By Mirosław Fiałek, partner, and Mariusz Domagała, senior associate, MFW Fiałek
Fiałek_pole

 

The new foreign direct investment regime introduced in Poland in 2020 established a foreign investment screening mechanism enforced by the Poland’s competition authority, UOKiK. The new foreign direct investment regime supplements the investment-control regime regulated by the Polish Act on Control of Certain Investments of 24 July 2015 (the Polish FDI Act). The new regime was introduced as a response to the Covid-19 pandemic for an initial period of two years. However, in mid-2022 the Polish parliament decided to extend this new regime for a further three years, until July 2025.

  • The new foreign direct investment regulations apply when a Polish enterprise is acquired or achieved by:Individuals who are not citizens of a Member State of the EU, the EEA or the OECD; or
  • Entities, other than individuals, that do not have, or have not had for at least two years before the date preceding the notification, a registered office in the territory of a Member State;

The Polish FDI Act defines ‘significant participation’ in an entity as a situation allowing another entity to influence the activities of such an entity by holding:

  • Shares representing at least 20% of the total number of votes; or
  • An equity interest in a partnership with a value amounting to at least 20% of the value of all contributions to such partnership; or
  • A share in the profits of another entity amounting to at least 20%.

The Polish FDI Act defines a ‘dominant entity’ as an entity that:

  • Holds, directly or through other entities, a majority of the total number of votes in the bodies of another entity, including through agreements with other persons; or
  • Has the power to appoint or dismiss a majority of the members of the management board (board of directors) or supervisory board of another entity; or
  • In the case of which more than half of the members of the management board (board of directors) of another entity are at the same time the members of the management board (board of directors), proxies or persons performing managerial functions of the first entity or of another entity remaining in a relationship of dependence with the first entity; or
  • Holds an equity interest in a partnership with a value of at least 50% of the value of all the contributions made to such partnership; or
  • Is able to decide on the directions of the activities of another entity, in particular under an agreement providing for the management of that entity or the transfer of profit by that entity.

The FDI Act lists three events when significant participation in a covered entity is acquired or achieved:

  • When significant participation is gained in the covered entity, by the acquisition of the shares or the rights attaching to shares, or by taking up shares in the covered entity; or
  • When the thresholds of 20% and 40% are respectively achieved or exceeded: (i) of the total number of votes in the governing body of a covered entity, (ii) in the profits of the covered entity, or (iii) the equity interest in a partnership that is a covered entity with respect to the value of all the contributions made to such partnership – by acquiring the shares or the rights attaching to the shares or taking up the shares in the covered entity; or
  • When acquiring or leasing a business (enterprise) or its organised part from a covered entity.

Acquiring dominance over a covered entity is understood as the acquisition of the status of a dominant entity as defined above, with respect to a covered entity by among other:

  • Acquiring the shares or the rights attaching to the shares, or subscribing for the shares in a covered entity; or
  • Entering into an agreement for managing a covered entity, or transferring profits by a covered entity.

The new foreign investment control regulations apply to acquiring or achieving significant participation in or acquiring dominance over the following entrepreneurs having their registered office in Poland:

  • A public company regardless of its type and the industry in which it operates
  • An entrepreneur that owns any of the assets disclosed in the uniform list of facilities, installations, equipment and services comprising critical infrastructure. referred to in Art. 5b.7.1 of the Act on Crisis Management of 26 April 2007
  • An entrepreneur that develops or modifies software used in services essential to society, including: supply of electricity, gas, fuel or fuel oil, drinking water supply, data transmission, data storage or processing, provision of cash, card payments, transportation of passengers or goods, food supply or hospital services
  • An entrepreneur providing cloud computing data collection or processing services
  • An entrepreneur conducting the following activities: generating electricity; manufacture, transport or storage of motor gasoline, diesel oil, natural gas, manufacture of chemical products; explosives, arms and ammunition, products and technologies for military or police purposes, telecommunications activities or food processing

The new foreign investment control regulations apply only to acquiring or achieving significant participation in or acquiring dominance over a covered entity if the revenues of such covered entity from sales and services in the territory of the Republic of Poland exceeded the equivalent of €10 million in any of the two financial years preceding the notification.

An entity that intends to acquire or achieve significant participation in or acquire dominance over a covered entity must in each case give prior notice to the president of UOKiK of its intention to do so, unless this obligation lies with other entities.

The investment control procedure is based on a two-phase model. The first phase should take no longer than 30 days. Only cases that may pose a serious threat to public order, public security or public health may be referred for appropriate control proceedings (phase two).

Depending on situation, acquiring or achieving significant participation or acquiring dominance without giving notice to the president of UOKiK or in face of their objections shall be invalid or no voting rights or other rights attaching to the shares of a covered entity may be then exercised. In certain cases, the president of UOKiK may also order that the shares of a covered entity be sold.

Furthermore, the representatives of the entities that acquired or achieved significant participation in or acquired dominance over a covered entity without giving notice to the president of UOKiK will be subject to a fine of up to 50 million złotys, or imprisonment from six months to five years, or both.