Securitisation 2023

Last Updated December 14, 2022


Law and Practice


Hogan Lovells (Warszawa) LLP handles every aspect of structured finance transactions. The firm has built a global practice in the major jurisdictions of Asia, the USA and Europe. Clients include managers and arrangers, trustees, investors, originators of securitised assets, and collateral and portfolio managers. Lawyers advise on the financing of a wide range of classic and innovative asset types, both as public and private standalone issues. The team is particularly well known for its work in asset-backed financing, and for its ability to advise on new and innovative transactions. Lawyers have extensive experience in advising originating banks and arrangers on a broad range of securitisation transactions, including a strong track record of advising on bank securitisations, automotive asset-backed securitisations and lease assets. Furthermore, the team's securitisation experience includes a number of market firsts and innovative transactions. Hogan Lovells Poland has been engaged in every major securitisation involving Polish originators, including recent major standalone issues originated by BNP Paribas Bank Polska SA, Europejski Fundusz Leasingowy SA, Santander Leasing SA, Santander Consumer Bank SA, PKO Leasing SA and Alior Leasing Sp. z o.o.

There are two major acts that regulate insolvency-related issues in Poland: the Bankruptcy Law of 28 February 2003 (the "Bankruptcy Law") (the stated rules of declaring bankruptcy in relation to insolvent entities, with the assets and rights of the bankrupt entity comprising the so-called bankruptcy estate) and the Restructuring Law of 15 May 2015 (the "Restructuring Law") (the stated rules of initiating restructuring proceedings in relation to companies in distress, or threatened with insolvency). Both acts apply directly to companies and entrepreneurs that have their registered office or management (centre of main interest) located in Poland.

Polish insolvency regulations can also apply to foreign entities that conduct their economic activity in Poland, or whose assets are located in Poland; in this case, Polish insolvency proceedings would apply as a secondary proceeding within the meaning of Regulation 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings. If a bankruptcy-remote special-purpose entity (SPE) established for the purpose of a securitisation transaction is located outside Poland, the Polish insolvency regulations as such could apply supplementarily, mainly to its Polish assets and rights.

Securitisation deals in Poland are usually structured as "true sale" transactions for the purpose of achieving bankruptcy remoteness, subject to certain limitations stated by the Bankruptcy Law and the Restructuring Law.

A transfer of receivables or rights (so-called assignment) differs from the transfer of assets (eg, in a form of sale). However, most of these differences are not relevant from the perspective of securitisation. The said transactions are based mostly on receivables or financial assets. Therefore, "assignment" of receivables is referred to herein as a "sale".

Claw-Back Provisions and Hardening Periods

In particular, certain types of actions performed by a bankrupt entity before the lapse of a relevant claw-back period can be declared ineffective (or are automatically declared ineffective), in accordance with claw-back provisions. The claw-back period is always counted back from the date of filing the petition for bankruptcy (similar claw-back periods generally apply to rehabilitation proceedings (postępowanie sanacyjne), one type of restructuring proceeding):

  • the six-month claw-back period – any action performed by the bankrupt entity with its affiliate within this claw-back period can be declared ineffective, unless it is proven that this action was not taken to the detriment of the other creditors; and
  • the one-year claw-back period – any action under which a bankrupt entity has disposed of its assets within this claw-back period is automatically ineffective towards the bankruptcy estate if the disposal was performed gratuitously or for a consideration significantly lower than the market value of the disposed assets.

The following hardening periods (counted from the date of filing the declaration of bankruptcy) apply to any security interest, with the relevant action being ineffective vis-à-vis the insolvency estate (similar hardening periods generally apply to rehabilitation proceedings):

  • the six-month hardening period – establishment of any security or any payment of a debt that is not yet due and payable, unless the beneficiary of the payment or security evidences at the time the action was carried out that they were unaware of the grounds for declaring insolvency; or
  • the one-year hardening period – creation of a mortgage, pledge or security assignment (transfer) if the insolvent debtor was not personally liable under the claims secured by that mortgage, pledge or security assignment (transfer) and received no consideration for such security, or if the consideration received is grossly lower than the value of such security.

Additionally, after the debtor is declared bankrupt or a restructuring proceeding is initiated in relation to it, its assets cannot be encumbered with any mortgage or pledge, nor be subject to any security assignment (transfer), except for the establishment of a mortgage if the application to enter the mortgage on a land and mortgage register has been filed with the court at least six months before the date of filing the application to declare the debtor insolvent or to initiate a restructuring proceeding, as applicable.

These risks are usually mitigated by performing legal and financial due diligence, setting up an SPE as an independent bankruptcy-remote company with no organisational or capital ties to the originator, and ensuring that the sale of receivables in a securitisation is performed at a value that corresponds to their market value. Without the true sale assignment of receivables, it would be virtually impossible to fully insulate securitised exposures from the financial risk of the originator.

True Sale versus a Secured Loan

Traditional securitisations (ie, involving economic benefits and a legal title to underlying transferred assets) are constructed in Poland as true sale transactions. In order to be classified as such, these transactions need to meet the Polish law requirements for being considered a “sale” of receivables and not a secured loan. Both sales (sprzedaż) and loans (pożyczka) are regulated under the Polish Civil Code as specific types of contracts (in relation to specific types of loans granted by Polish banks (kredyt), also under the Polish Banking Law).

In the context of receivables, the main difference between these two types of contracts is that, under a sale, a seller is not obliged to repay or otherwise return to a purchaser the purchase price received in exchange for the disposed assets. In certain cases, a seller may have an option to repurchase the receivables, or be liable for any defects of disposed assets, which do not affect this general rule. To the contrary, a borrower's obligation to repay an amount at least equal to the amount of a utilised loan is an inherent component of any loan agreement under Polish law. Under a loan agreement, a lender has a direct claim to a borrower for the repayment of a loan. This right does not exist under a (properly carried out) sale agreement in relation to a purchase price, and consequently should not appear in any true sale securitisation.

Protection for Transferred Assets

Receivables assigned in a properly structured "true sale" securitisation are protected from the bankruptcy of an originating entity, subject to certain exceptions (discussed in more detail above). As explained, it means that a sale should be unconditional, so that an SPE – as the legal owner of the assignment receivables – is insulated from the financial condition and other assets of the seller in the further course of the transaction. Ultimately, other creditors, or the insolvency receiver of the originating entity, would not be able to effectively access and claw back the assigned receivables from the SPE. The SPE would be able to claim for and retain all cash flows under the assigned receivables from debtors (except for certain other risks related to day-to-day servicing, etc).

The other difference under the Polish insolvency laws between a true sale and a secured loan is that a secured loan creates a receivable that participates in the insolvency proceedings of the borrower, being in certain circumstances exposed to reduction, moratorium, arrangement, or other similar events.

Obtaining Legal Opinion

It is common market practice to obtain the opinion of a legal counsel in a securitisation transaction, to support the true sale effect of the transfer of receivables and to confirm the bankruptcy remoteness of the acquisition of receivables by an SPE. The legal opinion should be limited to the general rules of insolvency and restructuring regulations (discussed above), under which any disposal of assets can be challenged if made against an incomparably lower equivalent, or if it is harmful to other creditors.

If the rights of the originating entity to repurchase the securitised receivables are too extensive, the legal counsel might request additional qualifications in Polish law opinions. However, a true sale is usually understood as a disposal of receivables that sufficiently protects them from other creditors and the insolvency receiver of the originator.

Originating banks that would like to achieve a capital relief effect on the transaction by way of a significant risk transfer require the opinion of a qualified legal counsel to confirm that the securitised exposures are put beyond the reach of the originator and its creditors, in accordance with Regulation (EU) 2017/2401 of the European Parliament and of the Council amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (CRR).

Commonly, bankruptcy-remote SPEs are used to insulate transferred assets from the financial risk of an originator.

Trusts or similar entities (commonly used for securitisation transactions carried out abroad) are not recognised under Polish law. A limited liability company (spółka z ograniczoną odpowiedzialnością) is the usual legal form used as an SPE for issuing purposes in securitisations in Poland, established as an orphan company owned by a non-profit special entity, such as a stichting registered and operating under Dutch law in the Netherlands. There are no entities specifically designated to act as SPEs in securitisation transactions in Polish law. The only exception is securitisation funds, which are discussed below, but in practice their suitability for securitisations is limited.

There are no specific requirements for a Polish SPE in the form of a limited liability company. No licence or other regulator consent is required. It can conduct activities on a minimum share capital (currently PLN5,000), with one executive member and one shareholder. A limited liability company is created by the execution of its articles of association in the form of a notarial act and its subsequent registration in the register of commercial companies as maintained by Polish registry courts. Corporate bodies of a limited liability company comprise executive member(s) and a shareholders’ meeting (a supervisory board is an optional body, usually not appointed for SPEs). It is common practice for already existing, dormant companies to be used in securitisation transactions. These dormant companies are managed by entities delivering professional corporate services, including management services.

An SPE can also be registered outside Poland; the most common choice of location is Ireland, although Luxembourg is often considered as well.

Requirements for an SPE in a Securitisation Transaction

Regulation (EU) 2017/2402 – which lays down a general framework for securitisation and creates a specific framework for simple, transparent and standardised securitisation (the "Securitisation Regulation") that has applied in Poland from 2019 – provides for certain requirements that should be fulfilled by an SPE used in a securitisation transaction (defined in the Securitisation Regulation as a "securitisation special purpose entity", or SSPE).

Pursuant to the Securitisation Regulation, an SPE should be a corporation, trust or other entity, other than an originator or sponsor, established for the purpose of carrying out one or more securitisations. The activities of the SPE should be limited to those appropriate to accomplishing the securitisation for which it has been established and its structure should allow isolating the obligations of the SPE from those of the originator. An SPE should not be established in a third country (not being an EU country) that is listed as a high-risk and non-cooperative jurisdiction by the Financial Action Task Force (FATF) and/or one that has not signed an agreement with a member state to ensure that that third country fully complies with the standards in the OECD Model Tax Convention on Income and on Capital or in the OECD Model Agreement on Exchange of Information on Tax Matters, and should ensure an effective exchange of information on tax matters, including any multilateral tax agreements.

The other legal form of an SPE that can be used as an issuing entity is a Polish securitisation fund, which is a special type of closed-end alternative investment fund (AIF) supervised by the Komisja Nadzoru Finansowego (KNF), the main purpose of which is to issue certificates for pecuniary contributions from investors in order to purchase the receivables or rights to the receivables for the collected monies, regulated under the Polish Act of 27 May 2004 on Investment Funds and the Management of Alternative Investment Funds, and the relevant EU regulations on AIFs and AIF managers.

A securitisation AIF can only be established by a licensed and regulated AIF manager (towarzystwo funduszy inwestycyjnych) that is economically and legally separate from the managed AIF. However, the establishment of a securitisation AIF in Poland does not require a prior approval of any regulatory authority, unless the AIF intends to offer its securities to the public or apply for admission to trading on a regulated market or alternative trading system.

In practice, securitisation AIFs are used in transactions purchasing non-performing loans originated by banks, since the disposal of non-performing loans to any entity other than a securitisation AIF does not allow an originating bank to achieve tax benefits.

There are special requirements for an SPE to be an issuing entity if the originating entity is a Polish bank. In accordance with the Polish Banking Law, an SPE cannot be linked to the bank-originator by means of equity (eg, it cannot be its affiliate or subsidiary) or organisation (eg, it cannot be managed by the bank-originator). In addition, the activities of an SPE must be limited to carrying out securitisation, comprising the acquisition of receivables, the issuance of securities based on these receivables, and supporting activities. The scope of activities of this SPE must be limited under its articles of association (statute). The above rule, as stated under the Polish Banking Law, also applies to SPEs incorporated outside Poland, if a Polish bank is the originator.

Consolidation of Insolvency or Bankruptcy Proceedings

The Polish insolvency regime does not recognise the concept of the consolidation of parent and affiliates for the purpose of insolvency or bankruptcy proceedings. There is no such term as the "substantive consolidation" of the indebtedness and other assets and liabilities. Consequently, the insolvency of a Polish originating entity would not have any impact on the financial standing of an SPE, although, in each case, an SPE is placed as a company with no links with the originator other than the contractual links created under the transaction documents.

It is standard practice for a legal opinion of an external counsel to support the bankruptcy remoteness of an SPE in a securitisation transaction. The Bankruptcy Law does not state any possibility for the insolvency consolidation of an SPE with the originating entity, its parents, or affiliates. If an SPE is located in Poland and, as such, is subject to the Polish insolvency regime, legal opinion on Polish law confirms its bankruptcy remoteness and does not state any material qualifications to that effect.

In general, financial assets (receivables) are transferred in a manner similar to other receivables; ie, by way of an assignment agreement.

Under Polish law, the legal relationship between a creditor and a debtor usually consists of two mirror-like elements: a receivable (asset) and an obligation (debt). Generally, in securitisation transactions, only the originator’s “receivable” component is subject to being transferred to an SPE in order to serve as the base for the financing of the SPE.

In accordance with the Polish Civil Code, by transferring a receivable, an assignor also transfers other rights and claims that are connected or ancillary to such receivable, including any interest.

Financial assets are usually freely transferable. In accordance with Polish law, each receivable can be transferred by its creditor to any third party, unless this transfer is contrary to the law or a contractual stipulation, or would be against the nature of an obligation (this concerns pre-emption rights, alimonies, salaries from work contracts, or personal easements).

Polish law does not recognise a general assignment, which means that the assignment can only refer to individual receivables, and not to the portfolio of receivables; however, the transfer of all receivables comprising the portfolio can be documented under one agreement.

The transfer of receivables is effective (ie, the legal title to the receivables is acquired by the assignee) upon the execution of an assignment agreement, unless the parties agree on a different effective date (please see below for exceptions). An assignment agreement can be executed in any legal form, although the Civil Code requires that an assignment agreement must be executed in written form if the receivable being assigned is evidenced in writing.

Certain receivables are not automatically transferred and require additional action in order to be perfected. This particularly applies to receivables secured by a charge over real estate (hipoteka, commonly translated into English as a "mortgage"). The transfer of a receivable secured by a mortgage is only perfected upon the registration of the assignee in the land and mortgage register maintained by the Polish courts for the underlying real estate. The registration must be carried out for each receivable separately (ie, should a pool of receivables be sold, the applications for these registrations have to be made separately for each receivable), which takes a great deal of time (usually a few weeks) and is the main obstacle to the securitisation of mortgage loans in Poland.

Requirements for Transfers in a True Sale versus a Secured Loan

A true sale is not regulated in Polish law as a specific type of sale, different from other sale transactions. In order to reach a true sale effect, the assignment of a receivable in accordance with the sale agreement must be definite and should be performed for a consideration (purchase price).

A sale agreement, including an agreement that is to be considered a true sale, must contain at least the basic elements for any sale transaction, which are the definition of the object of the sale and the purchase price, according to the Polish Civil Code. A sale agreement can be affected by a lack of either of these two necessary elements, including by its own invalidity in certain cases.

The transfer of receivables by way of a security (ie, to secure a loan) is not a sale; it constitutes a fiduciary transfer for security reasons only. It is also effected under an assignment agreement, which should be executed in written form for receivables documented in writing, but should always state a conditional reverse transfer of assets upon the secured loan being repaid. This reverse transfer can be automatic, or can require the execution of a reassignment agreement.

Other than that, the transfer of receivables under true sale and fiduciary transfer are similar.

Differences in Rights

As explained above, a true sale is not regulated under Polish law as a specific type of sale. Consequently, every sale agreement is formally considered as a true sale, unless it is evidenced otherwise (please see above in this respect). In the latter case, there is a material legal risk that such a sale would be rendered invalid and ineffective, to the extent that the statutory timeframes for filing these objections are observed (in particular in the course of bankruptcy proceedings, to the extent statutory hardening periods apply).

Polish law lists other types of securitisation transactions, alternative to true sale transactions, named sub-participations. Similar to synthetic securitisation, sub-participation securitisation does not involve the assignment (sale) of receivables. Instead, in accordance with a sub-participation agreement, an originator is obliged to shift all cash flows from a particular receivable, or pool of receivables, to a securitisation AIF (and not to any other entity).

Unlike in other types of securitisation, the payment of the price for any “rights to cash flows” cannot be deferred. A sub-participation can only be performed with a securitisation AIF, as only securitisation AIFs are placed in a bankruptcy-remote position by Polish law, in the case of an originator's bankruptcy. In the latter case, the receivables that generate cash flows that were “sold” in accordance with a sub-participation agreement will not constitute part of the originator’s bankruptcy estate. Instead, it is the securitisation AIF that will assume all the rights arising under these receivables and related security interest. Sub-participations are a somewhat theoretical option for an alternative structure of securitisation transaction in Poland, and are very rare.

One of the key Polish tax aspects that has to be analysed in all transactions concerning securitisation of receivables implemented by Polish originators relates to the VAT and Civil Law Transaction Tax (CLTT – a type of transfer tax) implications of the sale of the receivables to an SPE (which is a special-purpose company or a securitisation fund).

According to the CLTT Law, the sale of property rights (such as receivables) is subject to 1% CLTT on the market value of these property rights, payable by the purchaser, if the transaction concerns property rights exercised in Poland, or property rights exercised outside Poland if the purchaser is a Polish entity and the purchase agreement is signed in Poland.

Nevertheless, according to the specific rules in the CLTT Law, no CLTT payment obligation arises if the sale of the receivables is treated as a service for VAT purposes (regardless of whether VAT is payable on it, or if the transaction is VAT exempt).

According to the position currently presented by the Polish tax authorities, the securitisation of receivables should be classified as a VAT-exempt financial service rendered by an SPE (ie, the purchaser of the receivables) to the originator (seller).

In order for the securitisation to be treated as a (VAT-exempt) service for Polish VAT purposes, it must include some kind of consideration payable to the SPE for entering into the transaction and for providing financing to the originator (as a result of the purchase of the receivables). Otherwise, the transaction would remain outside the VAT system (which could trigger a CLTT payment obligation).

There are a number of other arguments used by practitioners to exclude the 1% Polish CLTT on the sale of receivables. In particular, in certain tax rulings issued on securitisation transactions, the tax authorities have stated that it was a specific transaction not listed in the CLTT Law and therefore was outside this burden.

The implications of the securitisation of receivables from an income tax perspective depend on several factors, with the most important being the type of originator, the nature of the receivables, and the type and location of the SPE purchasing the receivables.

Generally, if the SPE is located outside Poland, Polish income tax would not apply to the income derived by this entity from the financial assets acquired. However, in this case, Polish withholding tax issues should be taken into account (discussed below).

If the SPE is located in Poland, the collections received from the acquired receivables will constitute taxable revenue for this entity. On the other hand, it will be entitled to deduct the purchase price paid for the receivables, as a tax cost. Any income derived by the SPE (ie, taxable revenue less tax costs) will be subject to 19% income tax in Poland.

If the Polish SPE participating in the transaction is a securitisation fund, it will be exempt from income tax on all its income, because all Polish investment funds, including securitisation funds, are exempt from Polish corporate income tax (CIT), except for income of closed-end funds derived from tax-transparent entities and real estates. Tax exemption also applies to investment funds located in other EU or European Economic Area (EEA) countries, should the fund meet certain conditions specified under Polish law.

In the vast majority of securitisation transactions, Polish withholding tax implications are among the most important. They can relate to the transfer of collections in the case of a foreign SPE participating in a transaction, or to interest payable by a Polish SPE to a foreign investor for the financing provided under the notes (issued by the SPE) or senior loans (granted to a Polish SPE).

As a result, the withholding tax aspects need detailed analysis based on the Polish domestic legislation and available double tax treaties, also taking into account the status of the financing parties and the nature of the collections to be transferred from Poland to the foreign SPE (ie, those that result from the legal type of the receivables being securitised). In addition to the bilateral tax treaty concluded by Poland with a given country involved in the transaction, the Multilateral Instrument to modify bilateral tax treaties (MLI) should be taken into account. The MLI convention entered into force on 1 July 2018 to implement the BEPS (base erosion and profit shifting) provisions aimed at counteracting aggressive tax planning. The MLI has already been ratified, accepted or approved by 100 jurisdictions, including Poland (status as of 30 November 2022).

Interest payable by a Polish SPE to a foreign investor that is a bank will most likely be exempt from withholding tax in Poland under the "banking loan" exemption included in the majority of double tax treaties signed by Poland.

In addition, a few tax treaties concluded by Poland (with the USA, France, Sweden and Spain) provide for no withholding tax on interest derived in Poland.

In the situation of securitisation concerning lease receivables, there are several tax treaties that do not treat lease payments as royalties under the treaty and thus do not impose withholding tax in Poland on these collections transferred to a foreign SPE, such as those concluded with Ireland and Luxembourg. It should also be noted that, according to the position presented by Polish tax authorities in a number of tax rulings, collections transferred to a foreign SPE in execution of duties performed by a servicer of securitised receivables should be treated as business profit. In consequence, it is not subject to income tax in Poland unless the SPE has a permanent establishment in Poland to which such collections are attributed.

According to Polish law, entities (acting as tax collectors) making payments to foreign tax residents resulting from the titles specified in Article 21 item 1 and Article 22 item 1 of the Polish Corporate Income Tax Act (for example, interest and lease payments) are entitled to apply the withholding tax exemption or a lower rate (resulting from a given tax treaty or other provisions) if they have a valid tax residency certificate. In addition, the tax collector is obliged to verify the applicability of the exemption/lower rate with due care. Such verification should include, in particular, confirmation that the payment recipient is a beneficial owner of the payments, conducting actual economic activity in connection with which the payments are derived.

According to the amendments that were implemented to the Corporate Income Tax Act as of 1 January 2022, in cases where the interest, royalties or dividend payments to the same related party exceed in total the amount of PLN2 million in a given tax year, the tax collector will, as a rule, be obliged to withhold and transfer to the tax office the tax on such payments at the domestic withholding tax rate (20% or 19% depending on the title for the payment), notwithstanding lower rates or exemptions provided by tax treaties or other specific provisions. This tax will be refundable on the request of the tax collector or the payments' recipient after the tax office verifies that the relevant conditions required for the application of the withholding tax exemption or a lower rate are met.

However, the law also provides for the possibility of avoiding the withholding tax if board members of the tax collector file specific written statements with the tax authorities. Such statements have to confirm that the tax collector possesses documents required by law to apply the tax exemption to the payments transferred to the recipient and that, after conducting (with due care) relevant verification, it is not aware of the existence of circumstances excluding the possibility of applying the withholding tax exemption. Such statements should confirm, in particular, that the tax collector is not aware of the circumstances excluding the possibility of recognising the recipient as a beneficial owner of the payments conducting actual economic activity in connection with which the payments are derived.

Each securitisation transaction can have its own tax implications, so the proper structuring of these projects always requires detailed analysis that takes a number of factors into account, including:

  • the type of originator and receivables being securitised (eg, bank loans, lease instalments, trading receivables);
  • the type and location of the issuer to which the receivables are transferred (ie, Polish securitisation funds, Polish or foreign SPEs);
  • the type of receivables being securitised; in particular, if these are performing or non-performing receivables;
  • if there is any remuneration payable by the originator to the SPE for entering into the transaction, in the form of a commission or a discount from the value of the receivables;
  • the type of financing provided to the issuer (eg, financing under notes/bonds, or a subordinated loan);
  • the type and location of the investors financing the SPE (eg, banks or non-banking entities, Polish or foreign entities); and
  • the functions performed by the servicer of the receivables.

In general, any loss incurred by a bank on the sale of the credit receivables will not be tax deductible. However, receivables arising under non-performing loans (NPLs) that are sold to a Polish securitisation fund (and not a normal company) will be treated as tax deductible, subject to certain limits and exclusions provided in the law. In addition, subject to certain requirements, any proceeds from the sale of the principal (not the interest component) of the NPL receivables to a Polish securitisation fund will not be treated as taxable income by the bank originator.

The Polish VAT treatment of the servicing of the receivables by the originator to the benefit of the SPE depends on the type of services rendered in this respect by the originator, and on the location of the SPE. The servicing of the receivables will usually be treated as a debt collection subject to standard VAT rates in Poland. In the case of an SPE located outside Poland, the place of supply of these services should generally be at the seat of the SPE (therefore, no Polish VAT would be chargeable).

There is no direct regulation in the VAT law relating to sub-participation, which is another type of securitisation and should be treated as a VAT-exempt financial service, similar to a true sale securitisation. However, since there is very little practice on the market relating to sub-participation transactions, the approach of the tax authorities is not uniform in this respect (there are tax rulings qualifying these transactions as being subject to 23% VAT, but there have also been positive decisions from the administrative courts confirming a VAT exemption of sub-participation). The approach of the Polish tax authorities with respect to the VAT treatment of sub-participation transactions should change after the recent judgment issued by the Court of Justice of the European Union (CJEU) on 6 October 2022 case no C-250/21 (relating to one of the Polish close-end investment funds), in which the CJEU stated that financing provided under sub-participation should benefit from VAT exemption.

Polish General Anti-Abuse Regulations

According to the Polish General Anti-Abuse Regulations (GAAR), the Head of the National Tax Administration in Poland is able to challenge Polish taxpayers' actions that have been acknowledged as tax avoidance under the GAAR. This can apply to transactions, the main purpose of which (or one of the main purposes) was to achieve tax benefits, including avoiding, decreasing or delaying the tax payable in Poland in connection with these transactions. If the relevant transaction or structure is acknowledged as tax avoidance, the tax liability of the relevant taxpayer will be calculated as if it resulted from an "adequate" transaction of similar economic consequences, or by ignoring the tax avoidance activity, which could result in a higher tax becoming due and payable.

Although securitisation transactions are usually implemented for reasons other than for tax or business, the above-mentioned new GAAR provisions should be observed when structuring a given securitisation. In certain situations, gathering the proper business substance and justification might be necessary to mitigate any risk of a GAAR application.

The Mandatory Rules for Disclosing Tax Arrangements

On 1 January 2019, the provisions of the Tax Ordinance Act concerning the mandatory rules for disclosing tax arrangements (the so-called MDRs) came into force. In light of these provisions, a tax arrangement is a qualified act in which at least one party is a taxpayer, or that can have an impact on the occurrence or non-occurrence of a tax obligation and that additionally meets the conditions specified in the MDR regulations (including so-called hallmarks). Polish provisions on the MDRs concern arrangements of a local and cross-border character, whereas, as far as cross-border arrangements are concerned, these provisions implement Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (the so-called DAC6 Directive).

The provisions concerning the MDRs are very detailed and complex, and differ in relation to local and cross-border arrangements. In simple terms, these provisions indicate that the reporting obligation can, in principle, include arrangements that:

  • are primarily or exclusively intended to obtain a tax advantage in circumstances where the taxpayer could reasonably choose a different course of action that would not result in an advantage, and at the same time, they have one of the "general hallmarks" indicated in the comprehensive list contained in the provisions of the MDRs; and
  • even if they are not aimed at obtaining a tax advantage, they have one of the "specific hallmarks" or "other specific hallmarks" indicated by the Tax Ordinance Act.

The reporting obligation to the Head of the National Tax Administration concerning so-called standardised (repeatable) arrangements is mainly related to the adviser and is implemented without nominally indicating the beneficiary (taxpayer), if the adviser is obliged to maintain professional secrecy (the adviser is a qualified tax adviser, attorney-at-law or advocate), and the client did not release the adviser from the obligation to maintain confidentiality. Non-standardised arrangements are to be obligatorily reported by the beneficiary, unless the beneficiary releases the adviser from the duty of professional secrecy (if the adviser is not released from the professional secrecy, it should inform the beneficiary of the need to disclose the arrangement and provide details required to be reported). Each notified arrangement will be assigned an identification number (NSP) that must be reported separately to the Head of the National Tax Administration by the beneficiary if said beneficiary, within the given accounting period, has performed any activities that are part of this arrangement or has obtained a tax benefit related to it.

Due to the broadly defined and imprecisely described concepts and categories used by the Polish provisions on the MDRs, there is a risk that the reporting obligation will cover not only typical tax planning cases, but also standard advice provided to clients informing them about the tax consequences of their transactions or business operations that are unrelated to any form of tax optimisation.

Taking into account the above, each securitisation transaction should also be analysed from the perspective of reporting obligations under the MDRs. In order to determine if a given transaction needs to be disclosed, the characteristics of the transaction should be verified from the perspective of "hallmarks" included in the MDR provisions.

Non-fulfilment of the disclosing obligations under the MDRs may result in criminal sanctions being imposed on the individuals responsible for such reporting. A fine imposed in this case may be up to PLN29 million.

It is common practice to obtain both legal and tax opinions for each securitisation transaction.

Also, due to the complexity of the tax issues involved in the securitisation transactions, as well as the fact that the majority of them are not addressed directly in the tax law, the confirmation of the key tax aspects through individual tax rulings issued by the Polish tax authorities is always recommended. This specifically relates to the VAT/CLTT treatment of the sale and servicing of receivables, the withholding tax treatment of the collections transferred to a foreign SPE, and the CIT implications for Polish originators and Polish SPEs. Obtaining an individual tax ruling takes three months from the time of filing the relevant application.

In general, the accounting treatment of securitisation should not affect the legal implications of the transaction. In particular, classifying a securitisation as providing financing to the originator does not have an impact on the true sale consequences under civil law. The same relates to the tax aspects, which means that from the tax perspective, the securitisation is treated as a sale of receivables with all its consequences (eg, taxable revenue and tax-deductible costs arising for the originator upon the sale of the receivables, collections that are taxable revenue for the Polish SPE).

Different rules can apply to the qualifying sale of receivables under certain accounting principles (eg, the sale of receivables for securitisation purposes can be qualified as a loan). However, this does not have any effect on the true sale effect of the assignment of receivables.

No information has been provided in this jurisdiction.

The Securitisation Regulation applies to Poland and all other EU countries. The Securitisation Regulation imposes certain disclosure requirements on originators, sponsors and/or SPEs and all these requirements apply directly to Polish entities performing such roles in securitisation transactions. These are discussed in more detail in 4.4 Periodic Reporting.

There is no autonomous local legal act regulating securitisation transactions under Polish law. Fragmentary regulation is contained in a few legal acts: the Banking Law, the Investment Funds Act and the Bankruptcy Law. As an EU member state, Poland has implemented European regulations that deal with various aspects of securitisation transactions. Trading in securities in Poland is regulated mainly by Regulation 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (the "Prospectus Regulation") and two Polish legal acts: the Act on Financial Instruments and the Act of 29 July 2005 on Public Offering, on Conditions for the Introduction of Financial Instruments to the Organized Trading System and on Public Companies (the "Act on Public Offerings").

Polish law does not diverge from the EU regulations in this case. After the implementation of the Prospectus Regulation, the definition of “public offering” that under the Act on Public Offerings previously differed from the definition used by the EU regulations is now fully compliant therewith.

According to the MAR (see Penalties below), persons professionally arranging or executing transactions on listed instruments (such as notes issued under securitisation transactions) are subject to the rules of notification of the member state in which they are registered or have their head office, regardless of where the instruments are listed. The same rule applies to persons discharging managerial responsibilities, as well as persons closely associated with them, who are obliged to notify the authorities of the transactions relating to the listed instruments of the related issuer. This means that this person would have to notify the KNF, in accordance with the form available on the KNF’s website.

Non-exempt public offerings or admissions to the regulated market need to meet the usual requirements arising under the Prospectus Regulation.

Admission to the Polish regulated market requires meeting other requirements, including obtaining the KNF’s approval of the prospectus. Furthermore, instruments cannot be admitted to trading on a regulated market or alternative trading system in Poland unless they have been registered in the Central Securities Depository of Poland (Krajowy Depozyt Papierów Wartościowych SA). The so-called alternative trading systems, corresponding to the multilateral trading facility (MTF) under Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (MiFID), provide less restricted disclosure requirements, subject to whether the issuer is already listed on the regulated market, etc. Depending on meeting certain requirements, the admission of these instruments to the alternative trading system might require a full prospectus or the less complicated information memorandum, up to the information note (least requirements).

Principal Regulators

The Polish regulator responsible for capital markets and the supervision of banks and insurance companies is the KNF, which has also been designated as the “competent authority”, in accordance with the relevant EU financial regulations, including the Securitisation Regulation.


The principal penalties relating to disclosure requirements under the Act on Public Offerings can be divided into criminal sanctions (including imprisonment or a fine), which can be imposed by a court, and administrative sanctions (a fine or withdrawal from trading), which can be imposed by the KNF.

The penalties for a violation of disclosure requirements set out in Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) (MAR) have been implemented by the Polish Act of 29 July 2005 on Trading on Financial Instruments, and are lower than the maximum penalties stated by the MAR. The maximum penalties range from PLN2 million for the unlawful disclosure of inside information by a natural person to more than PLN10 million or up to 2% of the total annual turnover for an infringement of public disclosure rules by the issuers.

The Public Market versus the Private Market

Most securitisation deals involve the listing of asset-based securities issued by the SPE on a regulated market. Popular destinations include the Irish Stock Exchange and the Luxembourg Stock Exchange, although it is also possible to list these instruments in Poland on the Warsaw Stock Exchange. Even though a public market offering and listing is connected to various requirements (including the obligation to publish a prospectus and MAR requirements), it is often chosen due to the better liquidity of these instruments and the possibility to attract more investors, who usually prefer listed instruments to non-listed ones.

Legal Opinion

Polish legal opinions concerning an issuer’s capacity to issue instruments (Polish issuers only), the validity and enforceability of these instruments, and their non-conflict with Polish regulations are usually required. These opinions would significantly differ depending on several factors, including the type of offering (public or private), the governing law of the debt instrument, whether it is admitted to trading on a regulated market or alternative trading system and, if so, whether in Poland or elsewhere. In any case, other than a fully fledged Polish public offering with a prospectus, this opinion would include detailed qualifications relating to Polish selling restrictions. In the case of international offerings, a tax opinion concerning withholding tax might also be desirable.

No information has been provided in this jurisdiction.

"Credit risk retention" regulations that apply in Poland are contained in the Securitisation Regulation (see Article 6). These regulations are addressed to originating entities, sponsors and original lenders. One of these entities, usually an originator, is obliged to retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. That interest is measured at the origination and determined by the notional value for off-balance sheet items.

In accordance with the Securitisation Regulation, there are a few methods of keeping the material net economic interest, two of which are commonly used.

The main method is the retention by the originator (or the sponsor) of the first loss tranche. In practice, it is effected by the originators providing a subordinated debt to the SPE, with a nominal value of not less than 5% of the total external funding delivered to the SPE. Subordinated financing can be delivered in the form of subordinated debt instruments (notes, bonds) or subordinated loans.

For certain categories of originators, providing subordinated financing to an SPE might not be acceptable. For leasing companies, exposure in interest-bearing debt instruments (such as notes or loans granted to an SPE) might not be economically effective, because of the specific tax regulations that apply to these entities. High exposure in lending instruments can affect their ability to recover the VAT payable on the initial acquisitions of the lease objects for conducting their leasing activities. For certain originator banks, an exposure in subordinated instruments might also not be acceptable, since it can affect the capital relief effect on the transaction. In all these cases, an alternative approach is used, named under the CRR as the "retention of randomly selected exposures". This means that, through the lifetime of the transaction, an originator will retain in its assets at least 5% of the nominal value of all securitised receivables that would otherwise have been securitised (ie, which meets the same eligibility criteria as the receivables actually sold to the SPE under the transaction), as randomly selected by the originator.

The fulfilment of the credit risk retention requirements must be periodically reported by the originator. The so-called investor report is usually delivered by the originator or by another entity participating in the transaction, such as a cash manager, on a monthly or quarterly basis.

The Securitisation Regulation requires that each member state shall lay down rules establishing appropriate administrative sanctions for being in breach of specific rules of the Securitisation Regulation, including a situation where an originator, sponsor or original lender negligently or intentionally fails to meet the requirements of risk retention provided for in Article 6 of the Securitisation Regulation. Further to the above requirement, the KNF was assigned with the right to impose certain administrative penalties on participants in a securitisation transaction who are in breach of obligations related to risk retention.

As mentioned in 4.3 Credit Risk Retention, certain reporting requirements are imposed on entities participating in a securitisation by the Securitisation Regulation. In particular, the disclosure (transparency) requirements are specified under Article 7.

Disclosure Requirements

A designated entity should be appointed in each securitisation to perform the disclosure requirements in accordance with the Securitisation Regulation. Such a designated entity could be an originator, a sponsor or an SPE. In practice, an SPE is usually appointed a designated entity; however, as an SPE has no resources to perform such a function in practice, an originator, usually in its capacity as servicer, is contractually obliged to deliver required data in required formats.

Disclosure requirements under the Securitisation Regulations depend on the specifics of the transaction; in particular, whether the transaction has simple, transparent and standardised (STS) status and whether it is a public transaction for which a prospectus has been prepared. Generally, disclosure requirements under the Securitisation Regulations are divided into:

  • those that must be fulfilled before pricing – in particular, the delivery of all underlying documents “essential for the understanding of the transaction” (including a prospectus), a transaction summary (if there is no prospectus) and STS notification, if relevant;
  • periodic reporting requirements that consist of providing data on the loan level and reports for investors; and
  • ad hoc reporting that includes inside information and significant events notifications.

Reporting Standards and Legislation

All reporting should be directed to investors and the KNF. Starting from 23 September 2020, all periodic reports should be prepared using the European Securities and Markets Authority (ESMA) reporting templates in an appropriate format, also taking into account the full content of the STS notification, if it was prepared.

In transactions where a prospectus was drawn, the entity designated to perform the disclosure requirements should make the information for a securitisation transaction available by means of a securitisation repository.

In “private” transactions, there is no requirement to use a securitisation repository. Information should be made available in a way agreed in the transaction documentation; usually the required reports are delivered directly to investors and the regulator or published on a designated website.

The main legislation that regulates the periodic reporting of the issuers of the securities that are subject to trading on the regulated market in Poland has been set out in the Act on Public Offerings and the Regulation of the Minister of Finance of 29 March 2018 on current and periodic information. In particular, the admission of only non-equity securities (which is the case in securitisation transactions) requires an issuer to publish quarterly and yearly reports or interim and yearly reports, containing audited financial statements for the relevant period. These reports are submitted to the operator of the market, to the KNF and to the chosen press agency. An entity that operates on the regulated market can also impose additional reporting requirements on the issuers.

The requirements concerning financial reports included in the report depend on the type of report (ie, quarterly, interim or annual). The issuer’s non-compliance with the reporting requirements can result in the exclusion of their securities from trading, and/or a fine of up to PLN5 million or 5% of their total annual revenue.

Issuers of securities admitted to trading on an alternative trading system are not subject to the regulations mentioned above, but instead to the rules imposed by the organiser of the facility. In practice, these requirements are identical, or at least very close to identical. However, alternative trading facilities operators usually envisage less complex reporting requirements and lesser fines imposed on the issuers if they do not comply with the regulations of the alternative trading facility.

Requirements for Alternative Investment Funds

Managers of AIFs are subject to the reporting requirements stipulated in the Act on Investment Funds, and the Regulation of the Minister of Finance of 28 June 2017 on the periodic and current reports on the activity and financial situation of fund managers and investment funds submitted by those entities to the KNF. The regulation envisages a wide range of situations that impose a reporting obligation on the issuers. In respect of the AIFs, the reports must be submitted to the KNF; for example, upon the occurrence of an event that could have a material impact on the fund, such as an incorrect valuation of the fund's assets, exceeding the investment limits stipulated in the articles of the fund or the applicable law, or court proceedings initiated against the issuer.

In accordance with the Delegated Regulation of Commission 231/2013 of 19 December 2012, supplying the Directive of the European Parliament and the Council 2011/61/EU (AIFMR), the manager of an AIF is also required to submit a separate statement (containing certain financial information) concerning the activity of the AIF carried out through the year to the KNF and, upon demand, to the investors, within four months of the end of each financial year.

Additionally, in accordance with the provisions of the AIFMR, fund managers are required to submit supplementing information to the KNF, drafted in accordance with Annex IV to the AIFMR and containing, in particular, investment strategies, material exposures, investors and their profiles, and the liquidity and use of leveraged financial instruments.

An issuer’s non-compliance with the reporting requirements can result in the KNF imposing additional activity limitations, a fine of up to PLN5 million, or even a withdrawal of the licence to run an investment fund.

Rating agencies are regulated in Regulation 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, amended by Regulation 462/2013 of the European Parliament and of the Council of 21 May 2013 (the "Rating Agencies Regulation"), which imposes additional restrictions on the activity of rating agencies in the area of securitisation and structured products. Polish law does not contain any material provisions concerning the regulatory framework for rating agencies, which are subject to direct supervision under the ESMA.

The issuers and the rating agencies that take part in the securitisation are subject to the additional requirements that apply to the process of rating granting to the issuer or issued securities. Any issuer is obliged to obtain at least two different ratings from independent rating agencies. Issuers are also advised to consider appointing at least one credit rating agency with no more than 10% of the total market share. Ratings are subject to public disclosure.

Credit Institutions

The originator of a traditional securitisation, being an institution to which the requirements of the CRR apply, can exclude securitised exposures from the calculation of risk-weighted exposure amounts and expected loss amounts if:

  • the significant credit risk associated with the securitised exposures is considered to have been transferred to third parties (the risk is deemed to be transferred upon meeting the criteria stipulated in the CRR); or
  • the originator applies a 1,250% risk weight to all securitisation positions it holds in this securitisation, or deducts these securitisation positions from Common Equity Tier 1 items.

If the possible reduction in risk-weighted exposure amounts is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide that significant credit risk shall not be considered to have been transferred to third parties.

Insurance Companies

The Polish Act of 11 September 2015 on insurance and reinsurance activity (IRAA) stipulates the rules concerning the financial management of insurance and reinsurance companies. In the above terms, the IRAA operates based on the notions of the Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR). According to Article 239 of the IRAA, insurance and reinsurance companies shall hold eligible own funds in an amount not lower than the SCR – and eligible basic own funds in an amount not lower than the MCR. The IRAA also stipulates the absolute floor of the MCR in respect of insurance and reinsurance companies (depending on the type and scope of the pursued insurance activity) (Article 272) and the relation between the MCR and the SCR (Article 273). The IRAA assumes capital-tiering stipulating that insurance and reinsurance companies shall classify own-fund items into one of the three tiers (Article 245).

Besides the IRAA’s implementation of Solvency II, insurance and reinsurance companies in Poland must directly observe the applicable regulations of law of the European Union. In reference to the financial management of insurance and reinsurance companies, Polish undertakings should apply, inter alia, the relevant provisions of the Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking up and pursuit of the business of Insurance and Reinsurance ("Solvency II") (Official Journal L 12, 17.1.2015, as amended) ("Regulation 2015/35"). In particular, when classifying own-fund items in specific tiers, an insurance and reinsurance company shall use the list of own-fund items that complies with Articles 69, 72, 74, 76 and 78 of Regulation 2015/35.

The IRAA stipulates that insurance and reinsurance companies shall determine the value of the technical provisions for the purpose of solvency on the part of reinsurers and SPVs in accordance with the relevant rules.

In particular, when calculating the amounts due from reinsurance contracts and from SPVs, insurance and reinsurance companies shall take into account the time difference between the receipt of the amount due from the reinsurer or SPV and the making of a direct payment. Insurance and reinsurance companies shall adjust the results of the calculations, taking into account expected losses due to the reinsurer or SPV being in default of its obligations. In order to calculate the expected losses, insurance and reinsurance companies shall determine the probability of the reinsurer or SPV being in default of its obligations and the average amount of the loss due to the reinsurer or SPV being in default of its obligations.

In addition, with reference to an SPV, although it is neither an insurance company nor a reinsurance company, it has a special regulation concerning solvency requirements principally regulated in Articles 326 and 327 of Regulation 2015/35.

In the event that the KNF considers that an insurance or reinsurance company failed to comply with the statutory requirements related to its activity, the KNF has the power to impose on such insurance or reinsurance company a penalty set forth in the IRAA, which envisages that such penalty may be up to 0.5% of the gross amount of premiums received by such company, disclosed in the previous financial statement, or, if the amount of received premiums was below PLN20 million, then such penalty imposed can be up to PLN100,000. The KNF may also impose on the members of a management board or proxies of such insurance or reinsurance company a penalty of up to the equivalent of three times its average monthly remuneration from the previous 12 months, but no more than PLN100,000 for non-compliance of such company with binding regulations.

There are no specific laws or regulations applying to the use of derivatives in securitisation transactions under Polish law. As an EU member state, Poland is subject to general EU regulations, including those applicable to derivatives (eg, Regulation 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories). There are also certain provisions under Polish law that apply to derivatives, particularly under the Polish Act on Financial Instruments, but all these are of general application and not specifically addressed to securitisations.

There are no separate regulations determining investor protections for investments in instruments issued in accordance with securitisation transactions. In general, Polish regulations are the same as the protective measures stipulated by the MiFID. The level of protection for investors depends on the category of client to which an investor has been allocated; ie, retail clients receive more protection (including the obligation of a seller of the financial instruments to offer only instruments that are "eligible" to such a retail client, bearing in mind the assessment that has been carried out prior to the offering of these instruments), whereas professional clients and so-called eligible counterparties receive less protective treatment.

Additional protection measures apply to investors that are consumers (ie, any natural person performing a legal act with an entrepreneur who is not directly connected to the business or professional activity of this natural person). In particular, any wrongful contractual provision (ie, any provision that is in conflict with good customs and in flagrant violation of the consumer's interest) can be declared ineffective by the court. Off-premises or distance (eg, by telephone) contracts of sale of financial instruments to consumers are subject to dedicated requirements.

Retail clients are also protected under the Securitisation Regulation. Generally, any financial instrument offered to a retail client should be “suitable” for such client. The seller of financial instruments should confirm such suitability in a suitability test performed in accordance with the MiFID.

Polish banks are allowed to securitise their assets. The Banking Law stipulates the possibility to sell bank receivables to an SPE (in the form of a company with limited liability) or a securitisation AIF. In order to be eligible for a securitisation transaction with a Polish bank as an originating entity, an SPE must be separated from the bank in both capital and organisational meaning. No specific rules apply to a securitisation AIF participating in a securitisation with a Polish bank – it would be regulated under the same provisions of the Act on Investment Funds as any other securitisation transaction.

Polish banks are also allowed to invest in securitisation positions. Here, the most important thing from the perspective of a bank as an investor is that the originating entity duly observes the risk retention rules.

As discussed previously, there is no specific form of SPE dedicated for securitisations under Polish law. The only exemption is a securitisation AIF; however, in practice, this form is used almost exclusively to purchase NPLs from Polish banks.

The scope of activities of Polish SPEs is limited by incorporating the relevant provisions into their articles of association or contractually. As a consequence, their activities consist of purchasing receivables, issuing debt securities, or borrowing under loans and conducting any other related activities, all solely for the purpose of the securitisations in which they are involved, and in compliance with transaction documents.

Credit enhancement in Polish securitisations is provided in various forms, with the main forms being subordinated tranches (in the form of subordinated debt instruments or subordinated loans), a deferred purchase price payable as the last position in an agreed payment waterfall, or over-collateralisation. These forms are mainly designated to cover the first loss and protect senior tranches of debt instruments.

Deposits are often used to protect against various risks, particularly liquidity risks and commingling risk.

If a Polish bank is an originating entity, its investment in subordinated tranches is always dependent on whether the bank is trying to achieve a capital relief effect. If this is the objective, the investment in subordinated tranches would need to be compliant with the CRR, as would any other credit enhancement delivered by the bank.

Polish law does not contain any particular rules relating to securitisation carried out by entities that are sponsored or partially owned by the government (ie, the State Treasury). The latter (eg, joint-stock companies with a sizeable number of shares owned by the State Treasury), including banks, often participate in securitisation transactions. However, it should be noted that guarantees granted by the State Treasury or certain state-owned entities (including the Polish Bank of National Development, Bank Gospodarstwa Krajowego), acting as sponsors or originators, can be subject to the special rules described in the Act of 8 May 1997 on Guarantees and Warranties granted by the State Treasury or certain legal entities.

Apart from foreign entities or multinational organisations, such as the European Bank for Reconstruction and Development or the European Investment Bank, which comprise the most engaged investors, active investors in debt instruments issued in accordance with securitisation include banks, financial institutions, and pension and investment funds.

The Act on Investment Funds and Alternative Investment Fund Management does not explicitly stipulate the investment limits related to securities that are issued in connection with the securitisation process. In the case of notes and similar instruments, the baskets are divided into two categories: notes that are subject to the admission to trading on regulated markets and those that are not.

As to the former, an undertaking for the collective investment in transferable securities (UCITS) fund (FIO) and an open-end AIF (SFIO with FIO investment limits) can invest up to 5% of its asset value in the notes issued by a single entity (or 10% if stated in the articles of association of the relevant fund – special rules can apply here). An AIF (FIZ and SFIO with FIZ investment limits) can invest up to 20% of its asset value in the notes issued by a single entity. The rules are more or less the same for notes not traded on regulated markets, but in each case the total combined share of the notes that are not admitted to trading on a regulated market in the assets of the fund cannot exceed 10% of the total value of the assets of a UCITS (FIO) and an open-end AIF (SFIO with FIO investment limits).

Pension funds impose investment limits on notes and investment certificates, issued in the securitisation process, which vary depending on the type of securities issued and on whether the securities are subject to public offering and if they are secured.

The relevant investment baskets can be divided into the following categories:

  • notes that are subject to public offering in Poland, or an EEA or OECD country, with principal and interest from these notes being fully covered (secured) or guaranteed;
  • notes that are not subject to public offering in Poland, or an EEA or OECD country, with principal and interest from these notes being fully covered (secured) or guaranteed; and
  • notes that are subject to public offering in Poland, or an EEA or OECD country, with principal and interest from these notes not being fully covered (secured) or guaranteed.

A pension fund can invest up to 10% of its asset value in any of the categories, with the exception of category 1 – a pension fund can invest up to 40% of its assets' value in assets of this category, but not more than 10% in the notes issued by a single entity.

If an investment certificate is issued by an AIF or other closed-end fund established in Poland, an EEA or OECD country, a pension fund can invest up to 10% of its asset value in a certificate, but no more than 2% in the certificates issued by a single entity.

Legal documentation used in securitisations in Poland can be divided into two parts: asset documents and finance documents.

Asset documents are governed by Polish law and used to effect bankruptcy-remote transfers. If an SPE is located offshore, finance documents are usually governed by English law. If an SPE is located in Poland, Polish law governing finance documents is also considered.

The two main asset documents are the receivables purchase agreement and the servicing agreement.

Receivables Purchase Agreement

A receivables purchase agreement is executed between the origination entity as the seller of the receivables and an SPE as the purchaser of the receivables, in written form, most usually with a date certified by a notary. In transactions where receivables are sold repeatedly during a revolving period, the receivables purchase agreement serves as an assignment and sale agreement for the initial pool of receivables (usually at closing) and then as a master agreement for each subsequent sale of the receivables. Each subsequent sale of the receivables takes place on the terms and conditions of the receivables purchase agreement, by way of submitting an offer by the origination entity and its acceptance by the SPE.

A properly structured receivables purchase agreement ensures the true sale effect and the bankruptcy-remote transfer of the receivables from the originating entity to the SPE, which is supported by independent legal opinion. An assignment of a receivable under Polish law can be structured as a "silent assignment", without debtors being notified. There is no established market practice as to whether and when notifications to debtors should be made in securitisation transactions. In some transactions, notifications are required to be made shortly after each sale of receivables, but there are also transactions where notifications are postponed and conditional upon certain agreed events; in particular, relating to financial and other conditions of the originating entity.

Servicing Agreement

A servicing agreement is concluded between the originating entity as the servicer of the receivables and the SPE. The servicer is appointed for the entire lifetime of the transaction, although its appointment can be terminated earlier following the occurrence of a servicer termination event. Servicer termination events are usually standard and consist of non-payment events, breach of obligations under the transaction documents, misrepresentations, insolvency, etc.

A servicer is usually appointed to deliver simple day-to-day administration services, and to conduct the enforcement of defaulted receivables. As a standard, a servicer is obliged to act in accordance with the servicing agreement and its standard credit and collection policy agreed with the SPE and the other parties to the transaction documents, particularly the note and security trustees for the noteholders (investors).

There is no established market practice on the appointment of a back-up servicer. There are transactions where the back-up servicer is appointed at the closing and is ready to replace the servicer any time upon the demand of the SPE (usually supported by an external agent named a back-up servicer facilitator), but there are also transactions that stipulate the later appointment of a back-up servicer upon an agreed event relating to expected difficulties of the original servicer to service the receivables.

See 5.4 Principal Covenants.

A sale of receivables in a securitisation transaction is concluded upon the execution of a receivables purchase agreement or, in relation to subsequent sales, upon the delivery of an offer and its acceptance. No other actions are required to conclude the sale. Usually, a security interest established in favour of the investors over the assets of an SPE has the legal form of a Polish registered pledge and is concluded upon its registration by the registry court.

Much like representations and warranties, contractual covenants in Polish securitisation documents match the approach usually seen in other jurisdictions.

The usual covenants for a seller include complying with laws and credit collection policies, refraining from amending documents evidencing receivables sold to an SPE, holding the necessary licences to conduct business, and standard reporting covenants. An important covenant of a seller relates to risk retention requirements; depending on the agreed structure of a transaction, this could be an obligation to maintain interest in the subordinated tranches of the financing or a balance retention of randomly selected receivables.

Covenants for a servicer usually include complying with laws and credit collection policies, maintaining accounting and other records to allow for a separation of the sold receivables from any other receivables, and providing periodic servicer reports.

The main covenants for an SPE are due observance of the transaction documents, not engaging in other business, and not incurring any indebtedness other than that allowed under the transaction documents.

As mentioned previously, the servicing of receivables can be divided into the regular day-to-day administration of receivables and their enforcement. A servicer is usually appointed to perform both types of servicing. Since an SPE is formally the owner of receivables sold and assigned by an originating entity, the servicer acts in the name and on behalf of the SPE. The main duties of a servicer are:

  • collecting proceeds from the receivables and transferring them to the SPE;
  • maintaining records relating to the receivables;
  • issuing periodic servicer reports; and
  • conducting enforcement proceedings.

In all actions, the servicer is obliged to observe the provisions of the servicing agreement and the agreed credit and collection policy.

The principal defaults used in securitisation documentation are standard, and usually comprise non-payment events, breach of transaction covenants, misrepresentation, or insolvency events. The defaults are usually subject to agreed remedy periods. Under the Polish Bankruptcy Law, the filing of an application for bankruptcy or a declaration of bankruptcy of an entity cannot constitute the basis for the compulsory amendment or termination of an agreement to which this entity is party.

The principal indemnities to which an originating entity is obliged towards an SPE are usually described widely. The originating entity is obliged to indemnify an SPE, its directors, agents and other related persons against any liabilities (which term is defined very broadly to cover any losses, damages, costs, charges, awards, claims, demands, expenses, or judgments, etc) incurred by an SPE or related persons as a result of its entry into the transaction documents. In particular, the originating entity is obliged to indemnify the SPE against any liabilities resulting from the improper actions of the originating entity, such as misrepresentations, incorrect reports, or breaches of covenants. The liability of the originating entity is excluded in the case of wilful misconduct or gross negligence by the SPE.

Usually, securitisation documentation also contains indemnity obligations imposed on an SPE, similar to market standards seen in other jurisdictions.

The main role of an issuer in any securitisation transaction is to purchase assets/receivables from an originator and issue debt instruments on their basis. The common responsibilities of issuers include providing security interest over securitised assets. The standard type of security interest is a registered pledge established over the entire enterprise of an issuer or a collection of movables and rights that are an economic entirety of variable composition (including transferred assets and receivables). In most cases, issuers do not run any other business activity besides purchasing assets or receivables and issuing debt instruments on their basis.

Most Polish securitisation transactions do not involve sponsors. If they do appear, their role is mostly to provide certain financial guarantees or additional financing, such as subordinated loans that may serve as risk retention.

Regarding underwriting rules, Polish law recognises two types of underwriting (gwarancja emisji). In accordance with the first type (which is basically identical to underwriting, as this term is used in other jurisdictions), a guarantor agrees to acquire all or a part of the instruments that are being offered exclusively to it, in order to distribute them to investors of its choice. A guarantor in this type of underwriting must be a bank, a Polish or foreign investment firm, or a consortium of these entities.

The second type of underwriting comprises any arrangements other than the first type. For these types of underwriting arrangements, the scope of entities authorised to act as underwriters (guarantors) is wider and additionally includes, in particular, investment funds.

The duties of a servicer include managing, servicing, collection, administrative and enforcement tasks, and specific duties in respect of the purchased receivables as set out in the servicing agreement entered into between the issuer and the servicer. In the case of securitising retail receivables (including lease or loan receivables), an originator serves as a servicer. Servicing of receivables does not require a licence under Polish law, except for servicing of receivables acquired by a Polish securitisation fund performing a securitisation that must be approved by the KNF.

In general, debt instruments offered under securitisation transactions are only offered to professional investors, not retail investors. Therefore, investors are mostly banks, funds and similar entities. The securitisation instruments are also often acquired by multinational entities, such as the European Investment Bank.

Polish law does not recognise trusts and trustees, as such. Polish law transactions often involve foreign law structures (mostly English law) and foreign trustees. This applies, in particular, to parallel debt structures, which are often used to combine Polish and foreign security interests. This parallel debt is often created under an English law security trust deed, with the trustee being a professional entity (often a bank or credit institution).

Polish law does not explicitly envisage the admissibility of synthetic securitisation schemes, but the establishment of these structures is permissible according to the general rules of freedom of contract.

Unlike true sale securitisation, synthetic securitisation is not linked to the transfer or assignment of underlying receivables. This feature allows originators to transfer the exposure to the risk arising from the receivables that are, in accordance with the statutory or contractual provisions, limited or not transferrable to third parties by a true sale assignment, or in the event that the transfer of security interest that constitutes collateral for these receivables demands a disproportionate effort to be effectively transferred to third parties.

The main provisions of law that can affect the process of synthetic securitisation are set out in the Banking Law, the Bankruptcy Law of Poland, the Act on Financial Instruments, the Act on Public Offerings and the Act on Bonds. Poland, as a member state, is subject to the EU legal regime, including the Securitisation Regulation and the CRR, and consequently all generally applicable provisions regulating synthetic securitisations included in these acts are applicable in Poland.

In most synthetic securitisations completed in Poland to date, credit risk of the underlying exposures was transferred under a guarantee. Alternative structures, involving risk transfer by using a credit derivative, are not visible yet.

The most common types of receivables originated by Polish parties are:

  • loan receivables (consumer, cash or auto loans);
  • lease receivables (mostly autos, equipment and inventory);
  • NPLs, securitised by banks with the use of investment funds; and
  • trade receivables (less often).

Mortgage loan receivables are semi-securitised; ie, Polish mortgage banks often issue covered bonds (listy zastawne) (on domestic and international markets), denominated in euros (EUR) or Polish złoty (PLN), that are secured by these receivables. However, covered bond issues are subject to special rules that do not involve SPE structures.

The prevailing structure used for each main type of receivable originated by Polish parties listed in 8.1 Common Financial Assets would involve a standard approach; ie, by using bankruptcy-remote SPEs, which are limited liability companies. A notable exception relates to securitising NPLs originated by Polish banks, where securitisation closed-end AIFs are commonly used, since the disposal of NPLs to any entity other than a securitisation fund does not allow an originating bank to achieve tax benefits.

From the perspective of laws applicable to specific types of financial asset, these somewhat affect the provisions of securitisation transaction documents and/or a selected security structure, rather than a general transaction structure. For example, when structuring a securitisation involving Polish assets, one should be aware of certain limitations related to consumer loans (since the Polish Law on Consumer Credit stipulates stricter debtor notification rules) or lease receivables (while still being a true sale transaction, the scope of receivables assignment and transfer should be tailored to mitigate certain legal risks specifically related to a lease under the Polish Civil Code), etc.

Hogan Lovells (Warszawa) LLP (Spółka partnerska) Oddział w Polsce

Plac Trzech Krzyży
00-499 Warsaw

+48 22 529 29 00

+48 22 529 29 01
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Hogan Lovells (Warszawa) LLP handles every aspect of structured finance transactions. The firm has built a global practice in the major jurisdictions of Asia, the USA and Europe. Clients include managers and arrangers, trustees, investors, originators of securitised assets, and collateral and portfolio managers. Lawyers advise on the financing of a wide range of classic and innovative asset types, both as public and private standalone issues. The team is particularly well known for its work in asset-backed financing, and for its ability to advise on new and innovative transactions. Lawyers have extensive experience in advising originating banks and arrangers on a broad range of securitisation transactions, including a strong track record of advising on bank securitisations, automotive asset-backed securitisations and lease assets. Furthermore, the team's securitisation experience includes a number of market firsts and innovative transactions. Hogan Lovells Poland has been engaged in every major securitisation involving Polish originators, including recent major standalone issues originated by BNP Paribas Bank Polska SA, Europejski Fundusz Leasingowy SA, Santander Leasing SA, Santander Consumer Bank SA, PKO Leasing SA and Alior Leasing Sp. z o.o.

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