Group interest in Poland PROF..DOROTA MAŚNIAK DEPARTMENT OF CIVIL LAW FACULTY OF LAW AND ADMINISTRATION UNIVERSITY OF GDANSK

Recognition of the group interest – legal norms  no standard category of the group interest.  a normative legal category - company legal interest (Art. 249 § 1 and Art. 422 § 1 of the Polish Commercial Companies Code)  pattern of proper performance of voting rights of the members and the shareholders. GROUP INTEREST IN CEE 20 November 2015 Budapest

Recognition of the group interest – doctrine – competing views 1. emphasizing the autonomous company (subsidiary) interest the company interest as an entity separate from the shareholders (members) and not the interest of shareholders as an indicator of the company interest GROUP INTEREST IN CEE 20 November 2015 Budapest

Recognition of the group interest – doctrine – competing views 2. company interest is only perceived "accessorial" – from the perspective of the interests of the participants in the corporation. leads to identifying the subsidiary interest with the group interest has recently prevailed in jurisprudence GROUP INTEREST IN CEE 20 November 2015 Budapest

Identifying the subsidiary interest with the group interest  The Interest of subsidiaries may be subordinated to the good of the group as a whole, determined by the parent company  The parent entity is legitimate to implement uniform strategy.  the Court of Appeal in Katowice of V ACa 702/12 found binding the managementto the interest of the corporation acceptable.  Acting in the interest of the group usually falls within the category of acting in the interest of the parent entity.  The interests of employees, creditors and other stakeholders rank lower in the hierarchy of goals GROUP INTEREST IN CEE 20 November 2015 Budapest

Group with wholly-owed subsidiary – autonomy of the parent  The parent entity who, as a wholly-owed subsidiary, defines the interest of the company.  The purpose of sole shareholder of the subsidiary can be subordinated to the purpose of parent and the group - the company can be established for any legally acceptable purpose - art. 151 §1 of the Polish Commercial Companies Code  The subsidiary may be limited to the role of dependant link in the activities of the group obtaining as a task the completion of only single function  sale of products, human resources management, delivery of raw materials to other companies within the group  The subsidiary can be deprived of independent existence outside the group. GROUP INTEREST IN CEE 20 November 2015 Budapest

Group with wholly-owed subsidiary – autonomy of the subsidiary  The area of subsidiary autonomy does not exist, in fact, as good in and off itself.  The autonomy of subsidiary is necessary not to protect the company but its creditors, employees and potentially other groups whose rights may be infringed as a result of excluding personal liability of the sole shareholder for the liabilities of subsidiary (art. 151 § 4 and art. 30 § 5 PCCC). GROUP INTEREST IN CEE 20 November 2015 Budapest

Protection of the interest of the creditors and emloyees  directive ordering the sole shareholder and the management to refrain from activities which may put the creditors at excessive and disproportionate risk (" proportionality test ”)  legitimate - taking over corporate opportunities of a subsidiary which:  does not affect the ability to fulfil obligations towards the creditors,  does not lead to disproportionate damage to the employees’ interest (e.g. group lay-offs not substantiated by the financial standing of the company or the group)  but supports the interest of the parent entity or the group. GROUP INTEREST IN CEE 20 November 2015 Budapest

Group with other subsidiaries (multi- shareholder company) – the autonomy of parent  Achieving balance between the interest of the parent and the minority - the principle of equal treatment of shareholders in the same circumstances  Respecting the fundamental interest of shareholders to obtain income from the company activity  The parent may, within certain limits, decide to choose the long-term growth strategy, which forces the entity to suffer some "losses" in a short-term perspective GROUP INTEREST IN CEE 20 November 2015 Budapest

Rules to protect of the integrity of the assets of subsidiary  prohibiting any concealed transfers of funds from the company as transactions outside the corporation (art. 355 § 3 PCCC)  subrogation operations of company assets:  downstream loans an quarantees (letters of comfort) – widely accepted  upstream loan – problematic  cash pooling - lack of legal obstacles but if they are not contrary to the prohibition on refund payments for the shares (art. 355 § 3 PCCC) GROUP INTEREST IN CEE 20 November 2015 Budapest

Protection of minority shareholders in a public company  „sell-out-right” in the event of a take over control of the subsidiary- institution of the mandatory bid (art Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies)  "sell-out right" combined with right of squeeze-out - enabling minority shareholders to require the majority shareholder to buy shares following a takeover bid  by shareholder, holding not less 90% of the share capital  by not more than five shareholders, holding jointly not less than 95% of the share capital in closed company (non public) – art. 418 PCCC GROUP INTEREST IN CEE 20 November 2015 Budapest

Conclusion  problem - lack of granting more specific claims to minority, which would allow to obtain compensation in the event of diminution of investment value in the subsidiary  postulate - realization in Polish law the concept of group interest associated with the introduction of new, additional instruments for the protection of minority shareholders and creditors GROUP INTEREST IN CEE 20 November 2015 Budapest