capital markets | In Principle

The first proposal of Polish regulations implementing the EU’s Women on Boards Directive, aimed at more balanced representation of women and men on the bodies of large listed companies, has now been published. This is to be achieved by setting requirements for the selection process of candidates for these positions and introducing a minimum level of participation of the underrepresented sex. The proposal comes as no surprise. Work on the directive took a decade, but it nevertheless elicited many comments in public consultations. The member states have to implement the directive by 28 December 2024.

Convertible loans are still a relatively rare debt financing instrument in Polish practice, but have recently gained popularity among startups and in venture capital. In essence, a convertible loan involves granting a loan that may be repaid by converting the debt into equity in the borrower. But depending on the expectations, circumstances and identified risks, the loan provisions can differ widely, with flexibility to modify the positions of the parties. This means it is worth paying attention to a number of financial and legal parameters, including obvious ones that can affect the feasibility of the undertaking.

Company shares are seen as an important element of the overall remuneration for professionals in the IT industry. This is also the case in companies developing video games. Prospective employees or contractors expect to be able to take a stake in the rapidly growing company as part of their remuneration package.

The Central Register of Beneficial Owners went into operation in Poland at the end of 2019. Since then, obligated entities defined in Art. 58 of the Anti-Money Laundering (AML) Act have had to verify whether there is an individual in their structure who can be considered an ultimate beneficial owner, and report this information to the Central Register of Beneficial Owners.

Employee stock ownership plans (ESOPs) allow a select group of employees (usually management) to take an equity stake in the employer by purchasing shares at a nominal value or a value determined in the programme. These plans are implemented over a period of several years, and a condition for offering shares is the company’s achievement of certain financial targets specified in the plan.

New obligations to provide information to the financial regulator, mandatory internal control systems, and new administrative fines against agents and members of their authorities—the “vegetable patch” introduced quite a few changes.

In recent years, ESG has been mainly about “E”—environmental aspects, which were most often subject to regulation. Now there is increasing emphasis on social (S) and corporate governance (G). A noteworthy measure in governance is the EU’s Gender Balance Directive, which came into force at the end of 2022. The directive is intended to ensure more balanced representation of women and men among directors of listed companies.

The Central Register of Beneficial Owners is a public register maintained by the Polish Minister of Finance, established pursuant to the EU’s 4th Anti–Money Laundering Directive (2015/849). The register has been in operation since autumn 2019, but in connection with harmonisation of provisions on disclosure of information on beneficial owners under EU legislation it is undergoing changes and improvements. Further modifications were made on 9 March 2023.

Poland’s Commercial Companies Code provides for a number of institutions strengthening the position of minority shareholders. One is that shareholders representing a fifth of the share capital may demand that the company’s supervisory board be elected by voting in separate groups (Art. 385). This is a departure from the statutory method of appointing the supervisory board by a resolution of the general meeting adopted by a simple majority of votes. One or more shareholders representing 20% of the share capital may demand that the supervisory board be elected in groups, even if the company’s statute provides for a different way of appointing the supervisory board, e.g. through personal entitlements.

After July 2022 amendments to the law, companies can now benefit from crowdfunding. As usual, the devil is in the details.

A private subscription is a convenient method to raise share capital. How to carry it out in practice?
 

The Foreign Exchange Law has remained unchanged for many years. However, foreign exchange permits, though rarely required anymore, as well as reporting obligations, should still be kept in mind. To a large extent, foreign exchange transactions are freely allowed, but this does not mean that they are completely liberalised and not monitored by the National Bank of Poland.