnessed a significant uptick in early-stage angel investments as well, with private investors such as high net worth individuals (including former founders), angel co-investment funds and family offices playing a growing role in providing such funding.

It is important to note that Poland continues to benefit significantly from EU funding, and start-ups (especially innovative start-ups operating in Poland) can often secure EU funds for specific projects or planned activities undertaken by the company.

In Poland, venture capital funding for start-ups usually comes from local venture capital funds, and recently it has become easier for Polish start-ups to obtain seed financing. Some of these venture capital funds receive support from government-related entities such as:

• the Polish Development Fund (Polski Fundusz Rozwoju);
• the National Centre for Research and Development (Narodowe Centrum Badań i Rozwoju); or
• other public entities.

There has been an increase in the amount and value of investments from foreign venture capital investors in Polish start-ups, with several foreign funds regularly putting money into these Polish start-ups.

Typical sources of venture capital in Poland are as follows:

• venture capital funds – these include both foreign and domestic funds, with the latter often being backed up by government-sponsored funds, as mentioned below;
• business angels – these are individual investors who provide capital and expertise to start-ups in return for ownership equity or convertible debt;
• corporate investors – certain established companies invest in start-ups as a part of their strategic investment or innovation efforts; and
• government-sponsored funds – the Polish government actively supports entrepreneurship and innovation through various funds and programmes for assisting start-ups and small businesses.

As regards the last point, organisations such as the National Centre for Research and Development, the Polish Development Fund, and PARP aid start-ups through grants, loans and various programmes.

Poland has been actively cultivating its start-up environment, making venture capital more accessible.

In terms of the number of deals, there is a higher volume of smaller deals supported by domestic funds, even though the proportion of the investment value is roughly equal between international and Polish funds.

There are well-developed market standards for venture capital documentation, and agreements are generally quite similar; however, there are no universally applicable templates, so agreements are negotiated individually. In addition to a share purchase agreement, it is common practice to sign a shareholders’ agreement or an investment and shareholders’ agreement.

Agreements increasingly include additional call options for investors and earn-out provisions for founders, aimed at motivating them to stay with the company and contribute to its further development. Ensuring the retention of key personnel is becoming increasingly important, especially for software houses and software development companies; hence, the growing importance of earn-outs and ESOP.

The development of start-ups often involves various changes in their corporate structure and jurisdiction, but is not always necessary. This depends on factors such as the start-up’s nature, development plans and investor requirements.

Most start-ups begin their operations as LLCs. This is a popular structure as it is easy to manage, offers limited liability for partners and attracts investors. When a start-up initially begins as an LLC, it often remains this way.

Start-ups that begin as partnerships or limited partnerships usually need to change into an LLC or a JSC, or involve asset deals instead of share deals.

As start-ups grow and secure more funding, they might change from being an LLC to a JSC, especially if they plan to go public with an IPO. As start-ups grow, some may involve foreign companies – ie, Delaware or others – to make it simpler to secure funding or investors; though this is not always necessary. Deciding whether to change the corporate structure and jurisdiction depends on the specific needs of each company.

When investors contemplate a liquidity event, they typically opt for one of two processes initially. Nonetheless, it is not unusual to see a dual-track process, which is more commonly undertaken by sizeable corporations and large institutional investors.

There are no strict rules defining what constitutes a “liquidity event”, but there is a trend in the Polish market where, rather than taking a company public and listing on a securities exchange, running a sale process is considerably more popular. This is especially true for mid-size and smaller transactions, which typically involve private sales to funds or industry investors.

Overall, there has been a rise in the quantity of smaller transactions compared to larger ones in the past year. It seems that companies often prefer to pursue acquisitions step by step, achieving their goals through several smaller acquisitions and consolidation, rather than through one large acquisition.

Most Polish tech companies still opt for listing on domestic stock exchanges rather than on foreign ones. They typically prefer either the main market of the Warsaw Stock Exchange (WSE) or New Connect, which is an alternative market within the WSE. New Connect has less stringent formal requirements compared to the WSE and is better suited for smaller companies.

Foreign stock exchanges are not as favoured among Polish tech companies, primarily due to their smaller market capitalisations. Only the largest Polish companies choose to list on foreign stock exchanges.

If a Polish company opts to go public on a foreign stock exchange, it might need to comply with specific regulations relevant to that particular exchange during any future sale process.

The most common method of sale involves bilateral negotiations with a selected buyer or with several potential buyers. Auctions also frequently occur.

In most cases of a liquidity event involving companies with multiple VC funds as partners, the frequent practice is for these funds to completely exit the company. However, there are instances where VC funds sell a controlling interest, with the option for the VC funds to continue holding shares in the company.

Most M&A transactions in Poland are cash considerations, and wholly stock-for-stock transactions are rare. However, for Polish tech start-ups, there is a rising trend of combining cash and stocks in M&A transactions. In these transactions, the stock usually represents a smaller part of the total purchase price.

Additionally, ESOPs are becoming more common.

In tech companies, there is a growing trend (similar to a common practice) for founders to be encouraged to stay with the company. This is done through incentive plans or substantial earn-out agreements. This means that even if 100% of the company’s shares are sold, founders stick around for two to three years, and a significant part of the sale price depends on achieving specific performance targets (KPIs). Often, an investment and shareholders’ agreement includes clauses that give founders (who continue to be part of the management team) a significant level of independence for the next two to three years after the deal. This ensures they have a say in determining the earn-out amount.

Representations and warranties are standard in every transaction in Poland. Apart from liability and indemnification clauses, this part of the agreement receives the most attention during negotiations.

In most cases, founders are expected to back all representations and warranties, including certain indemnities, even after the transaction is closed. Meanwhile, VCs may prefer to only be responsible for specific representations and warranties related to due organisation, share ownership or their ability and legal authority to enter into the agreement.

Indemnification clauses, especially for taxes and social security (ZUS), are becoming more popular – though this depends on due diligence findings. Larger deals often include added protections such as Escrow accounts. Holdbacks are less common now; however, it is becoming more common for the price adjustment mechanism or the price to be paid as earn-out over time after the deal, giving investors a sense of safety and confidence.

In Poland, spin-offs are not customary. However, spin-offs in the tech industry sometimes take place for various reasons, including selling a part of the business or mitigating risk by carving out specific assets that could pose a risk. A spin-off might also be necessary due to investor requirements or group policies, or to optimise value. It may also be done for tax purposes.

To carry out a spin-off, each of the involved companies must pass a shareholders’ resolution with a three-quarters majority of votes representing at least half of the share capital (unless the articles of association or statute specifies a more stringent requirement). The spin-off and its transfer to a new company often occurs when acquiring start-ups that were initially operated as partnerships.

It is possible to structure a spin-off as a tax-free transaction, both at the corporate and shareholders’ level. The key requirements include that:

• the assets transferred to another entity as a result of a spin-off and the assets remaining in the company should be classified as a business (a going concern) or its part;
• the spin-off should take place due to justified business reasons; and
• the company subject to a spin-off should not be a part of any prior corporate restructurings (mergers, demergers, etc).

Combining a spin-off with a merger is permitted, but there are no detailed rules for this and it is not a common practice. A post-transactional merger is more typical, especially for industry investors who, after the deal, merge the newly acquired business with their existing company.

A spin-off usually takes about six months. Typically, the parties involved obtain a tax ruling confirming tax neutrality of the spin-off (seeking confirmation that the assets being transferred and those remaining in the company may be treated as business (going concern) or organised part of business).

It is advisable to obtain this tax ruling before the transaction. The authorities are legally required to issue the tax ruling within three months.

It is permissible to acquire a stake of up to 50% in a publicly traded Polish company without being required to make a formal takeover offer. However, once the stakeholder surpasses the 50% threshold in terms of voting rights in the target company, the stakeholder has a duty to submit an offer to acquire all the remaining shares in that company.

Material shareholding in a public company and changes to that holding must be publicly disclosed and notified to the authorities. The notification requirement applies to:

• reaching or dropping below the thresholds of 5%, 10%, 15%, 20%, 25%, 33%, 33.33%, 50%, 75% or 90% of the total votes in the public company by any shareholder;
• changes in the shareholding of any shareholder with over 10% of the total votes, resulting in a change of at least 2% in total votes in the case of a public company whose shares have been admitted to the official listing, and 5% of the total votes traded on a regulated market;
• changes in the shareholding of any shareholder with over 33% of the total votes, resulting in a change of at least 1% in total votes; and
• a list of shareholders holding a minimum of 5% of the total votes at the general shareholders’ meeting, and the number of votes attached to these shares (within seven days following the date of the general shareholders’ meeting).

Pursuant to EU regulations, if a shareholder directly or indirectly acquires more than 50% of the voting rights in a public company, the shareholder must announce a mandatory takeover bid. This mandatory offer must:

• involve all the remaining shares in the company’s share capital; and
• be submitted within three months of surpassing the 50% threshold.

However, the duty to announce the mandatory offer does not apply if the shareholder or entity which indirectly acquired the voting rights reduces its shareholding to no more than 50% of the total votes within three months from exceeding this threshold, by reasons of:

• a share capital increase;
• changes in the company’s articles of association; or
• the expiry of preferential rights to its shares.

When determining whether an investor planning to acquire shares must make a mandatory offer, consideration should also be given to:

• the shares held by the investor’s affiliated entities; and
• the number of votes that entities acting together with or as the investor’s proxy holders have at the general meeting.

The usual way to acquire shares in public Polish companies is through a tender offer. This involves submitting an offer to the Polish Financial Supervision Authority (KNF) and the Warsaw Stock Exchange (WSE), and is carried out with the help of brokerage firms.

Mergers are not a common method for transactions in the Polish market. They are occasionally used as a post-closing step, typically to simplify the corporate structure.

Takeovers of publicly traded technology companies in Poland usually involve cash transactions. While share-for-share deals are allowed, they are rare. If any of the acquired company’s shares are traded on a regulated market, the offer price cannot be lower than the average market price of the acquired company:

• during the three months preceding the submission of notification on the intention to make a tender offer when these shares were listed on the primary market; and
• within six months prior to submitting the notice of intention when these shares were listed on the primary market, or a shorter period if the shares have been traded for less than six months.

If the average market value of the shares significantly differs from their fair value, the acquired company can request permission from the KNF to propose a price offer that does not meet the acquisition offer criteria. In share-for-share offers for 100% of the target company’s shares, the offeror must also provide cash, and selling shareholders can choose the form of payment.

A takeover offer can be either unconditional or have certain conditions, as allowed by Polish law. Shareholders who want to pass a resolution to take a public company off the stock exchange must submit an offer to buy shares from all other shareholders. In this case, their offer can include conditions for making a bid. The offeror can also add other conditions to their voluntary offer, such as requiring the acquired company to:

• adopt certain resolutions at the general meeting or supervisory board; or
• enter into specific agreements.

In a voluntary offer, the offeror may reserve the right to acquire shares (covered by the tender offer), even if the reserved condition is not met.

Negotiated takeover offers for public companies are based on agreements between the offeror and the majority shareholders of the acquired company. In these agreements, the offeror commits to making a tender bid offer, and the shareholders agree to respond to the offer under specified conditions.

Other arrangements, such as lock-up agreements, exclusivity clauses or future investments by the offeror in the acquired company, can also form part of these agreements. It is worth noting that public companies rarely provide warranties and representations in such agreements.

To sell or exchange all the remaining publicly traded shares, both a voluntary tender offer and a mandatory tender offer for the shares of the public company must be submitted. Unlike a mandatory offer, a voluntary offer can include a condition specifying the minimum number of shares to be acquired, after which the acquirer commits to purchasing those shares.

When determining the minimum number of shares to be acquired in the voluntary tender offer, the offeror must ensure that this minimum number of shares, together with the number of shares held by the offeror (including those held by persons acting as proxy holders and companies affiliated with the offeror) does not exceed 50% of the total number of votes in the company.

Squeeze-Out

Majority shareholders (maximum of five) who possess 95% or more of the voting rights can in some circumstances force the remaining minority shareholders to sell their shares, even if the minority shareholders do not agree. Procedure may be carried out within three months from reaching the threshold, and is subject to minimal price requirements. The offeror must provide security for the total price.

Reverse Squeeze-Out

In the same situation, the minority shareholders can also request that their shares be bought by the majority shareholder. When another shareholder acquires or exceeds 95% of the total votes, a shareholder of a public company can request that other shareholder to purchase their shares. Such a request must be submitted in writing within three months from the date of the other shareholder reaching or exceeding this threshold.

A tender offer can only be announced if it is secured by an amount not less than the total value of the offer. This security must be documented with a certificate, issued by a bank or another financial institution providing such security. The offer is then announced and managed through a brokerage entity. The brokerage house must inform the KNF about the offer, including its content. After 17 working days, the offer’s content must be made available to the public through at least one news agency in a free and accessible manner for all investors. The brokerage house must also promptly post the announced tender offer on its website.

It is common to include protective measures in deal documentation to safeguard the purchaser. These measures often include:

• MAC clauses (frequently used);
• granting power of attorney to respond to a call option or takeover offer;
• price adjustments;
• non-compete and non-solicitation clauses secured by liquidated damages; and
• sometimes, a break-up fee.

For public companies, owning less than 100% of the shares can be enough to control the company, and minority shareholders are often susceptible to being outvoted.

It is typical for negotiated takeovers of public companies to include irrevocable commitments from the principal shareholders of the acquired company to endorse the transaction. These commitments often require major shareholders to support and accept the tender offer under the agreed-upon conditions. This can also involve their commitment to persuade the acquired company’s management board to express a favourable opinion on the tender offer.

A takeover offer in Poland must go through a brokerage house, which has to notify the KNF of its intention to publish the tender offer at least 17 business days before announcing the offer, including the content of the offer. The KNF has ten business days to request any necessary changes to the content of the tender offer. The KNF may also request changes or modifications to the nature or quantity of the security within a timeframe specified by the KNF. Depending on this process, the KNF review may take up to 15 working days.

Additionally, the brokerage house must provide the tender offer to at least one information agency for publication on a free, accessible platform available to all investors.

In certain cases, the offer price may require regulatory approval (from the KNF).

Subscriptions for the tender offer can be made within 30 to 70 days after the offer is announced, typically starting between the first and fifth business day. In voluntary offers requiring merger control approval from the Polish Office of Competition and Consumer Protection (UOKiK), this period can be extended up to 120 days. If all remaining shares are subscribed for before the original deadline, the subscription period may end early.

In general, there are not many restrictions on starting technology businesses in Poland. People and entities from the European Union (EU) can operate in Poland on the same terms as Polish citizens. However, certain activities (especially in the fintech or payment services sector) require approval from the KNF. Obtaining approval usually takes between one and three months. Running banking activities also requires obtaining the necessary permit.

It is worth noting that providing payment services on a smaller scale is possible through the Small Payment Institution (Mała Instytucja Płatnicza), which does not require regulatory approval but only registration in the relevant registry.

Another important regulatory aspect for technology companies is the offering of telecommunications services. Engaging in such activities requires registration in the registry of telecommunications entrepreneurs maintained by the President of the Office of Electronic Communications.

The main securities market regulatory authority for M&A transactions in Poland is the UOKiK, which approves M&As, as explained in 7.5 Antitrust Regulations. The UOKiK also oversees foreign investments, as mentioned in 7.3 Restrictions on Foreign Investments. In regulated markets, such as finance and insurance, the supervisory authority is the KNF.

When entities from outside the European Economic Area (EEA) acquire Polish entities whose turnover exceeded EUR10 million in one of the last two years, regulations concerning foreign investment control apply. The new investment control rules require foreign investors from outside the EU or EEA to notify the UOKiK about investments that would result in obtaining specific decision-making powers in protected Polish companies.

This applies when the investor:

• gains control over the Polish company;
• acquires a significant stake; or
• attains significant influence.

Notification is required when acquiring shares or stocks that would result in reaching or exceeding 20%, 25%, 33% or 50% of the total voting rights at a general meeting or shareholders’ meeting, or capital share participation.

The new regulations (protected entities) cover a wide range of entities, including the following.

• Public companies.
• Entities that own assets categorised as “critical infrastructure”, or that develop or modify software in legally designated critical areas for the State.
• Entities operating in specific sectors of the economy, such as:
1. IT (software developers dedicated to certain strategic and specified sectors);
2. electricity generation (both conventional and renewables);
3. fuel and gas transmission and storage;
4. telecommunications companies;
5. medical and pharmaceutical industry;
6. heat generation, transmission and distribution; and
7. meat, dairy, grain, and fruit and vegetable processing.

When acquiring such companies, the investment control process is mandatory and is overseen by the UOKiK.

In addition, the acquisition of real estate or a company owning real estate by non-EU or EEA nationals requires the approval of the Ministry of Interior and Administration. The restriction does not apply to investments in listed companies.

Export control laws in Poland align with EU regulations. These export control laws cover strategic goods, which are goods of significant importance for national security and the maintenance of international peace and security. Such strategic goods include the following.

• Armaments: weapons, ammunition, explosives, related products, parts and associated technology, as outlined in the regulation specifying armaments requiring a trade permit.
• Dual-use items: goods, including software and technology, that can serve both civilian and military purposes. This also includes all goods that can be used for non-explosive purposes and can assist in any way in the production of nuclear weapons or other nuclear explosive devices.
• Goods, technology and software: as defined in Annex 1 of EU Regulation No 428/2009 on the control of exports, transfers, brokering and transit of dual-use goods.

Merger Control

In the case of a planned transaction, the parties involved must seek prior approval from the President of the UOKiK if their turnover in the year preceding the application exceeded EUR1 billion globally or EUR50 million in Poland.

The law outlines situations where the obligation to notify may be excluded due to the potentially insignificant impact of the planned transaction on the market. This applies when the target company’s turnover did not exceed the equivalent of EUR10 million in Poland in either of the two preceding financial years. Clearance will not be needed if the merger involves entities within the same capital group. The UOKiK clears transactions that do not result in a significant restriction of competition.

Merger clearance is typically granted within one month. However, this period may be extended by up to four months for more complex cases (Phase II).

If an enterprise carries out a merger or acquisition, even unintentionally, without obtaining prior consent from the President of the UOKiK, the President has the authority to impose a fine of up to 10% of the previous year’s turnover. Additionally, if such a merger is found to be anti-competitive, structural sanctions may also be imposed.

Transactions falling under EU jurisdiction, as defined by EU Regulation No 139/2004 on the control of concentrations of undertakings, must be notified to the European Commission. In such cases, they are not subject to proceedings before the UOKiK.

Polish labour laws are aligned with EU regulations. In the case of an asset deal or business transfer, TUPE rules and workplace transition rules must be considered. If there is a potential change in the workplace due to an asset deal, employees must be notified. If there are labour unions involved, they also need to be informed.

Moreover, if the new employer plans to amend employees’ working conditions, they are required to discuss these changes with the workplace labour unions. The goal is to reach a collective agreement that outlines the terms of these employment changes.

Work Councils

In any situation, even when the transaction involves only shares or ownership stakes, consultations with the work council are necessary (if such a council exists in the company). These consultations aim to evaluate the transaction’s impact on the employer and employees, but it is important to note that the council’s opinion is not binding.

When a part of a workplace is acquired, both the previous and the new employer share joint responsibility for the employment-related obligations that existed before the transfer.

In Poland, transactions in the private market can be conducted in foreign currency without the need to obtain permission from the National Bank of Poland.

In 2021, simple joint-stock companies were introduced into the Polish Commercial Companies Code (KSH). They are gradually becoming more popular (see 2.1 Establishing a New Company), particularly among start-ups, although LLCs are still the most common choice. In 2022, crowdfunding was regulated.

In October 2022, an amendment to the KSH came into effect. This amendment not only introduced changes to the rules governing corporate governance but also introduced new provisions on holding companies.

The above-mentioned provisions have been supplemented by provisions on sell-out and squeeze-out of shares held by minority shareholders (irrespective of their legal form). Shareholders representing not more than 10% of the share capital of a subsidiary may demand that a resolution on the acquisition of their shares by the dominant parent company be included on the agenda of the next general meeting, provided that such dominant company holds, directly, indirectly or by virtue of agreements with other persons, at least 90% of the shares.

Until the purchase price has been paid in full, the shareholder retains all the rights attaching to the shares they hold. This right is limited in two ways:

• first, it can only be exercised once per financial year; and
• second, it cannot be exercised earlier than three months after the announcement of a subsidiary’s participation in a holding in the National Court Register (KRS).

A public company being considered for acquisition or merger must share specific information with potential buyers as part of the due diligence process, in accordance with capital market provisions and regulations:

• publicly available information – the company must provide public data, such as financial and management reports, to interested offerors;
• confidential data – confidential information may also be shared with potential buyers; however, this information should be accessible to all bidders to ensure fair competition; and
• compliance – the company’s board needs to follow capital market provisions and regulations when disclosing information and conducting due diligence.

The extent and level of technological due diligence on provided information for data security and confidentiality depends on the company’s board decisions. It is important to note that data protection and confidentiality rules must be followed during the due diligence process.

The due diligence process must be conducted in compliance with General Data Protection Regulation (GDPR) requirements. This means that processing of personal data found in these documents must be done in a lawful manner and properly documented to show compliance with the law.

The entity disclosing documentation for due diligence acts as data controller. If investors access the documents in a controlled environment (provided by and under supervision of data controller) and solely for review, they will not be seen as data controllers or processors. In this case, the controller should give those reviewing the documents permission to process personal data, and ensure they keep it confidential.

If investors can access and process documents on their own, such as making copies or using their own computer infrastructure, they become data controllers. In this case, the entity sharing the data must have legal basis, such as legitimate interest, to disclose data to the investors.

Before disclosing documents with personal data, the data controller must determine if it is necessary for the specific purpose. Whenever possible, it is advisable to anonymise documents before disclosing them to investors. Personal data should be disclosed to investors only to the extent reasonably needed for the legal review. Other personal data, such as employee information, should not be shared unless it is crucial for evaluating key contracts. If not necessary, data should be removed (or anonymised) from the documents before disclosing them to those conducting due diligence.

If third-party service providers are used, such as external providers of virtual data rooms (VDRs) for data sharing, a data processing agreement should be entered into with such providers. Before entering into such an agreement, it is essential to ensure that the VDR service provider guarantees secure and lawful processing of personal data.

The acquisition or purchase offer for shares in a public company must be officially announced in accordance with capital market law procedures. MAR regulations apply. Any person or entity interested must notify the KNF about their intention, obtain approval, and then make the offer public with all the key details, such as the price and conditions.

The timing and details of the offer can vary, and the KNF oversees this process to ensure it is performed correctly. However, for private companies, there is no need for this public announcement process.

The issuance of a prospectus is required when issuing new shares. If an acquisition or merger offer involves exchanging one company’s shares for another company’s shares, and this issuance results in an increase in the share capital of the company, a prospectus may be required; however, this depends on factors such as how many shares are being issued and the specific laws in place.

This prospectus should contain detailed information about, inter alia:

• the offer;
• the companies involved; and
• their financial situation.

If the company’s shares are listed on certain stock exchanges, this can affect whether a prospectus is required and how it is approved. The requirement of a prospectus varies depending on the specific situation and rules in place.

There is no legal requirement for bidders to include financial statements as part of their bid documents. However, financial statements will be necessary in the case of a company merger.

Furthermore, all Polish companies have a duty to prepare and submit annual financial statements to the registry.

All financial information must follow the accounting standards, such as International Financial Reporting Standards (IFRS) or National Accounting Standards (NAS). Offerors must provide accurate and comprehensive financial information, so that everyone can understand the terms and implications of the deal.

It is important to note that the specific requirements regarding information documents or financial information can vary based on the transaction type, industry and other factors. The offerors should consult with relevant regulatory authorities, as well as with legal and financial experts, to ensure they comply with all legal requirements and provide accurate financial information in their documents.

In private share sales, the transaction documents are usually not made public. However, the buyer must let the company being acquired know about becoming a shareholder. The acquired company must report this change in ownership to the National Court Register (KRS). The KRS may request documents related to the share transfer, but these are often submitted in a summarised form to safeguard sensitive business information.

Also, it is mandatory to update the information in the Ultimate Beneficial Owner Register, and report regarding the new ultimate beneficial owner.

Each member of the management board of a Polish company has a general obligation to manage the company’s affairs and to represent the company to third parties with due care and the diligence of a prudent businessperson. They must also exercise their duties in compliance with:

• applicable laws;
• the company’s by-laws and articles of association;
• any resolutions of the shareholder meetings; and
• the obligations under their employment agreement (if any).

These key responsibilities include:

• duty of loyalty – directors have a duty to act in the best interest of the company, safeguarding its long-term success and refraining from actions that could be detrimental to the company or benefit other parties;
• duty of care – directors must act with due diligence and care, conducting thorough research and analysis before making decisions regarding the merger;
• duty of care for stakeholders – directors must show concern for the interests of all stakeholders in the company, including shareholders, employees, suppliers and customers; and
• avoiding conflicts of interest – directors should avoid situations where their personal interests may conflict with those of the company.

Poland is traditionally portrayed as a shareholder primacy jurisdiction, and directors’ main responsibilities are towards shareholders; nonetheless, there is growing awareness of the need to consider the interests of everyone involved, such as employees and suppliers. New rules and changing laws might make directors more accountable for taking these different interests into consideration.

It is not common to establish special or ad hoc committees in business combinations. To provide assurance to the directors, it is more common to request an additional resolution from shareholders or the supervisory board.

The management of the company being acquired is not always directly involved in M&A negotiations. Whether they get involved depends on the type and size of the company, and on its ownership structure. However, the management often plays a key role in defining the terms of representations and warranties, since they have the best knowledge of the company’s condition.

In general, legal disputes involving shareholders challenging the management’s approval of a transaction are uncommon.

In most transactions, buyers and sellers both usually hire legal and financial advisers. Furthermore, for due diligence they may also need technology experts (IT, cybersecurity) or other experts (eg, environmental), depending on specific circumstances.

In larger transactions, the company and its board members might seek assistance from advisers. Board members especially may want a fairness opinion to assess whether the offer is fair.